Compensation for unfair dismissal

If the Commission finds a dismissal was unfair (‘harsh, unjust or unreasonable’), it may order compensation. An employee can only receive compensation for lost income ('remuneration').

An employee does not always receive compensation, even if the dismissal was unfair.

Before we can order compensation, we must decide if the employer should give the employee their job back (reinstatement).

Reasons we might not order reinstatement:

• the business no longer operates
• the employee cannot work because of illness or injury
• the employer and employee cannot work together as their relationship has broken down
• the employer would probably dismiss the employee again.

Note: we cannot order compensation for reasons such as pain and suffering, shock, distress, hurt or humiliation.

It is important to know that most employees only receive a small amount of compensation for unfair dismissal. The median is between 5 – 7 weeks pay.

Less than 0.4% of applicants receive the maximum limit (the compensation cap) that we can order an employer to pay.

The maximum we can order is the lower of these 2 amounts:

• half of the employee’s annual wage OR
• the compensation cap, which is $87,500 for 2024-25 and changes on 1 July each year.

We may reduce the amount of compensation if we find:

• the employee did not suffer any financial loss from the dismissal
• the employee deserves a lower amount because of bad behaviour ('misconduct').

The way we work out compensation is complex. For full details of what we must consider, see The formula to work out compensation. This considers the rules in section 392 of the Fair Work Act 2009.

These examples show how we work out the most we can order an employer to pay.

Example 1 – compensation is within the cap

Michael earned $50,000 per year before his employer dismissed him.

Half of Michael's annual salary is $25,000 and the compensation cap is $87,500 for 2024-25.

So Michael’s compensation cap is $25,000 (the lower of these 2 amounts).

Like most employees, Michael receives less than the maximum amount of compensation. In this case, the Commission calculates Michael’s compensation is 6 weeks' salary, or $5,770. As this is within his cap of $25,000, the Commission orders the employer to pay him $5,770.

Example 2 – compensation is over the cap

Viv earned $50,000 per year before her employer dismissed her.

Half of Viv's annual salary is $25,000 and the compensation cap is $87,500 for 2024-25.
So Viv’s compensation cap is $25,000 (the lower of these 2 amounts).

Although this does not happen often, the Commission calculates that Viv's compensation is more than her cap of $25,000. The Commission orders the employer to pay her $25,000.

Example 3 – an employee receiving a high-income is covered by an enterprise agreement

Krisha earned $180,000 per year before her dismissal.

This is above the high-income threshold but she is protected from unfair dismissal because an enterprise agreement applies to her.

Half of Krisha’s annual salary is $90,000 and the compensation cap is $87,500 for 2024-25.

So the cap for Krisha is $87,500 (the lower of these 2 amounts).

The Commission calculates Krisha’s compensation as $93,000. This is more than the limit, so the Commission orders the employer to pay her $87,500.

The table below shows the results from the last 5 years of unfair dismissal conciliations.  This information will help you understand the more common outcomes.  For hearing outcome information see outcomes or remedies at an unfair dismissal hearing.