Employees are often provided with benefits by their employer in addition to their normal salaries or wages. It is often when an unfair dismissal application is made that a dispute arises as to the value to be attributed to a benefit for the purposes of calculating whether an employee’s earnings are above the high-income threshold.
In Johnson v Benex Civil Pty Ltd [2022] FWC338 the Fair Work Commission (FWC) dismissed an employee’s unfair dismissal application after it found that she did not have access to the jurisdiction as her personal use of a company car pushed her over the high-income threshold.
The employee commenced employment as a manager with her husband’s business (the employer) on 9 October 2017. In or about March or April 2021, the employee’s relationship with her husband soured and the pair separated.
On 6 April 2021, the employer emailed the employee advising her that she had engaged in inappropriate behaviour, alleging that she had accessed the employer’s email, Telstra and iCloud accounts. On 14 April 2021, the employee was summarily dismissed for alleged serious misconduct and she subsequently filed an unfair dismissal application.
The employer raised a jurisdictional objection to the unfair dismissal application on the basis that the employee’s earnings exceeded the high-income threshold (then $153,600).
According to the employer, the employee’s total earnings were estimated to be $172,000 comprised of:
The Prado was supplied to the employee on 5 March 2021, 40 days before her dismissal. In those 40 days, the employee had sole personal use of the Prado and travelled 4,000km.
The employer argued that the kilometres driven by the employee in the 40 days leading up to her dismissal should be annualised to determine the annual rate of earnings. The employer submitted that the value of the Prado was $36,593.92, calculated in accordance with the formula as set out by Kunbarllanjnja Community Government Council v H.W. Fewings [1998] AIRC 268 (Fewings).
The employee disputed the calculation of her annual earnings as submitted by the employer.
The main issue in dispute between the employer and employee was the calculation of the personal use of the motor vehicles and whether they should be included in the calculation of the annual earnings.
Commissioner Spencer was required to determine which benefits contributed to the calculation of the employee’s annual rate earnings and in turn, the total annual rate of earnings. As there was no written agreement about the monetary value of non-salary benefits, the FWC was required to calculate their value.
Regulation 3.05(6) of the Fair Work Regulations 2009 (FWC Regulations) provides that in the absence of any agreed monetary value of a benefit between the parties, the FWC has the discretion to estimate the real or notional money value of the benefit.
Relevantly, where an employee is provided with a fully maintained vehicle for use during their employment and that vehicle is also used for private purposes, the value of that private use can be included in an employee’s annual earnings.
In relation to the Prado, Commissioner Spencer accepted the formula to determine the value of the use of a company car as the one derived from Fewings. She also noted that there was case law which demonstrated that there is flexibility in applying the formula set out in Fewings.
Using the Fewings formula, the annualised kilometres was calculated to be 35,200km based on the employee’s actual use of the vehicle in the 40 days that she had the car (of which she had 100% personal use). Accordingly, the Prado had an annualised value of $45,056. Commissioner Spencer found that even using the estimated mileage under the lease agreement would have still placed the employee’s earnings above the high-income threshold.
Commissioner Spencer found that that the RAV4 was not a benefit that the employee received at the time of her termination, as she was given the new Prado. As such, its value was not to be included in her total earnings.
Additionally, Commissioner Spencer found that all the costs associated with the mobile phone as well as the whole of the private health insurance benefit were to be attributable to the employee’s total earnings.
Accordingly, the FWC found that the employee’s earnings were: $176,239.89 and the employee was over the high-income threshold by $22,639.89.
The employer’s jurisdictional objection was upheld and the application was dismissed.
Employers should ensure that they are aware of what constitutes a benefit and which benefits, monetary or non-monetary are likely to be considered as part of an employee’s total earnings for the purposes of the high-income threshold.
Moreover, it is a good reminder to ensure that the value of non-monetary benefits are written and agreed upon in an employment contract. This is to limit any ambiguity surrounding an employee’s total earnings and whether or not they are over the high-income threshold, which is currently set at $158,500.
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