Here is an excellent analysis of how components of a salary package are dealt with in the context of determining whether an employee’s earnings exceed the high income threshold.
“Were the Applicant’s annual earnings over the $162,000 high income threshold?
(s.382(b)(iii))
[9] Section 333 of the Act provides that the high income threshold is the amount prescribed
by, or worked out in the manner prescribed in the regulations. Regulation 2.13 of the Fair Work
Regulations 2009 provides that as of 1 July 2022 the figure was $162,000. This figure applied
at the time of the Applicant’s termination on 23 April 2023.
[10] Section 332 of the Act defines ‘earnings’ as follows:
“Earnings
(1) An employee’s earnings include:
(a) the employee’s wages; and
(b) amounts applied or dealt with in any way on the employee’s behalf or as the
employee directs; and
[2023] FWC 2235
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(c) the agreed money value of non-monetary benefits; and
(d) amounts or benefits prescribed by the regulations.
(2) However, an employee’s earnings do not include the following:
(a) payments the amount of which cannot be determined in advance;
(b) reimbursements;
(c) contributions to a superannuation fund to the extent that they are
contributions to which subsection (4) applies;
(d) amounts prescribed by the regulations.
Note: Some examples of payments covered by paragraph (a) are commissions,
incentive-based payments and bonuses, and overtime (unless the overtime is
guaranteed).
(3) Non-monetary benefits are benefits other than an entitlement to a payment of money:
(a) to which the employee is entitled in return for the performance of work; and
(b) for which a reasonable money value has been agreed by the employee and
the employer;
but does not include a benefit prescribed by the regulations.
(4) This subsection applies to contributions that the employer makes to a superannuation
fund to the extent that one or more of the following applies:
(a) the employer would have been liable to pay superannuation guarantee charge
under the Superannuation Guarantee Charge Act 1992 in relation to the person
if the amounts had not been so contributed;
(b) the employer is required to contribute to the fund for the employee’s benefit
in relation to a defined benefit interest (within the meaning of section 291-175
of the Income Tax Assessment Act 1997) of the employee;
(c) the employer is required to contribute to the fund for the employee’s benefit
under a law of the Commonwealth, a State or a Territory.”
[11] Regulation 3.05 explains how to work out amounts for the purposes of assessing
whether the high income threshold applies in relation to a dismissal, and includes Reg
3.05(6) that provides for circumstances where a non-monetary benefit that has not been
for an agreed amount may be included for the purposes of the unfair dismissal
jurisdiction.
[2023] FWC 2235
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[12] Regulation 3.05(6) reads as follows:
“REGULATION 3.05 When a person is protected from unfair dismissal–high
income threshold
…..
Benefits other than payment of money
(6) If:
(a) the person is entitled to receive, or has received, a benefit in accordance with
an agreement between the person and the person’s employer; and
(b) the benefit is not an entitlement to a payment of money and is not a nonmonetary benefit within the meaning of subsection 332(3) of the Act; and
(c) the FWC is satisfied, having regard to the circumstances, that:
(i) it should consider the benefit for the purpose of assessing whether the
high income threshold applies to a person at the time of the dismissal; and
(ii) a reasonable money value of the benefit has not been agreed by the
person and the employer; and
(iii) the FWC can estimate a real or notional money value of the benefit;
the real or notional money value of the benefit estimated by the FWC is an amount for
subparagraph 382(b)(iii) of the Act.”
[13] In support of its submission, the Respondent filed materials including a spreadsheet
summarising the Applicant’s gross pay from 21 March 2022 to 19 March 2023, screenshots of
a bank account’s transaction history with payments to the Financial Planning Association
(FPA), and screenshots of internet banking transfer payments to the Applicant. The Respondent
additionally submitted copies of the Applicant’s payslips for the period 22 March 2022 until 22
March 2023.
[14] In support of his submission, the Applicant filed materials including the original
employment agreement, the revised employment agreement, the termination of employment
letter, and payslips.
