From 1 July 2017, the high income threshold will be $142,000 and the compensation cap for unfair dismissal claims will be $71,000.

As we have previously reported, the National Minimum Wage will increase to $694.90 per week from 1 July 2017 (click here - https://www.mccabes.com.au/national-minimum-wage-increase-2017/).

The high income threshold also increases each year. From 1 July 2017, the high income threshold will be increased from $138,900 to $142,000.

When assessing whether an employee’s earnings are in excess of the high income threshold, the following amounts are taken into account:

• wages; • amounts dealt with on the employee's behalf or as the employee directs (such as salary sacrifice amounts); and • the agreed value of non-monetary benefits.

Amounts that cannot be determined in advance, such as overtime payments or incentive-based bonuses, are not included in the calculation.

What is the effect of the high income threshold?

  1. No access to unfair dismissal regime

    If an employee earns above the high income threshold, they are unable to bring an unfair dismissal claim under the Fair Work Act 2009 (Cth) (FW Act) unless they are covered by a modern award or an enterprise agreement.

    This provides an employer with greater flexibility in terms of the procedures adopted when dismissing an employee. However, employers need to remain mindful that employees who cannot access the unfair dismissal regime may still have other legal options available to them, such as a general protections claim, discrimination claim or breach of contract claim, depending on the circumstances.

  2. Availability of guarantee of annual earnings

    In addition, if an award-covered employee earns above the high income threshold, an employer can look to provide a guarantee of annual earnings to the employee. A guarantee of annual earnings is an undertaking given by the employer that it will pay the employee at least the high income threshold in relation to the performance of their work.

    Whilst an employee is covered by a guarantee of annual earnings, a modern award will not apply to them. This means that the employee does not need to apply the terms of the relevant modern award to the employee, which lessens the administrative burden for the employer.

    A guarantee of annual earnings must be in a form that satisfies the requirements of the FW Act and the existence of a guarantee of annual earnings does not preclude an employee from bringing an unfair dismissal claim.

Compensation cap for unfair dismissal matters

The maximum compensation payable in an unfair dismissal claim will also be increased as of 1 July 2017. The maximum compensation payable is half the high income threshold, which will be $71,000.