Under Australia’s Fair Work Act, the threshold for high income employees is automatically indexed each 1 July. The high income threshold up to 30 June 2013 was AUD$123,300 per annum, but from that date it increased to AUD$129,300.
What does this mean for employers?
- Although a dismissed employee with a minimum employment eligibility period (6 months for businesses which employ 15 or more employees and 12 months for businesses which employee fewer employees) who is covered by a modern award or enterprise agreement is able to make an unfair dismissal claim regardless of the high income threshold. An employee earning more than the high income threshold who is award or agreement-free is not entitled to make an application for unfair dismissal in the Fair Work Commission (those employees are called “high income employees”).
- Employers with the agreement of an employee earning more than the high income threshold who would otherwise be covered by a modern award, may offer to that employee a guarantee of annual earnings, pursuant to which the employer guarantees the employee that his/her annual earnings over an agreed period will exceed the high income threshold. In those circumstances, the modern award will not apply to the employee, but the employee can still make an unfair dismissal claim.
- It is essential, however, that guarantees of annual earnings be reviewed each year to ensure that the rate exceeds the indexed high income threshold. This review must take place and be put into effect prior to 1 July each year.
Another effect of the indexed change, which is effective 1 July 2013, is that the maximum compensation payable for a successful unfair dismissal claim has been increased to $64,650 (or the remuneration to which the dismissed employee was entitled during the 26 weeks immediately preceding the dismissal, whichever is less).
For more information or advice, contact your local MSI advisor