The recent Personal Injury Commission (PIC) decision of Taylor-Craig v Smartgroup Benefits Pty Ltd [2023] NSWPIC 137 determined that the Pre-Injury Average Weekly Earnings (PIAWE) should not include a bonus paid to Mr Taylor-Craig in the relevant earning period before his injury.
The status of bonus payments and their inclusion or exclusion from PIAWE has been a matter of interest since the introduction of the current PIAWE regime for workers injured on or after 21 October 2019.
Clause 6(1) of schedule 3 of the Workers Compensation Act NSW 1987 defines earnings as:
(1) The "earnings" received by a worker in respect of a week means the amount that is the income of the worker received by the worker for work performed in any employment during the week.
Clause 6(2) of schedule 3 goes on to explain what is not included as ‘income’ for the purposes of calculating PIAWE:
(2) The "income" of a worker does not include: -
(a) any minimum amount paid to a superannuation fund or scheme in respect of the week to avoid an individual superannuation guarantee shortfall, within the meaning of the Superannuation Guarantee (Administration) Act 1992 of the Commonwealth, for the worker, or
(b) the monetary value of any non-monetary benefit provided to the worker for the performance of work by the worker, or
(c) any payment in respect of loss of earnings under a scheme to which the workers compensation legislation relates or under any other insurance or compensation scheme, or
(d) any payment made without obligation by the employer.
It is the wording in Clause 6(2)(d) that was considered in the case of Taylor-Craig v Smartgroup Benefits Pty Ltd. Were the bonus payments paid to Mr Taylor-Craig a “payment without obligation” by his employer and thus not to be included in PIAWE?
Payment without Obligation
The background facts in this case:
- Mr Taylor-Craig was originally employed as a leasing consultant in October 2016 [para 38]
- The company changed names and a letter of offer / contract of employment with Smartgroup Benefits Pty Ltd was entered into on 19 July 2018 [para 51]
- Pay based on a base salary, monthly commission and quarterly and annual bonuses based on the team and company performance [para 37, 39]
- If Mr Taylor-Craig met monthly targets his pay would include the commission / bonus [para 41] with no commission / bonus payable if targets not met or in one instance when there seems to have been a customer service discrepancy [para 42]
- In March 2020 the commissions were paused to ensure business continuity during the COVID lock down and avoid the business needing to make redundancies [para 44], before being reinstated in July 2020
- Deemed date of injury on 4 February 2022
When calculating the PIAWE the insurer included all the income of Mr Taylor-Craig during the 52 weeks before the injury but excluded the bonuses paid leading to a calculation of $1407.37 per week.
If the PIAWE included the bonuses paid during the relevant earning period, the PIAWE would increase to $2224.13 per week; a significant difference of over $800.00 per week.
Principal Member Capel records consideration of the terms of the contact is required [para 89] was relevant in determining whether the bonus payment is one that should be excluded as a ‘payment made without obligation by the employer.’
Of relevance to the eventual determination is that some of the in force letter of offer / contract of employment from 2018 was not admitted into evidence for consideration by the Principal Member [consider discussion in paragraphs 9-29]. The parts of the signed letter of offer included in evidence are reproduced in the decision in para 52.
Of particular importance is part 5 of the reproduced letter of offer which provides:
In addition to your TRP, the Company may in its absolute discretion provide you with other benefits (‘Discretionary Benefits’). The Company may cease to provide Discretionary Benefits or change the basis on which it provides them at any time, and nothing in this clause constitutes a promise or guarantee that you will receive any Discretionary Benefit.
Discretionary Benefits including any bonus or incentive payment do not form part of your contract of employment or remuneration. You agree and acknowledge that the payment of a Discretionary Benefit does not create any expectation that further Discretionary Benefits will be paid.
After Principal Member Capel reviewed the contract, he stated at paragraph 105:
The “Discretionary Benefits” clause in the “Terms Sheet” state that the respondent had an “absolute discretion” to pay other benefits, namely bonuses and commission, and could cease to provide them or change the basis on which it provides them at any time. It stated that the Discretionary Benefits including any bonus or incentive payment did not form part of the contract or remuneration, and a past payment did not mean that further Discretionary Benefits would be made.
Principal Member Capel further stated at para 106 that there was ‘nothing in the clause constituted a promise or guarantee that he would receive any discretionary benefit. In other words, any payment was made at the respondent’s discretion, and it was under no obligation to pay the bonus.’
On this basis Principal Member Capel found that the bonuses paid to Mr Taylor-Craig were a type of payment under which there was ‘no obligation to pay’ and accordingly they were not included in the PIAWE [para 107].
