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What is meant by ‘high income threshold’ and ‘compensation cap’ for unfair dismissal applications, and what are the new amounts for this financial year?

Award Wage Increases

In accordance with the Annual Wage Review 2015–16 decision, the determinations adjusting wages in all 122 modern awards were signed on 21 June 2016. The new award wages will operate from 1 July 2016. Allowances will also increase. View the determinations on the Fair Work Commission (“FWC”) website.

High Income Threshold

An employee whose annual rate of earnings is above the ‘high income threshold’ – and who is otherwise not covered by an award or enterprise agreement – is not eligible to apply for an unfair dismissal remedy.  As of 1 July 2016, the high income threshold will increase to $138,900.

It is not always clear which payments and benefits are included in an employee’s annual rate of earnings for the purposes of unfair dismissal protection. Do not assume that an employee is exempt just because his or her total remuneration package is above the high income threshold amount.

EMA Note 26 2014 may assist you in determining what payments are included or excluded, however if you are unsure whether an employee is exempt, you should seek specialist advice.

Trap! 
Even where an employee’s earnings are above the high income threshold, he or she may still be eligible to make an unfair dismissal application if a modern award or enterprise agreement applies to that employee.

Compensation Cap

In the event of a successful unfair dismissal application, reinstatement is the primary remedy. If reinstatement is not appropriate, or if the Fair Work Commission considers that compensation is appropriate in all the circumstances of the case, it may make an order of compensation. That order cannot be higher than the 26 weeks’ pay,1 or the compensation cap (whichever is lower).

As of 1 July 2016, the compensation cap will increase to $69,450.

Require further information/assistance?

If you require further information or advice, please contact your local Consultant at either our Adelaide or Melbourne offices.

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