Niceties in the calculation of the unfair dismissal salary cap
The limit on non-award employees commencing unfair dismissal proceedings is an income of under $136,700 (effective 1 July 2015), which includes guaranteed salary (not statutory superannuation), and other guaranteed benefits. It sounds simple, but sometimes calculating the settlements of salary which come within this definition, and which may take a particular employee outside the unfair dismissal jurisdiction, can be difficult.
As a couple of examples:
- An employee on $115,500 base salary for a 40 hour week was contractually obliged to work 58 hours a week with overtime paid at $56.00 per hour plus a 5% project allowance. This totalled $173,250 per annum, exceeding the salary cap. The employee argued that the overtime component was not guaranteed, because it was not paid if inclement weather interrupted his work or if he took sick leave
- The Fair Work Commission (FWC) decided that the overtime was to be included in his annual earnings, because events outside the control of the employer did not indicate that the overtime was not guaranteed. The overtime expected to be received, all things being equal, could be determined in advance and was therefore part of guaranteed income, even though traditional overtime is not anticipated or agreed in advance
- Guaranteed income can also include non-monetary items, if a “personal use” value can be calculated for work-related benefits.
For example, with a car allowance, the FWC applies a formula based on work-related use and private use to establish a dollar value for private use, and then considers whether that takes the employee outside the salary cap. In a recent case concerning a work provided iPad, although the employee claimed that he used it only for work purposes, the contents of the ipad showed numerous personal photos and videos. In addition 62.5% of his iPhone use ($1,220 conservatively, 412 out of 659 calls identified as private) and 60% personal use of a car ($11,454 conservatively since it didn’t include tolls and speeding fines paid by the employer) took the employee over the salary threshold.
If you’re faced with an unfair dismissal claim, it’s worth considering whether additional cash or non-cash benefits take pay above the threshold, potentially putting the application outside the jurisdiction of the Commission.
For more information please read our Plain English Guide to Termination of Employment: Dismissal & Redundancy.
Stephen Booth, Principal
Phone: +61 2 9895 9222