The reason why the compensation payout one can receive is capped is on the basis that it can have a serious impact on the cash flow of the average Australian small to medium business.
In one of our articles titled “Are you a high earner for the purpose of unfair dismissal claims?”, we discussed the high earner income threshold which currently stands at $175,000. With this being said, the maximum amount of compensation that can be awarded for an unfair dismissal is currently capped at $87,500.
The current application fee is $87.20 which is insignificant in comparison to the amount of compensation the employee could receive if their claim is successful.
Unfair dismissal claims have a tendency to settle during the conciliation or conference stage. With this in mind, employers can settle the claim prior to the hearing which is cost effective and can save both sides their legal costs.
Section 392 of the Fair Work Act 2009 (Cth) sets out the criteria for determining the amount of unfair dismissal compensation that may be ordered. The Fair Work Commission has developed a spring formula which is used to work out the appropriate amount of compensation within s 392 of the Act.
The spring formula estimates the likely amount the employee would have received if the employment had not been terminated. An amount will be deducted for earnings accrued since termination of the employment and an amount to account for any contingencies. This amount will then be calculated to impact any taxation and the legislative cap will be applied which is currently at $87,500.
The compensation you can claim for unfair dismissal claims is very limited. With this in mind, you cannot make a claim for legal costs as it is a no costs jurisdiction, or claim for damages for distress and injured feelings. In this regard, you can claim remuneration which you are entitled to. This includes wages for the anticipated employment period, payment for notice period, long service leave and annual leave.
Please note that the amount the Fair Work Commission orders will be reduced if the employee’s misconduct contributed to the employer’s decision to dismiss.
If you would like more information on unfair dismissal claims and to find out if you have a claim please contact one of our friendly lawyers on (02) 9199 8597 or email us.
The information contained in this post is current at the date of editing – 25 February 2025.
