High Income Threshold in Australia: What it Means For Employers

Author: Megan Adams, Progressive Legal

In the dynamic landscape of employment laws and regulations in Australia, the concept of a “high income threshold” plays a crucial role in determining various legal rights and entitlements for both employees and employers.  

If you’re an employer navigating the intricacies of the Australian labour market, it’s essential to grasp the significance of the high income threshold and how it impacts your obligations. On this page, we’ll break down the key aspects of the high income threshold, its implications, and why it’s relevant to your business. 

What is Unfair Dismissal? 

Before delving into the high income threshold, it’s important to understand the concept of unfair dismissal.  

Unfair dismissal refers to the termination of an employee’s employment in a manner that is considered unjust, unreasonable, or without a valid reason under the Fair Work Act 2009. 

When an employee is unfairly dismissed, they may have the right to seek remedies, such as reinstatement or compensation, through the Fair Work Commission. 

What is the High Income Threshold? 

The high income threshold, in simple terms, refers to the maximum annual salary an employee can earn while still being eligible to make an unfair dismissal claim under the Fair Work Act 2009. 

This threshold serves as a crucial benchmark that helps determine whether an employee’s termination can be challenged as an unfair dismissal in the Fair Work Commission. 

As of 1 July 2023, the high income threshold in Australia is set at $167,500 per annum. This figure is adjusted annually on 1 July and can be found here.  

This means that employees earning above this threshold are generally excluded from unfair dismissal protections, provided they are not covered by a modern award or enterprise agreement. 

Implications for Employers 

For employers, understanding and correctly applying the high-income threshold is of paramount importance.

Employees who fall above this income limit do not have access to unfair dismissal claims, which can save employers from potential legal disputes and associated costs.  

However, it’s crucial to note that other avenues of dispute resolution may still be available to these employees, such as claims related to general protections, workplace discrimination or breaches of contract. 

Modern Awards and Enterprise Agreements

While the high-income threshold generally excludes employees earning above the prescribed amount from unfair dismissal claims, it’s important to consider the role of modern awards and enterprise agreements.  

These agreements can override the high-income threshold and extend unfair dismissal protections to higher-income employees. Therefore, it’s essential for employers to accurately identify employees’ classification within industrial instruments and thoroughly and regularly review any applicable awards or agreements to understand the full scope of their obligations.

Calculating the High Income Threshold 

Calculating the high-income threshold involves more than just determining an employee’s annual salary. It’s important to consider various components of remuneration, such as: 

Base Salary

This includes the employee’s standard wage or salary. 

Allowances

Certain allowances, such as travel or meal allowances, can contribute to the overall income. 

Overtime Payments

If an employee has guaranteed overtime, these payments should also be factored in. 

Non-Monetary Benefits

The value of non-monetary benefits, such as a company car, can impact the high-income threshold calculation. 

The high-income threshold does not include performance-based bonuses and commissions, reimbursements, non-guaranteed overtime, or compulsory Superannuation contributions. 

By accurately calculating an employee’s total remuneration, you can determine whether they fall above or below the high-income threshold, thus clarifying their entitlement to unfair dismissal protections. 

Managing Disputes and Legal Compliance

While the high income threshold offers some protection to employers against unfair dismissal claims, it’s important to maintain best practices in human resources management.  

Treating all employees fairly, regardless of their income, helps create a positive work environment and minimise the risk of potential legal disputes.  

Employers are encouraged to keep thorough records of employment contracts, agreements, performance evaluations, and any other relevant documentation.

This proactive approach not only ensures legal compliance but also demonstrates a commitment to transparency and fairness. 

Key Takeaways 

Navigating the intricacies of employment law is essential for every business, and understanding Australia’s high-income threshold is a key aspect of this endeavour.  

By grasping the implications of the high-income threshold, calculating it accurately, and maintaining strong HR practices, employers can effectively manage their legal obligations and reduce the risk of costly disputes. 

At Progressive Legal, we’re dedicated to helping businesses like yours navigate the complexities of employment law. Our experienced team of legal professionals is well-versed in Australian labour regulations and can provide expert guidance tailored to your specific needs.  

Contact us today to ensure your business remains compliant and well-informed in the ever-changing landscape of employment law. Call us on 1800 820 083 or simply request our expert advice below.

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