July 1 changes: unfair dismissal, wages and super

Analysis

July 1 changes: unfair dismissal, wages and super

Changes affecting unfair dismissal, minimum award wages and superannuation will kick off from July 1.

Changes affecting unfair dismissal, minimum award wages and superannuation will take effect July 1.

High income threshold


The high income threshold will increase to $142,000 per annum, effective 1 July 2017. The previous threshold was $138,900 per annum until 30 June 2016.

The high income threshold is the amount by which a category of non-award employee is excluded from the unfair dismissal provisions of the Fair Work Act, and in relation to the guarantee of annual earnings relating to modern awards.

The increase in the threshold affects a number of different provisions under the Fair Work Act, including:
  • an award/agreement-free employee’s eligibility to claim unfair dismissal
  • the maximum amount of compensation of six months' earnings that the Fair Work Commission can order an employer to pay to an employee deemed to have been unfairly dismissed, and
  • the level an employer can guarantee an employee’s earnings which renders the provisions of the applicable modern award no longer applicable to the employee.

Unfair dismissals


The high income threshold has increased to $142,000 pa (previously $138,900 pa). Under unfair dismissal laws, an employee who is not covered by a modern award or enterprise agreement whose annual rate of earnings exceeds the “high income threshold” is ineligible to claim unfair dismissal.

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

Earnings include:
  • an employee’s wages
  • 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, e.g. commissions, incentive-based payments and bonuses, and overtime (unless the overtime is guaranteed).
  • Reimbursements – for example, meal allowance, motor vehicle allowance, travel allowance, etc.
  • employer contributions to a superannuation fund.
The maximum amount of compensation the Fair Work Commission can order in an unfair dismissal matter is now $71,000 from 1 July 2017 (previously $69,450 up to 30 June 2017).

Guarantee of annual earnings


High income employees who are covered by a modern award can agree to avoid or modify the award. An employer must provide a written undertaking guaranteeing annual earnings at least equal to the “high income threshold”. However, these employees remain “covered” by the award and may access unfair dismissal provisions.

Annual wage review


On 6 June 2017, the Fair Work Commission handed down its annual wage review.

The decision varied the following:
  • Minimum wage rates in modern awards – increase by 3.3 per cent from first full pay period commencing on or after 1 July 2017 (rounded to the nearest 10 cents)
  • National minimum wage – increased by 3.3% to $694.90 per week, or $18.29 per hour
  • Wages for juniors, apprentices – most rates are expressed as a percentage of a nominated adult rate so they receive a proportionate increase to the adult rate
  • Wages for trainees and piece workers – most trainees are covered by the National Training Wage system that is included as a schedule in most awards. National Training Wages will also be increased by 3.3 per cent from the first pay period to commence on or after 1 July 2017. Piece rates will increase in accordance with the relevant provisions in the modern award, pay scale or transitional award.
  • Supported wage system – employees with a disability: these employees are paid a percentage of the relevant adult wage, based on their assessed capacity. The 3.3 per cent increase will also flow through to these employees.

Superannuation


Changes were announced in the federal budget regarding superannuation which will apply from 1 July 2017. The main superannuation changes are:
  • the introduction of a $1.6 million transfer balance cap
  • removal of tax exemption for transition-to-retirement pensions (TRIPs)
  • the annual concessional (before tax) contributions cap will be cut to $25,000
  • the annual non-concessional (after tax) contributions cap will be cut to $100,000
Other changes will also be implemented. Click here for more information.
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