High-income threshold: When is an allowance part of 'earnings' for dismissal claims?

The Fair Work Commission (FWC) recently dealt with a case involving a senior cyber security specialist who was dismissed from his role at a chemicals, energy, and fertilisers company.

The worker challenged his dismissal, claiming it was unfair. He argued that his earnings were below the high-income threshold for unfair dismissal claims, contending that his after-hours technical support allowance should not be included in the calculation of his total earnings. The worker also questioned whether he was covered by a modern award.

This case sheds light on the factors that determine eligibility for unfair dismissal claims, including income thresholds and award coverage.

The decision provides insights into how the FWC interprets 'earnings' and the importance of understanding all components of an employee's remuneration.

High-income threshold

The dispute centred on whether the worker's annual earnings exceeded the high-income threshold, which at the time of his dismissal on 10 May 2024 was $167,500. The employer argued that the worker's annual rate of earnings was $174,022, comprising a base salary of $158,202 and an after-hours technical support allowance of $15,820.20.

The worker, who held the position of senior cyber security & GRC specialist, contended that his earnings were below the threshold. He argued that the technical support allowance should not be included as it was not a fixed allowance and was not paid as part of his regular pay.

To support his claim, he provided evidence of pay slips over a period of almost three months from late the previous year, where the employer did not pay him the technical support allowance.

The FWC emphasised the importance of understanding what constitutes 'earnings' under the Fair Work Act. Drawing on previous decisions, the Commission noted:

"Now what does a man earn? He earns the sum which is the fruit of his labour; whatever he receives by way of remuneration for the services he gives, or as Lord Macnaghten said in Abram Coal Co v Southern [1903] AC 306, a man's 'earnings' are 'the full sum for which the man is engaged to work'."

This definition underscores that earnings include more than just base salary, potentially encompassing various allowances and benefits.

Is the allowance part of ‘earnings’?

The FWC examined the nature of the technical support allowance. The worker had been employed as a senior cyber security & GRC specialist since 1 March 2022. His role involved providing advice about cyber security threats, assessing new products and services, and tracking deviations from the company's risk appetite.

The technical support allowance was introduced to the worker's remuneration package on 12 August 2020. According to the employer's IT&S after hours technical support policy, employees providing after hours technical support (AHTS) were generally required to work a specific roster of one week in six, being available to take technical support calls between 5:30 PM and 7:30 AM on weekdays and 24 hours a day on weekends and public holidays.

The Commission examined whether the allowance should be considered part of the worker's earnings. It stated:

"The technical support allowance was not excluded by the operation of s 332(2). It was not consideration to meet some sort of expense incurred that is open to be characterised as reimbursement. The payment was expressly calculated as a percentage of [the worker's] base salary, rather than having any connection to any 'actual cost' that he may have incurred or would likely incur."

Award coverage

In addition to the earnings threshold, the FWC also considered whether the worker was covered by a modern award. The employer argued that their business was mainly engaged in the energy and natural resources industry, and that the worker's role was neither an engineering nor scientific one.

After reviewing the limited evidence presented, the FWC concluded:

"Based on the dearth of evidence before me and having considered the submissions made, I find that the PE Award did not cover [the worker] whilst employed." This finding further impacted the assessment of the worker's eligibility to make an unfair dismissal claim.

Based on its analysis, the FWC reached the following conclusions:

"Based on the abovementioned reasons, I have found that the technical support allowance forms part of [the worker's] 'earnings', as that term is understood for the purposes of the Act (see s332(1)) and therefore [the worker's] earnings exceed the high income threshold."

This determination was crucial in deciding the worker's eligibility for unfair dismissal protection. The Commission further stated:

"[The worker] is not a person protected from unfair dismissal and accordingly his application must be dismissed."