Sting in the Salary Package Tale

Davidson v Adecco Australia Pty Ltd T/A Adecco [2012] FWA 8393 (4 October 2012)

A company thought it had packaged a salary for a manager high enough to avoid the unfair dismissal threshold, but Fair Work Australia found otherwise. The manager’s salary was constructed of a wage and a “travel allowance” and together these put the manager’s total earnings beyond the threshold. Or so it seemed.

After the manager had been dismissed, he claimed unfair dismissal and the company unsurprisingly argued the manager was beyond the reach of the claim. But FWA found  that while the manager’s contract described the travel allowance as an “additional benefit”, at the same time it was worded to prevent the manager from making reimbursement claims for any work related travel.

The company stated it did not require employees to spend their car allowance. Given the clear words of the manager’s contract, if the manager did expend funds travelling in the course of his duties, then the allowance had to be reduced by the amount so spent to determine the actual unencumbered earnings of the manager.  The employee led evidence of various travel expenses he incurred in the line of duty. FWA accepted his claim.

This type of salary packaging is sometimes used to reduce overall costs of employees (and enhance their take-home pay)by designating such an allowance which in reality is not spent as it is depicted. When the parties have a falling out, the arrangement is forgotten. That may or may not have been the case here, but it serves as a warning to employers to be very specific in how they designate each component of a salary package. Otherwise it might come back to bite them.