Unfair dismissal compensation: how much, and who can claim
Compensation for unfair dismissal has a legal ceiling and a short deadline. Enter your salary to see the most the Commission can order.
Compensation for unfair dismissal in Australia is capped by the Fair Work Act at the lower of two amounts: the total pay the employee received, or was entitled to, in the 26 weeks before dismissal, and half the high income threshold. From 1 July 2026 the high income threshold is $190,100, so the overall cap is $95,050, up from $91,550. An employee on $90,000 a year can therefore be awarded at most $45,000. To apply, an employee must have completed the minimum employment period of 6 months, or 12 months in a business with fewer than 15 employees, must be covered by an award or enterprise agreement or earn less than the threshold, and must lodge the application within 21 days of the dismissal. Reinstatement is the primary remedy, and compensation is ordered only where reinstatement is inappropriate.
Maximum unfair dismissal compensation
Most the Commission can order
$45,000
| 26 weeks of your pay | $45,000 |
| Overall cap, half the high income threshold | $95,050 |
| Earnings above the threshold | No |
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The compensation ceiling by salary
| Annual salary | Weekly pay | 26 weeks of pay | Maximum compensation | Able to apply |
|---|---|---|---|---|
| $55,000 | $1,058 | $27,500 | $27,500 | Yes |
| $75,000 | $1,442 | $37,500 | $37,500 | Yes |
| $90,000 | $1,731 | $45,000 | $45,000 | Yes |
| $120,000 | $2,308 | $60,000 | $60,000 | Yes |
| $160,000 | $3,077 | $80,000 | $80,000 | Yes |
| $185,000 | $3,558 | $92,500 | $92,500 | Yes |
| $200,000 | $3,846 | $100,000 | $95,050 | Only if an award or agreement applies |
Up to a salary of $190,100, the 26-week figure is the binding limit, since 26 weeks of pay at that salary is exactly $95,050. Above it, the dollar cap applies, and only employees covered by an award or agreement can apply at all.
How the Commission arrives at an amount
The cap is a ceiling, not a tariff. The Commission starts from the pay the employee would have received had the dismissal not occurred, which means estimating how long the employment would otherwise have lasted. From that figure it deducts money earned in other work since the dismissal and makes an allowance for contingencies. It then weighs the factors listed in section 392: the effect of an order on the viability of the employer’s business, the employee’s length of service, the efforts the employee made to find other work, and any misconduct that contributed to the decision to dismiss. Only after those steps is the result compared with the cap.
Compensation cannot include any amount for shock, distress, humiliation or other hurt caused by the manner of the dismissal. An employee who found an equivalent job within three weeks has lost three weeks of pay, however badly the dismissal was handled.
Who is protected from unfair dismissal
Four conditions apply together. The employee works for a national system employer, which covers most private sector employment. The minimum employment period has been served: 6 months, or 12 months where the employer has fewer than 15 employees, counted at the time notice is given. Either an award or enterprise agreement covers the job, or annual earnings are under $190,100. And the employee has been dismissed, which includes a resignation forced by the employer’s conduct. Casual employees qualify only if they worked on a regular and systematic basis with a reasonable expectation of continuing work.
What makes a dismissal unfair
A dismissal is unfair if it was harsh, unjust or unreasonable, was not a genuine redundancy and, for a small business, was not consistent with the Small Business Fair Dismissal Code. The Commission asks whether there was a valid reason related to capacity or conduct, whether the employee was told of that reason and given a chance to respond, whether a support person was unreasonably refused, and whether warnings were given about unsatisfactory performance. A valid reason delivered through an unfair process can still be an unfair dismissal.
A genuine redundancy is a complete defence: the job is no longer required, consultation obligations under the award or agreement were met, and redeployment within the employer’s enterprise or an associated entity was not reasonable. The redundancy entitlements guide sets out what is owed in that case.
The process, step by step
- Lodge Form F2 with the Fair Work Commission within 21 days and pay the application fee, which can be waived in cases of financial hardship.
- The employer responds, and may object that you are not eligible, for instance on the minimum employment period.
- A conciliation is held by telephone, usually within a few weeks. Most claims settle at this stage, typically for a sum of money and a statement of service.
- If there is no settlement, the matter goes to a conference or hearing before a Commission member, who decides.
Tax on compensation and settlements
Money paid to settle or satisfy an unfair dismissal claim is generally an employment termination payment. It is not a genuine redundancy payment, so there is no tax-free amount based on years of service. The concessional rate, 32% under preservation age and 17% from age 60, applies up to a cap that falls as your other income for the year rises. The termination payment tax calculator works it out. To receive ETP treatment the payment must be made within 12 months of the termination, unless the delay is caused by legal action started within that time.
Other claims that may fit better
A general protections claim is available from the first day of employment and at any salary, where the dismissal was for a prohibited reason such as making a complaint, taking leave, illness, pregnancy or union membership; compensation there is not capped. Discrimination complaints go to the Australian Human Rights Commission or a state body. A claim for unpaid notice or leave is a debt claim, and you cannot pursue both an unfair dismissal and a general protections claim over the same dismissal.