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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?

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 2018, the high income threshold increased to $145,400.

Some types of payments that do not count as ‘earnings’ are: super guarantee contributions, non-monetary benefits and any payments the amount of which cannot be determined in advance (such as incentive based payments or expense reimbursements).

The value of a car, travel or vehicle allowance may be included as ‘earnings’ if it (or part of it) is intended for personal use.1

For more information about what is included as earnings, see EMA Note Issue 5 2017.2 If you have a high-income employee, seek specialist advice on how to pro-actively manage the risk to your business of an unfair dismissal.

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 26 weeks’ pay,3 or the compensation cap (whichever is lower).

As of 1 July 2018, the compensation cap increased to $72,700.

Require further information/assistance?

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

1 See Harris v SX Projects Pty Ltd [2014] FWC 3047 (9 May 2014).
See Fair Work Act 2009 (Cth) s 392: 26 weeks’ pay means the total amount received by the person or to which the person was entitled (whichever is higher) for the period of employment during the 26 weeks immediately before the dismissal.

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