The high income threshold under the Fair Work Act
(Act) is indexed. Effective 1 July 2011, the high
income threshold increased from A$113,800 to A$118,100, a 3.7%
The high income threshold as defined by the Act serves two
first, other than where a worker is covered by a modern award
or enterprise agreement, it determines the level of remuneration
under which claims for unfair dismissal can be brought and above
which claims can not be brought
second, it determines the level of earnings above which (if
guaranteed) an award can be ousted.
Importantly, the threshold excludes the amount employers are
liable to pay under the Superannuation Guarantee Charge Act
1992. As such, the high income threshold is A$118,100 plus
Consequently, the cap in damages or compensation for unfair
dismissal is increased to A$59,050 (six months pay) but of greater
immediate concern is the effect the indexing has on employment
where the employer has guaranteed annual earnings in excess of the
high income threshold.
The provisions of section 328 of the Act onwards contemplate the
guarantee of annual earnings subject to indexing. This means that
for employers who have guaranteed the earnings of a high income
employee to obviate an Award or other industrial instrument will
need to ensure that the payments made exceed the high income
threshold as it has been indexed. In other words, the annualised
earnings must since 1 July 2011 exceed A$118,100 plus mandated
If the guaranteed payment (because of indexing) has fallen below
what is now the high income threshold, then the guaranteed period
will end as at the date of that indexing because as annualised
earnings fall below the threshold. It is clear from Section 333 of
the Act that the high income threshold only ever ratchets upwards.
Section 333 provides that any regulation, to the extent that it
would have the effect of reducing a previously set high income
thresholds, is of no force or effect.
Consequently, employers who wish to oust an Award for high
income earners may need to revisit the guarantee already provided
with a view to increasing the remuneration so as to guarantee
annual earnings above the high income threshold, at least from 1
July 2011 until the date on which that threshold will be next
indexed, namely 1 July 2012.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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