From 1 July 2018, the High Income Threshold increases to $145,400. What is the high income threshold and why is it important?
The High Income Threshold affects how modern awards apply to employees and affects their ability to access unfair dismissal.
Which entitlements are affected by the High Income Threshold?
- Employees who earn more than the high income threshold and who aren’t covered by a modern award or enterprise agreement, can’t make an unfair dismissal claim
- Employees who are covered by a modern award and have agreed to a written guarantee of annual earnings that is more than the high income threshold, don’t get modern award entitlements.
- The maximum amount of compensation payable for unfair dismissal is capped at either half the high income threshold, or 6 months of the dismissed employee’s wage - whichever is less.
What’s counted under the High Income Threshold?
An employee is affected by this if their ‘earnings’ are more than the high income threshold. Earnings’ include:
- Wages
- Money that is paid on their behalf (e.g. superannuation top-ups or salary sacrifice)
- The agreed value of non-monetary benefits (e.g. laptops and mobile phones).
An employee’s earnings don’t include:
- Payments that can’t be set in advance (e.g. commissions, bonuses or overtime)
- Reimbursements
- Superannuation contributions that the employer has to make.
Employers need to take care in assessing earnings – for example, providing an employee with a company car will not take an employee over the high income threshold unless there is a prior agreed value assigned to the use of the vehicle.
It is also important to be mindful that employees who earn over the threshold and are unable to lodge an unfair dismissal claim may still have other legal avenues to challenge their dismissal. These avenues include a 'Breach of Contract' claim, anti-discrimination laws and the general protections provisions of the Fair Work Act.
Employers with employees under Guarantee of Earnings contracts should check these contracts and the written Guarantee to ensure they continue to comply.
If you need assistance understanding whether your employees have access to unfair dismissal or understanding the impact of the high income threshold, please contact us.