Increase to High Income Threshold

Each year on 1 July, the high income threshold under the Fair Work Act 2009 (Cth) is indexed in accordance with the Regulations to the Act. This year the high income threshold increased to $118,100 effective 1 July 2011.

The high income threshold is relevant to:

• whether a person is protected from unfair dismissal;
• whether, where the employer has given a guarantee of annual earnings that exceeds the high income threshold, a modern award applies to the person; and
• the maximum compensation payable for an unfair dismissal claim.

Calculating the High Income Threshold

Earnings for the purpose of calculating the high income threshold include the employee’s wages, amounts applied or dealt with in any way on the employee’s behalf or as the employee directs (e.g. employee voluntary superannuation contributions) and the agreed money value of non-monetary benefits (e.g. company car, computer or mobile phone).

Earnings do not include payments for which the amount cannot be determined in advance (e.g. commissions and bonuses), reimbursements or compulsory employer superannuation contributions.

Where there is no agreed money value of non-monetary benefits such as a company car, Fair Work Australia can estimate a real or notional money value of the benefit for the purpose of determining whether a person is protected from unfair dismissal. This estimation is likely to be conservative.

Guarantee of Annual Earnings

A modern award will not apply to an employee if the employer gives an employee a guarantee of annual earnings in excess of the high income threshold and notifies them in writing before or at the time of giving the guarantee (e.g. in the letter of offer or contract of employment), that a modern award will not apply to the employee during the period during which the annual rate of the guarantee exceeds the high income threshold.

Despite the modern award not applying, the employee is still protected from unfair dismissal if, but for the guarantee, the modern award would have applied.

Maximum Compensation

The maximum compensation payable to an employee for an unfair dismissal is capped at the lower of half of the high income threshold, being $59,050 from 1 July 2011 or the equivalent of six months’ wages for the employee.

If you require any assistance in relation to calculating the high income threshold please contact National Workplace Lawyers on +61 2 9233 3989. 

National Workplace Lawyers

Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.