Q. Our company recently terminated a worker's employment due to poor performance. The employee had more than 20 years of service and worked in sales, dealing mainly with our major clients. 

His annual base salary was about $160,000, with an additional $30,000 based on commission on sales. 
 
He has now made application to the Fair Work Commission claiming unfair dismissal. It is our understanding an employee who earns in excess of the high income threshold does not have access to an unfair dismissal remedy. 
 
Is commission or bonus included in the employee’s annual rate of earnings for the purpose of the high income threshold? 
  


A. The Fair Work Act (s382) provides that a person is protected from unfair dismissal if:  

  • the minimum period of employment has been completed and 

  • are either

    • covered either under a modern award or an enterprise agreement 

    • earn less than the high income threshold 

If the employee is award/agreement-free, the high income threshold becomes the important factor in determining whether the employee can seek a remedy under unfair dismissal law.  

 

High income threshold 

The high income threshold is based on an employee’s annual rate of ‘earnings’. The Fair Work Act (s332) defines the meaning of earnings to include:  

  • the employee’s wages or salary

  • any amounts applied or dealt with in any way on the employee’s behalf or as the employee directs (salary sacrifice arrangement). and 

  • the agreed money value of non-monetary benefits. 

 
An employee’s earnings do NOT include:  

  • payments the amount of which cannot be determined in advance, examples include commissions, incentive-based payments and bonuses, and overtime (unless the overtime is guaranteed) – see Jenny Craig Weight Loss Centres Pty Ltd v Margolina [2011] FWAFB 9137 

  • reimbursements, examples include meal allowance, motor vehicle allowance, travel allowance, etc. 

  • employer contributions to a superannuation fund. 

 

Non-monetary benefits 

Non-monetary benefits are included in earnings if they have an agreed monetary value, for example private use of a company vehicle, housing or other benefits provided for personal use

However, tools of trade (e.g. a work-only vehicle) are generally excluded. If the value is disputed, the Fair Work Commission may determine the appropriate value.

 

Possible outcomes 

In this case, the following are potential outcomes with respect to the person’s right to claim unfair dismissal, depending on the specific circumstances, these being:  

  • award-covered: The person may claim unfair dismissal, regardless of annual rate of earnings 

  • award/agreement-free: Person may claim unfair dismissal if base salary is $160,000 (as commission or bonus is not counted as earnings for the purpose of the threshold), or 

  • award/agreement free: A person cannot claim unfair dismissal if base salary plus agreed value of non-monetary benefits (company-provided motor vehicle) exceeds high income threshold. 

 

Bottom line

Bonus or commission is not included in an employee’s annual rate of earnings for the purpose of the high income threshold, but the employer should also check the possibility the person may be covered by a modern award.