Principal Workplace Relations Consultant in AMMA’s Brisbane office, Katie Jacklin (pictured), reviews a decision confirming general industry practice to treat travel allowances as earnings.
In a recent mining industry unfair dismissal matter, the Fair Work Commission (FWC) confirmed earlier precedent that remote area travel allowances (RATA) formed part of an employee’s total earnings and therefore should be a factor in assessing a claim against the high-income threshold.
In her 21 October 2020 decision, Commissioner Paula Spencer rejected a former Rio Tinto environmental advisor’s unfair dismissal claim after finding a $22,720 RATA constituted earnings which meant her total income exceeded the threshold.
The environmental advisor working for Rio Tinto made an unfair dismissal application after the company dismissed her for ongoing performance issues in June 2020.
Rio raised the jurisdictional objection that the former employee’s remuneration exceeded the high-income threshold, claiming that in calculating her earnings the FWC should take into account a number of allowances attributable to travel, accommodation and the remote locality.
Rio claimed the employee’s total remuneration included a base salary of $112,810, a remote area allowance of $28,202.50, an RATA of $22,720 and $29,484 attributable to accommodation benefits provided to her and her family.
This meant the employee earned a total income of $193,216.50 – in excess of the high-income threshold for unfair dismissal claims, the employer argued.
The parties were also in dispute about when the dismissal took effect given the timing of the dismissal coincided with the updated high-income threshold value.
The termination letter stated that the advisor’s dismissal took effect from 30 June 2020, when the high income threshold was $148,700.
However, the letter was sent to the applicant’s legal representative outside of business hours and therefore she did not receive the dismissal letter until the following day on 1 July 2020, when the high income threshold had been revised to $153,600.
Rio argues allowances constitute earnings
Neither party contested that the base salary of $112,810 and the remote area allowance of $28,2020.50, which were subject to review in 2020, comprised the applicant’s earnings.
Rio argued that the RATA should be included in the applicant’s earnings. It argued the RATA did not fall within the carve out clause in s.332 of the FW Act, could not be considered a reimbursement and that the amount was capable of being determined in advance.
To support its claim that the RATA constituted earnings, Rio cited a previous full bench decision which found that a “vehicle allowance will not typically consist of an employees ‘wage’ save for circumstances where the car allowance is, in reality, paid to the employee as a means of providing the employee with additional income and there is no requirement or expectation that the employee will have to use the car for work purposes.”
In disputing the applicant’s claim that the RATA is considered a reimbursement, Rio argued that the additional sum of money paid to the applicant to assist with travel costs is entirely unrelated to any work-related expenses.
Rio also submitted that the RATA entitlement crystalised on the applicant’s anniversary date which meant that, and for other reasons, it is capable of being determined in advance within the meaning under s.332.
The parties were also in dispute about company-supplied accommodation being a non-monetary benefit that should be included in calculating the applicant’s earnings.
Rio acknowledged there was no agreed value, but it could be implied using a market value of the accommodation provided and should therefore form part of the earnings. The market value was calculated by Rio to be $29,484 per year.
Income includes remote travel allowance, not accommodation
Commissioner Spencer was satisfied the RATA should be included in the applicant’s earnings, accepting Rio’s submission that the allowance was not entirely related to expenses incurred by the business and the amount was capable of being determined in advance.
She distinguished the applicant’s claim from an earlier ruling on a travel allowance paid to a salesperson who claimed all travel he undertook in his vehicle was business related and he undertook little to no personal travel.
In that decision the FWC found “the allowance recompensed the employee for business related costs and therefore could not be categorised as a payment for his work or services”.
Commissioner Spencer also cited authority where the employer had no unilateral right to withdraw the travel allowance which satisfied the FWC that the amount formed part of the employee’s wages to be determined in advance rather than a reimbursement.
She did however reject Rio’s contention that the accommodation provided to the applicant is non-monetary benefit with no agreed value and did not include the estimated market value in the applicant’s earnings.
While neither party made a submission on a $1,723 private health policy, Commissioner Spencer found that it should also be included in the applicant’s earnings citing a full bench decision in Savannah Nickel Mines Pty Ltd v Crowley.
Commissioner Spencer found the total remuneration included the base salary, remote area allowance, RATA and the private health insurance, all of which exceeded the high-income threshold whether calculated at 30 June or 1 July 2020.
The application was dismissed.
Implications for employers
The outcome in this matter is consistent with previous FWC decisions and common understanding regarding the treatment of allowances for the purpose of calculating an employee’s total income.
In the resources and energy industry, where remuneration often comprises several monetary and non-monetary benefits, determining an employee’s true total earnings can be a complex process.
For information and advice on dealing with allowances in payroll, managing terminations, conducting independent investigations and discipline/performance management, speak to AMMA’s workplace relations consultants at your local AMMA office.