Unfair Dismissal Compensation in Australia: How the FWC Calculates It

Unfair dismissal compensation in Australia is based primarily on lost earnings, not on a fixed payment for being treated unfairly. If the Fair Work Commission (FWC) finds a dismissal harsh, unjust, or unreasonable, it considers reinstatement first. Only if returning to the job is inappropriate can it decide whether financial compensation should be ordered and how much.

Updated October 28, 2026: For dismissals taking effect on or after July 1, 2026, the statutory compensation ceiling is the lower of the employee's relevant remuneration over the preceding 26 weeks and AUD 95,050. The AUD 95,050 figure is not a standard payout. It is half the 2026–27 high-income threshold of AUD 190,100. These figures are set out in the FWC compensation-cap guidance.

What must happen before compensation is considered?

First, an employee must be protected by Australia's national unfair dismissal laws. Typically, they need at least six months of service, or 12 months when the employer is a small business with fewer than 15 employees. They also need to be covered by a modern award or enterprise agreement, or have earnings below the high-income threshold. Special rules apply to casual service and other employment situations; being dismissed does not by itself establish eligibility.

The FWC then asks whether the employer dismissed the worker and whether the dismissal was harsh, unjust, or unreasonable. A genuine redundancy or dismissal consistent with the Small Business Fair Dismissal Code may fall outside an unfair dismissal finding. Factors can include the reason for dismissal, whether the worker could respond to allegations, and relevant performance warnings. See the FWC overview of unfair dismissal and the minimum employment period guidance.

Even when a dismissal is found unfair, compensation is not automatic. The FWC must first decide whether reinstatement is appropriate. If it is not, compensation may be considered instead. The Commission’s explanation of compensation also makes clear that it cannot award damages merely for shock, distress, humiliation, or similar emotional harm under this remedy.

How does the FWC calculate unfair dismissal compensation?

Section 392 of the Fair Work Act 2009 requires the Commission to evaluate the circumstances, rather than simply multiply an employee's weekly pay by a preset number of weeks. Its assessment generally follows these questions:

1. How long would employment probably have continued? The FWC estimates the likely remaining period of employment if the dismissal had not happened, considering service history, performance, and any relevant job uncertainty.
2. What remuneration would the worker have received? The estimate is based on the pay and other remuneration the employee would likely have earned in that period.
3. What earnings offset the loss? Wages from another job and some other remuneration already received, or reasonably likely to be received before payment, can reduce the amount.
4. Did the employee reasonably try to limit their losses? Job applications, interviews, and other reasonable attempts to find work matter. A lack of reasonable efforts may justify a deduction.
5. Are other adjustments justified? The Commission considers relevant contingencies, the employer's business viability, and any employee misconduct that contributed to the dismissal. Contributory misconduct requires an appropriate reduction.
6. Does the calculated amount exceed the legal cap? If so, the ordered amount must be reduced to that employee's applicable ceiling. Tax treatment may also affect the order's calculation and final payment.

These principles are explained in the FWC's official compensation calculation guide.

How much compensation can a worker actually receive in 2026–27?

For someone dismissed on or after July 1, 2026, the high-income threshold is AUD 190,100 and the national ceiling component is AUD 95,050. But the individual cap is still the lesser of AUD 95,050 and the remuneration they received or were entitled to receive during the relevant 26 weeks before dismissal. Different dismissal dates can trigger different thresholds. For dismissals from July 1, 2025, through June 30, 2026, the national ceiling component was AUD 91,550.

Illustrative calculation, not a prediction: Suppose a worker normally earned AUD 1,000 a week and the FWC concluded they would otherwise have remained employed for another 10 weeks. That suggests AUD 10,000 of projected pay. If they earned AUD 3,000 from other work during the relevant period, the starting loss could be AUD 7,000 before considering mitigation, contingencies, misconduct, taxes, or other factors. With normal remuneration of AUD 26,000 in the previous 26 weeks, their statutory ceiling would be AUD 26,000, not AUD 95,050. Nothing about the ceiling guarantees an AUD 7,000 order.

The FWC reports that the median compensation is between five and seven weeks' pay and that fewer than 0.4% of applicants receive the maximum compensation limit. These are general published figures, not an estimate for an individual case. See its compensation examples and statistics.

Does an unfairly dismissed Coles worker receive the same payout as anyone else?

No. The same legislative framework can apply to a retail worker at Coles or another national-system employer, but a monetary outcome depends on that employee's service, likely continuing employment, earnings, attempts to find new work, conduct, and case-specific evidence. Retail workers may also have pay or conditions set by an applicable award or enterprise agreement. A figure mentioned in coverage of one worker's dispute is not a tariff for everyone dismissed by the same retailer.

It is also possible for an employer to have had a valid concern about conduct while the overall dismissal is nevertheless found harsh or unreasonable. The fairness decision and the compensation calculation are separate inquiries. Employees should check the actual written FWC decision rather than applying a reported dollar figure to their own case. The Commission publishes its decisions and orders for readers who want the primary record.

What is the deadline to file an unfair dismissal claim?

An application generally must reach the FWC within 21 days after the dismissal takes effect, with the counting period beginning on the following day. The Commission can extend the deadline only in exceptional circumstances. Do not wait for an internal grievance or a complete evidence package if that risks missing the limit.

The FWC increased its application fee to AUD 92.70 on July 1, 2026. A fee waiver may be available on serious financial hardship grounds. Employees can use the official eligibility checker and Form F2 application to start the process. The current filing fee and threshold change are listed in the FWC’s July 2026 fee notice.

What records help support a compensation claim?

• Employment contract, award or enterprise agreement details, rosters, and pay slips.
• Termination notice, performance records, meeting notes, and relevant emails or messages.
• Documents showing ordinary wages and benefits, including variable hours where applicable.
• Job applications, interview invitations, rejection emails, and evidence of efforts to get another job.
• Pay information from subsequent employment, including start dates and expected future earnings.

Keeping records helps a worker substantiate both the unfair dismissal allegations and the claimed financial loss. The FWC may arrange voluntary conciliation, where the employee and employer can negotiate a settlement without a formal ruling. Settlements can include a financial payment or nonfinancial terms, but an agreed settlement is not the same thing as a Commission compensation order. Learn more from its conciliation options guide.

Is unfair dismissal the same as general protections dismissal?

No. An unfair dismissal case asks whether the dismissal was harsh, unjust, or unreasonable. A general protections dismissal claim concerns dismissal for a prohibited reason, such as exercising a workplace right. They use different legal tests and remedies, and a worker generally cannot pursue both applications for the same dismissal. Workers uncertain about the correct pathway should seek prompt advice from a union, community legal service, or employment lawyer before the 21-day period ends. The FWC guidance on general protections dismissal explains the distinction.

The key takeaway: The AUD 95,050 figure is a ceiling for the relevant 2026–27 period, not a promised award. Compensation reflects provable remuneration loss after required adjustments, and even a successful unfair dismissal finding does not necessarily result in a payment. This article provides general information about Australia's national workplace relations system, not legal advice about a particular dismissal.