In this article we will look at unfair dismissal for high income employees. Is there a cap on compensation they can seek? Can they still make unfair dismissal claims?
1. High Income Employees – Can they still make a claim for unfair dismissals?
Yes they can. But there is a limit to the compensation they can receive based on their salary.
What’s a high-income employee? Under the Fair Work Act it’s defined as anyone earning over the salary cap of $148,700 and who is not covered by an award. The Fair Work Act sets limits to an employee’s eligibility for unfair dismissal compensation based on their salary. This is called the High-Income Threshold (HIT). It is amended annually.
What’s the Maximum Unfair Dismissal Payment?
Successful applicants for unfair dismissal claims may receive a maximum of 26 weeks of pay and with the salary cap now increased, the new maximum amount of compensation will be $74,350 as of 1 July 2019.
2. What’s Included and Excluded in the Definition of Salary?
· Car benefits / allowances (private use)
· Health & fitness club memberships
· Medical benefits
· Incentive based payments & bonuses
If you haven’t defined a specific value for an employee’s included benefits, the Fair Work Commission (FWC) has a discretion in assessing the HIT whether to include any non-monetary benefits for which the parties have not agreed a value, but which it is satisfied can be given a real or notional value.
What You Should do to Ensure all the eligible Employee Benefits are Included in Calculating the Employee’s Salary for Unfair Dismissal Purposes?
The best solution is to include an agreed value for non-monetary or other indirect benefits (such as fringe benefits) in an employee’s contract. Because they are agreed, they can then be included in the calculation of the salary cap.
3. High Income Earners Covered by Awards Can Still Take Unfair Dismissal Action
High income earners (i.e. earning more than $148,700) can still take an unfair dismissal action if they are award/agreement covered employees. So for example, a licensed club manager covered by the Registered Clubs Award earning over the threshold could still claim unfair dismissal and cost you up to the $74,350 (as at 1 July 2019) if the claim is successful!
What is the Minimum Employment Period before an Employee can Make an Unfair Dismissal Claim?
If it is determined that the employee is either Award covered or agreement covered, then the employee must have completed a minimum employment period of at least six months, or one (1) year in the case of a small business employee, in order to make a claim for unfair dismissal.
4. ‘Small Business’ – What are the Rules?
Small employers are reminded that the definition of small employer is ‘fewer than 15 employees on a simple headcount’. Employees of small employers need to be employed for at least 12 months before they can take an unfair dismissal action.
Also – small businesses have slightly different rules for dismissal. The Small Business Fair Dismissal Code provides protection against unfair dismissal claims, where the employer has followed the Code. The Fair Work Commission can deem a dismissal to be fair if the employer follows the Code and can provide evidence of this. However, given the interpretation by the FWC of how the Code is applied, we always suggest you get our advice before proceeding even if you feel comfortable with the actions you have taken.