What is the maximum payment an employee can receive for being unfairly dismissed?

[DanB]

is there a maximum payment if an employer is found to have unfairly dismissed an employee?

An employee is not performing and has missed vital monetary deadlines. Nothing has been formally written down in terms of a performance management plan, however the employee has been spoken too numerous times before with no improvement. The employee has asked for a performance review in the last two years, however has not received one. He has been here almost 2 years.

The employer has instructed he goes and the position is not being made redundant.

Therefore if the employee was to launch an unfair dismissal case, what could be the maximum payout to the employee?

[Greg Schmidt]

Hi Dan,

The maximum amount of compensation that can be awarded to an unfairly dismissed employee is an amount equal to the employee's total remuneration for the six months' employment prior to dismissal (s392, Fair Work Act 2009).

However, the Fair Work Commission will first consider whether reinstatement to the employee's former position is appropriate. Where an employer is ordered to reinstate the dismissed employee, the Commission will frequently also order that the employer make a payment to the person to restore pay lost by the person between the date of dismissal and the date of reinstatement. This period would often be around two to three months - but could well be longer depending upon delays, appeals, etc. In calculating the amount of "lost pay", the money that the dismissed employee actually earned (or could have earned) through other employment in that period is taken into account, but there's no monetary limit on a "lost pay" order. (s. 391).

So while there's a definite limit on compensation, it's also possible that an employer may be obliged to pay an unknown amount of money for lost pay (at least two months is likely, but potentially could be 6 months or more) AND be forced to re-employ an unsatisfactory employee.

Moral of the story: Best to use appropriate HR practices from the outset, and make sure that your dismissal decisions are correct and defensible.

Cheers,
Greg