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THE HIGH-INCOME THRESHOLD

 
 
 

What is it… and how can you use it?

As kids, we may all dream of the six-figure salary, that we think can buy all the things in life we would ever need – pay for all the bills with lots of spare dollars left over for holidays!  Ah, the reality is a little different – the old adage of no matter what you earn, there never seems to be enough to go around!

While wages / salaries may not be rising a lot, and certainly not in real terms (see previous blog), there may well be people within your organisation that earn at, or above, the high-income threshold.

Currently, until 30 June 2020, the high-income threshold is $148,700 per annum.  It:

  • includes monetary and non-monetary benefits, but

  • does not include Super, commission, overtime or other such income that is not able to be determined in advance, such as bonuses

  • has certain conditions around including cars / car allowances

 
 
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Why is it defined in the Fair Work Act = a measure of flexibility?

Essentially this is one of the more flexible clauses within the Fair Work Act, on the basis that those earning such an amount, will have roles of significant responsibility and the high income “compensates” the employee for any potential ‘instant’ termination.  It is expected that such roles have a clear impact on the organisation, so this clause allows the Employer to act swiftly to make necessary business changes without undue delay.

The high-income threshold is the rate at which the Act essentially defines who can be terminated without notice.  If an employee earns at, or above, this threshold (which rises every year in July as per the Minimum Wage percentage), then an employee no longer obtains some of the protections that the Fair Work Act gives lower-earning employees.

However, you should note that there are many provisions of the Act that still apply, particularly around discrimination, and unlawful termination.

As an Employer though, you can terminate a high-income threshold employee without many of the associated processes that go with terminating other employees.  I.e., as long as you still give notice of a meeting, provide opportunity to bring a support person, you can terminate almost immediately for any reason (misconduct, performance) as long as it is not discriminatory nor unlawful.

Practically, this means that you do not need to go through a series of written warnings and meetings, but can move to instant termination.

You still need to pay accrued entitlements and notice period, if the employee is not working out the notice.

You also need to take careful note of the following:

  • Is the employee truly above the high-income threshold and for the time period defined (parts of an employee remuneration are not included)?

  • Is the termination lawful – i.e., not unlawful / discriminatory?

  • Have you still undertaken a solid process – alert the employee to the meeting, provide opportunity for a support person, take notes.

 
 
 
Mad Panda Media