Home > News > How to Apply the High Income Threshold for Unfair Dismissal and for Fixed Term Contract Limitations
March 25, 2024
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By Micheal Niu, Lawyer
Each year a high-income threshold is set by the Fair Work Commission and is used to determine, inter alia, whether:
- A worker is potentially protected from unfair dismissal laws; and
- The new two-year fixed term contract limit applies to a worker.
The high-income threshold for FY23-24 is $167,500.
This article explores how the high-income threshold can be met by part-time employees for these two different purposes.
Unfair dismissal protection
Any worker who earns less than the high-income threshold and who has completed a minimum qualification period of employment will be protected from unfair dismissal.
In Florenca v IFAP , the Fair Work Commission clarified that a part time employee whose actual annual earnings was less than the high-income threshold will be protected from unfair dismissal, despite the employer arguing that if the part time employee had hypothetically worked on a full time basis, her annual earnings would have exceeded the high-income threshold.
The Fair Work Commission held that it could not find any requirement under the Fair Work Act 2009 to convert the employee’s earnings into that which she would have earned should she have worked on a full-time basis. Adding further, the earnings should mean “the fruit of labour, that is, they are whatever is received by way of remuneration for the services provided.”
Fixed term contract limit
Any worker who earns less than the high-income threshold cannot be employed on a fixed term contract that exceeds 2 years in duration (with limited exceptions that apply).
Unlike the unfair dismissal protection threshold, the high-income threshold for part time fixed term employees is reduced on a pro-rata basis depending on the part time employee’s hours of work compared to a full time employee.
This high-income threshold is calculated by the following formula:
- The number of hours worked under the terms of the contract over a 1-year period;
- Divided by the number of hours that a full-time employee would work in the year; and
- Multiplied the by the high-income threshold, for the financial year in which the contract is entered into.
To determine the number of hours that a full-time employee would work in the year:
- Take the number of hours a full-time employee would be required to work under an enterprise agreement or modern award that applies to the employee (modern awards usually specify 38 hours for full employees);
- If no enterprise agreement or modern award applies, take the number of hours of a comparable full-time employee working for the same employer; and
- If the number of hours cannot be worked out as above, then default to 38 hours per week.
Example
Kara is a doctor. Kara is offered a part-time fixed term contract by a private medical practice to work 30 hours a week for 3 years. Under the limitations, a fixed term contract can’t be for more than 2 years unless an exception applies.
Her yearly part-time salary will be $140,000.
Under the contract, each year Kara would work 30 hours a week for 52 weeks, totalling 1560 hours.
A full-time employee in that role, covered by the Medical Practitioners Award, would work 38 hours a week, totalling 1976 hours over the same 52-week period.
Applying the formula: 1560/1976 x $167,500 = $132,236.84
Kara’s salary of $140,000 is above the calculated high-income threshold for the year her contract will be entered into so her fixed term contract is exempt from the limitations.
Key takeaway
The high-income threshold for part time employees does not change for unfair dismissal protection laws, whereas it will be reduced on a pro-rata basis for fixed term contract laws.
If you have any questions in relation to this article, please contact the MST Lawyers’ Employment Law team on +61 3 8540 0200 or email [email protected].
FWO – Library Article – K600486 – High income threshold amounts
Industrial Foundation for Accident Prevention (2019) FWC 144 (Link).
Reg 2.14 of the Fair Work Amendment (Fixed Term Contracts) Regulations 2023 (Link)
