Increase in Unfair Dismissal Cap

Fair Work Australia announced on Tuesday afternoon that the high income threshold in unfair dismissal cases will increase to $123,300. This means from 1 July 2012, employees who are not covered by an enterprise agreement or a modern award, and whose earnings are $123,300 or greater are not protected from unfair dismissal. The high income threshold is calculated by reference to:

• the employee’s wages;
• amounts dealt with on the employees behalf or at the employer’s direction for example, superannuation payments over and above the superannuation guarantee charge; and
• any agreed money value of non-monetary benefits for example, motor vehicles.

Payments which cannot be determined in advance, reimbursements and contributions to superannuation in accordance with the superannuation guarantee charge (currently 9%) are not included in calculating earnings.

For dismissals occurring on or after 1 July 2012, a cap on the compensation payable will be $61,650 or the amount the employee received during the 26 weeks immediately prior to the dismissal (which ever is lessor).

Employers should give careful consideration to the drafting of contracts of employment including a focus on agreed monetary values which may take employee’s earnings over the high income threshold. A well drafted and `up to date’ contract of employment can provide significant assistance in determining whether an employee’s earning are above the high income threshold.

If you would like more information about the changes to the high income threshold or the compensation cap on unfair dismissals or other related matters 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.