[15] Essentially, the Respondent submits that the Applicant’s total earnings, monetary and
non-monetary benefits consisted of
- $164,676.29 (plus superannuation;
- Additional monies paid of $12,732.56;
- Payment of industry membership fees $1,200pa; and
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- Bonus on 50% new business income – included in total salary above.
[16] As stated above, Respondent submitted a spreadsheet summarising the gross pay and
additional monies paid to the Applicant for the 12 months leading up to the termination of his
employment. This spreadsheet is reproduced below.
[17] The Respondent submitted that the Applicant’s earnings totalled $177,408.85, an
amount in excess of the $162,000 high income threshold.
[18] Although not fully developed, it is apparent from the Respondent’s oral submissions at
hearing that it considered the Applicant’s ‘relevant’ income to include an estimate of the amount
of time the Applicant allegedly spent furthering his own business interests whilst employed by
the Respondent. Further, the Respondent is of the view that the Applicant’s base salary at
[2023] FWC 2235
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termination is to be determined by reference to the Applicant’s base earnings for the 12 month
period up to the date of termination. On that basis, the Respondent submits that the Applicant’s
base salary at termination is $164,676.29.
[19] The Applicant submits his remuneration at the time of termination was a base rate of
pay of $135,746.61 and a 10.5% superannuation guarantee charge of $14,253.39, amounting to
an annual remuneration package of $150,000. In support of this submission the Applicant relies
on the revised employment agreement, a termination of employment letter, and payslips.
[20] The Applicant further submits that the superannuation guarantee charge of $14,253.39
is not to be included as earnings pursuant to section 332(4)(a) of the Act and that as a
consequence the sum of $14,253.39 should be deducted from his annual remuneration package
of $150,000.
[21] The Applicant submits that the sum of $3608.89 paid in bonuses for new businesses
from 1 November 2022 to 19 March 2023, does not form part of his earnings, pursuant to s
332(2) (a) of the Act. In support of this submission, he points to clause 11.2 of the revised
employment agreement which in essence provides that the entitlement to a bonus is dependent
on the Applicant achieving a certain level of new business income and that it ‘varies
significantly from month to month based on how much new business is received from the
Respondent’.
[22] The Applicant does not dispute that the Respondent paid for his FPA membership
valued at $1200. The Applicant submits that the sum of $1200 should not be included in the
calculation of his earnings as it was a ‘business expense and not part of the Applicant’s salary
package’, and they ‘did not obtain any fringe benefit from the membership’.
[23] Accordingly, his remuneration at the time of termination was $135,746.61.
Consideration
Salary
[24] It is well established that the time at which the annual rate of earnings must be
ascertained is at the time of the termination of the person’s employment. The exercise requires
the determination of the annual rate of earnings at that time, not the annual earnings to that time
(the amount earned in the 12 months to that time).1
[25] It is not in dispute that the Applicant was notified of his dismissal on 23 March 2023,
taking effect on 23 April 2023. On the material before me, I find that at the time the Applicant
was dismissed, he was contractually entitled to an annual salary of $150,000 (inclusive of SGC)
as set out in the revised contract of employment. The Applicant’s payslip for the period of 6
March 2023 – 19 March 2023 supports the contractual entitlement.
[26] For reasons discussed below, the amount of $14,253.39 on account of SGC is not
included as part of the Applicant’s earnings. I am satisfied that at the time of the Applicant’s
dismissal, his guaranteed base salary was $135,746.61.
[2023] FWC 2235
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Superannuation
[27] s332(2)(c) of the Act provides that compulsory superannuation payments made by the
employer are expressly excluded from the calculation of an employee’s earnings. Accordingly,
for the purposes of calculating the Applicant’s earnings, I have deducted the sum of $14,253.39
from the Applicant’s income of $150,000.
Financial Planning Association membership
[28] It is not in dispute that the Respondent paid for the Applicant’s membership fees for the
FPA, totalling $1200.
