Factors Fair Work takes into account for unfair dismissal compensation

Updated 21 March 2026 

An employee can make a claim for dismissal if they deem their dismissal harsh, unfair, or unreasonable, under section 387 of the Fair Work Act 2009 (Cth). While the maximum compensation for an unfair dismissal is 26 weeks of pay, many factors influence the amount of compensation an employee may obtain in an unfair dismissal case. In reality, many cases are resolved at the conciliation stage between the applicant employee and the respondent employer; not all cases proceed to a hearing, where a senior member of the commission makes a ruling. 

Compensation criteria

If a case does run to a hearing, what factors does the Fair Work Commission take into account for compensation? Below are the factors set out in section 392 of the Fair Work Act 2009 (Cth).

• effect of the order on the viability of the employer’s enterprise; 
• length of the person’s service with the employer
• the remuneration the person would have received if they had not been dismissed 
• efforts the person has made to mitigate their loss because of the dismissal
• amount of any income reasonably likely to be earned by the person between the time of making the order for compensation and the actual compensation 
• any other matter Fair Work considers relevant 

The above factors are relevant for parties to consider, well before an unfair dismissal case reaches the hearing stage. If the parties are able to resolve their case at the conciliation stage, the commission won't enforce a compensation decision, and the parties reap the benefit from having agency in a private resolution at conciliation that remains confidential and is not a published decision, thereby protecting the reputation of both parties and allowing for solutions outside of financial compensation.

Factors that reduce compensation 

Misconduct

If parties are not able to resolve their case privately and the case proceeds to a hearing, Fair Work will take any employee misconduct into account and reduce the compensation amount if the matter progresses to a hearing and a finding is made that the employee engaged in misconduct, but the dismissal was unfair. 

Shock, distress etc disregarded 

While a termination can be upsetting and unexpected at times, for an employee, Fair Work will not consider shock, distress, humiliation, or other hurt caused by the dismissal in the compensation amount. 

Compensation cap

The amount ordered by Fair  Work must not exceed the lesser of: 

• the higher income threshold immediately before dismissal 
• the amount that is received by the person or to which the person was entitled (whichever is higher) for any period of employment with the employer during the 26 weeks immediately before the dismissal. 

Instalments permitted 

Fair Work may permit the employer to pay the amount required in instalments specified in the order. 

Do you have questions or comments about compensation for an unfair dismissal? Be sure to leave them below.