A lesson in navigating the high-income threshold in unfair dismissal claims

Unfair dismissal laws play a vital role in protecting employees across Australia, ensuring their employment rights are upheld when it comes to termination of employment. However, not every employee is eligible to file an unfair dismissal claim under the Fair Work Act 2009 (Cth) (FW Act). One key factor influencing eligibility is whether the employee’s annual earnings exceed the high-income threshold.

The high-income threshold sets a limit on an employee’s eligibility to access unfair dismissal protections under the FW Act. Those not covered by a modern award or an enterprise agreement must earn below this threshold, which is a prerequisite for making a claim. Yet, determining an employee’s annual rate of earnings isn’t always clear-cut. It’s often been a contentious point in unfair dismissal claims brought before the Fair Work Commission (FWC).

The recent FWC case of Mr Murray Hobson v Murrin Murrin Operations Pty Ltd sheds light on this complex area. Offering valuable guidance on accurately calculating an employee’s annual earnings to assess their eligibility to access unfair dismissal protections.

Here, our experts explore this case and the critical insights it provides for navigating the intersection of income thresholds and employee rights.

What is the high-income threshold?

The high-income threshold is currently set at $175,000 per annum and is adjusted annually on 1 July. Employees who have an annual rate of earning above $175,000 per annum (currently) and who are also not covered by a modern award or enterprise agreement are ineligible to bring unfair dismissal proceedings. Earnings are prescribed under the FW Act to include:

• wages;
• such other amounts (if any) worked out in accordance with the Fair Work Regulations 2009 (Cth);
• amounts dealt with on the employee’s behalf or as the employee directs; and
• the agreed monetary value of non-monetary benefits.

Non-monetary benefits are those other than an entitlement to a payment of money to which:

• the employee is entitled to in return for work; and
• for which a reasonable monetary value has been agreed upon by the employer and the employee.

These may encompass aspects such as the private use of a company car, housing, or other benefits that may be offered by an employer.

The FWC also has the discretion to include these non-monetary benefits in the calculation of the high-income threshold by attributing a value to the benefit.

Case study: Murrin Murrin Operations Pty Ltd

To support the complexities of calculating an employee’s earnings for the high-income threshold, we address the case of Mr Murray Hobson v Murrin Murrin Operations Pty Ltd.

The employee, who was engaged as a tailing and water management coordinator, recently filed an unfair dismissal application after being dismissed by his employer, Murrin Murrin Operations Pty Ltd (Murrin Murrin Operations), in September 2024.

The employee had suffered a non-work-related illness in 2023 and remained on a prolonged period of absence due to that illness. Subsequently, the employee exhausted his accrued leave entitlements, and the employer placed the employee on a salary continuance scheme. While the employee’s gross salary before he entered into the salary continuance scheme was $163,800 per annum, the salary continuance scheme entitled the employee to 75 per cent of his gross salary during the period he was absent from work. The reduced sum was paid by the employer to the employee over a 10-month period until his employment was terminated by the employer. At the time of the employee’s dismissal, the high-income threshold was $175,000 (gross) per annum.

Did the employee meet the high-income threshold?

In this case, the FWC determined the employee was ineligible to make an unfair dismissal claim on the basis that his annual rate of earnings exceeded the high-income threshold.

The employee argued that the imposition of the salary continuance scheme (displacing the payment of his normal annual salary by the employer) meant that the gross annual rate of earnings amounted to $122,850, and during his absence from work, he hadn’t received any other payments from his employer. He claimed that during his absence, he didn’t receive any of the allowances he was previously entitled to be paid by his employer, including site allowances, medical allowances, and additional superannuation contributions. The employee said he was paid a lesser sum than what his contract of employment entitled him to be paid in exchange for his labour. The FWC disagreed with the employee, finding the sum of the annual rate of earnings is determined by reference to the underlying payments and benefits to which the employee was entitled and not pursuant to the payments he received under the salary continuance scheme. The underlying payments and benefits included sums derived from the employee’s contract of employment and the employer’s remuneration policy as it applied to the employee, including:

• a base salary of $163,800 per annum;
• a non-discretionary and payable site allowance of $20,000 per annum;
• a medical allowance of $5,000 per annum; and
• a superannuation contribution of three per cent per annum of $5,660, in addition to the employer’s statutory obligations to pay the minimum superannuation contribution.

These sums equated to a total sum of $194,460, a significant $16,460 over the high-income threshold. This, therefore, made him ineligible to make an unfair dismissal claim.

This case is another demonstration of how the FWC calculates an employee’s earnings to determine if those earnings exceed the high-income threshold and whether the employee is eligible to make an unfair dismissal claim.

If any of this information has raised questions for your business regarding understanding the high-income threshold for unfair dismissal claims, or if you have another workplace matter you need assistance with, please contact the team at Citation Legal for a confidential discussion.

About our author

Caterina Apostolakos is a qualified Solicitor at Citation Legal. Caterina provides employment relations advice and support to our clients’ businesses on a wide range of matters.