[29] The Applicant submitted that the FPA membership was a ‘business expense and not part
of the Applicant’s salary package’, as the ‘Applicant did not obtain any fringe benefit from the
membership.
2
[30] The Applicant additionally submitted that ‘to become or remain a Certified Financial
Planner an adviser must be a member of the Financial Planning Association. The cost of this
has been borne by the business as a business expense previously and is not a fringe benefit nor
part of my remuneration. It is not included in my contract of employment’3
.
[31] The Respondent submits that the $1200 should be included as earnings pursuant to
s332(1)(b) of the Act as the Applicant was in control of the business bank accounts and directed
the business monies towards paying the FPA annual membership.
[32] It is therefore necessary for me to determine whether the $1200 payment to the FPA on
behalf of the Applicant was a non-monetary benefit to be included in the calculation of the
Applicant’s earnings.
[33] As stated earlier, the Applicant’s employment was governed by a written contract of
employment. The revised contract at clause 17 provides that ‘The Employer must pay the
Employee’s costs of attending all such seminars, lectures, or workshops as are considered by
the Employee (acting reasonably) as are necessary for the Employee to maintain an appropriate
standard of continuous professional development’. I accept the Applicant’s evidence that
membership of the FPA is a prerequisite to becoming or remaining a Certified Financial
Planner. I am therefore satisfied that the payment of $1200 to the FPA was on account of the
Applicant’s professional development rather than a non-monetary benefit.
[34] For completeness I observe that even if I am wrong and the sum of $1200, is included
in the Applicant’s earnings, my conclusion that the Applicant’s earnings do not exceed the high
income threshold is not disturbed.
Bonus on 50% new business income
[35] s332(a) of the Act provides that an employee’s earnings do not include payments the
amount of which cannot be determined in advance. In considering the application of s 332 (a)
in Foster v CBI Constructions Pty Ltd4
Vice President Catanzariti, Vice President Lawler, and
Commissioner Lewin stated as follows:
[2023] FWC 2235
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“Clearly, the legislative context to the meaning of earnings is that amounts which cannot be
pre-determined in advance are excluded. For example, bonuses which may be dependent on the
performance of the individual or group of employees, are not included because of its
indeterminate nature.”5
[36] On the material before me, I am satisfied that the ‘bonus on 50% new business income’
is dependent on the amount of new business income generated by the Applicant and is unable
to be determined in advance. Accordingly, for the purposes of calculating the Applicant’s total
earnings, I will not include the sum of $3608.89.
Additional monies paid to the Applicant in the sum of $12,732.56.
[37] The Applicant submits that the sum of $12,732.56 was paid to him by way of a
reimbursement. The Respondent does not dispute that the amount of $12,732.56 was paid to
the Applicant but submits that the precise amount paid to the Applicant on account of business
expenditure is yet to be determined. It is not in dispute that the matter is currently before the
South Australian Employment Tribunal.
[38] s332(b) of the Act expressly provides that reimbursements are not to be included in the
calculation of an employee’s earnings. There is insufficient material before me to make a
finding as to what, if any, portion of the sum of $12,732.56 is a payment by way of
reimbursement to the Applicant.
[39] The onus of establishing a jurisdictional objection falls on the party taking the objection,
in this case the Respondent.
6 Given the paucity of evidence before me as to the character of the
payment of the sum of $12,732.56 to the Applicant, the Respondent has failed to discharge this
onus.
[40] In any event, I observe that even if I were to include the entire sum of $12,732.56 as
earnings, my conclusion that the Applicant’s earnings are below the high income threshold
would not be disturbed.
Conclusion
[41] For the reasons above, I consider that the Applicant’s annual rate of earnings at the date
of his termination is to be calculated by totalling the following:
- Annual Base Salary $135,746.61 (see paragraph [26] above).”
Croxton v Hayes Sterling Wealth Advisors Pty Ltd [2023] FWC 2235 delivered 5 September 2023 per Cirkovic C