Increases to high-income threshold and compensation cap from 1 July 2023
From Saturday 1 July 2023, two key changes will apply to unfair dismissal applications:
- the high-income threshold will increase from $162,000 to $167,500.
- the maximum compensation that can be awarded by the Fair Work Commission will rise from $81,000 to $83,750.
The compensation cap is half the value of the high-income threshold, per section 392(5) of the Fair Work Act 2009 (Cth) (FW Act). Accordingly, both figures rise on 1 July each year, in a manner prescribed by the Fair Work Regulations 2009 (Cth).
High-income threshold and earnings
An employee will be precluded from bringing an unfair dismissal claim if their annual earnings are above the high-income threshold, and they are not covered by an award or enterprise agreement.
For these purposes, 'earnings' will include:
- amounts applied or dealt with in any way on the employee’s behalf or as the employee directs;
- the agreed money value of non-monetary benefits; and
- amounts or benefits prescribed by the regulations (eg an employee’s personal use of employer-provided benefits such as a company car),
but will not include:
- payments the amount of which cannot be determined in advance (for example, bonuses that are contingent on the employee’s performance);
- compulsory contributions to a superannuation fund; and
- amounts prescribed by the regulations.
Guarantee of annual earnings
The increased high-income threshold will also affect guarantees of annual earnings under the FW Act. These are agreements between modern award-covered employees and employers, under which the employer undertakes to pay the employee at least the amount of the high-income threshold over a period of 12 months or longer.
In return for the undertaking, the employer can avoid the application of the applicable modern award, although employees will remain notionally covered by the award and able to bring unfair dismissal claims.
Please reach out if you would like assistance with preparing a guarantee of annual earnings or for specific advice on how these changes affect your workplace.
This article was written with the assistance of Darcy Keogh, Law Graduate.
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