Each year on 1 July, the High Income Threshold under the Fair Work Act is increased. As at 1 July, 2020, the High Income Threshold is $153,600.
The Fair Work Commission defines the meaning of earnings to include:-
- Any amounts that the employee directs to be paid on their behalf ie., salary sacrifice
- Agreed value of any non monetary benefits ie., fully maintained company car, private use of a company mobile phone, private use of a company laptop. Note: if the employer and employee are unable to agree on the value of these benefits the Fair Work Commission may do so.
Whilst not earnings, Fringe Benefit Tax (FBT) is also included when calculating any non monetary benefits included in an employee’s contract, when assessing an employee’s income.
The Fair Work Commission defines what is not earnings:-
- Payments which cannot be guaranteed ie., commissions, incentive-based payments or bonuses, overtime (unless it is guaranteed)
- Expense reimbursements
- Superannuation contributions made by the employer
An employee who has not yet completed 12 months with the employer will have their income calculated based on the annual equivalent for the period of service completed ie., 7 months completed - $153,600 / 12 x 7 = $89,600.
It is commonly misunderstood that because an employee earns in excess of the High Income Threshold, that they cannot claim remedy for unfair dismissal. This however is not always the case. An award/agreement free employee cannot seek remedy for unfair dismissal if their annual earnings are higher than the High Income Threshold.
A high income earner will have access to unfair dismissal remedy if they are covered by an award, even when as a guaranteed high income they are excluded from the application of an award.
An employee covered by a modern award or agreement can access unfair dismissal remedy even if their salary is higher than the High Income Threshold.
For assistance in determining if your high income earner has award coverage, please contact us at email@example.com or 1300 720 004.