The employee was the Chief Executive Officer of a not-for-profit organisation. Following the termination of employment, the CEO lodged an unfair dismissal application. The organisation argued that because the CEO earned well above the High Income Threshold, the employee was not protected from unfair dismissal.

The Fair Work Commission approached the matter differently.

Rather than focusing on the employee’s earnings, it considered whether the CEO’s role was covered by the SCHADS Award. The Commission found that the role fell within the Award’s classification structure and that award coverage remained relevant despite the CEO earning above the High Income Threshold. [fwc.gov.au]

For many employers, that finding may come as a surprise.

The High Income Threshold (currently $190,100) does not automatically remove award coverage. An employee can earn well above the threshold and still be covered by a modern award.

The Fair Work Act contains specific provisions dealing with a Guarantee of Annual Earnings (GAE). A GAE is designed to remove award coverage for an employee who would otherwise be covered by a modern award. To be effective, it must meet the requirements set out in the legislation, including being in writing, specifying the guaranteed earnings, containing a guarantee period and being accepted by the employee.

This is particularly relevant for not-for-profit organisations operating under SCHADS.

Many readers will be familiar with SCHADS Level 8. When you read the classification descriptors, they align closely with the responsibilities often performed by CEOs, Executive Managers and General Managers within community organisations. As a result, it is entirely possible for a senior executive earning above the High Income Threshold to still be covered by the Award if a compliant Guarantee of Annual Earnings is not in place.

A standard offset clause or all-inclusive salary clause is not the same thing as a Guarantee of Annual Earnings. The fact that an employee earns above the threshold does not, by itself, switch off award coverage.

The Bloom HR Takeaway

For not-for-profit organisations, the SCHADS Award reaches further into management and executive roles than many people realise.

If you have CEOs, Executive Managers or other senior employees earning above the High Income Threshold, it may be worth reviewing whether the role is covered by an award and, if so, whether there is a compliant Guarantee of Annual Earnings in place.

This case is a useful reminder that award coverage and earnings are two separate questions. Before making decisions about contracts, performance management, termination of employment or industrial obligations, it is worth confirming exactly where your senior employees sit under the Award and whether the documentation supports the intended arrangement.

Unsure whether your CEO, Executive Manager or senior employee is still covered by an Award? Bloom HR can review your contracts, classifications and remuneration arrangements to ensure they align with your organisation’s obligations.

Supporting those who support the community.

#FairWorkFriday #SCHADS #NotForProfit #CEO #EmploymentLaw #HumanResources #AwardCoverage #WorkplaceRelations #BloomHR

The post Fair Work Friday: Your CEO earns above the High Income Threshold. So why does the SCHADS Award still apply? appeared first on Bloom HR.