There are many instances where a terminated employee cannot file a claim for unfair dismissal. This includes if your business has below 15 employees and employed the applicant for less than 12 months, and also if they earned above the high income threshold. In this article, we’ll outline recent changes to the high income threshold and explain how this will affect employers.
Basic pointers
- Employees must be employed for at least 6 months to successfully file for unfair dismissal, and it is 12 months if working for a small business.
- Employees have 21 days after the date of dismissal to apply for unfair dismissal.
- Only employees who earn less than the high income threshold can apply. However, this is waived if a modern award or enterprise agreement applies.
- The FairWork Ombudsman handles all cases of unfair dismissal, and further information can be found on their website here.
Changes to the threshold
- From the financial year of 1 July 2018 to 30 June 2019, the high income threshold was $145, 400 per annum.
- This has now increased as of 1 July 2019, and the new threshold is $148, 700 per annum.
- This threshold means any employee who earns under this amount per year can apply for unfair dismissal. Provided they also satisfy a few other factors like the ones above.
- The new maximum compensation amount for unfair dismissal for this financial year is now $74, 350.
- This means if an unfair dismissal case is successful, your business could potentially be liable to pay that entire amount. This is why it’s crucial your legal documents are comprehensive and up to date.
What constitutes yearly earnings?
The Fair Work Act 2009 (Cth) defines all earnings as:
- Wages. For example income paid weekly, fortnightly, monthly or any other arrangement.
- Other arrangements like salary sacrificing.
- And any non-monetary benefits like company car, or any other type of allowance.
Types of monies not identified as earnings:
- Incentives, bonuses and commissions that can’t be determined in advance
- Reimbursements.
- Superannuation payments that are compulsory
How to protect your business
Follow the steps below to protect your business from unwarranted claims for unfair dismissal:
- Establish an effective and well-rounded employment contract at the time of hiring any new employees. This will set out clear procedures in the event of dismissal.
- Hire an employment lawyer to review your contracts.
- If you’re planning on terminating an underperforming employee, make sure you follow best practice and issue a termination letter.
Conclusion
The key here is to be proactive. Outdated documents can expose your business to legal issues as they don’t reflect your current circumstances. This is because it no longer relies on the relevant laws to properly protect your business.
Lawyers can be expensive, however it is cheaper than the potential compensation payment if the unfair dismissal case is successful. Being proactive with your contracts and documents therefore minimises your legal risks and better protects your business.
