See Fair Work Act 2009 ss.392(2)(c), 392(2)(e) and ss.392(5)‒(6)
The formula set out in Sprigg v Paul's Licensed Festival Supermarket (the Sprigg formula) is commonly used in working out the appropriate amount of compensation. The Sprigg formula has been refined with use.
The Sprigg formula was decided under previous legislation but it has continued to be applied under the Fair Work Act.
The Full Bench of the Commission in Bowden v Ottrey Homes Cobram and District Retirement Villages set out the approach to be taken under the Fair Work Act regarding the determination of compensation.
If, when applied, the Sprigg formula 'yields an amount which appears either clearly excessive or clearly inadequate' then the Fair Work Commission should reassess the assumptions made in reaching that amount. Compensation should be appropriate having regard to all of the circumstances of the case.
The Sprigg formula
- Estimate the remuneration the employee would have received if they had not been dismissed. Lost remuneration is usually calculated by estimating how long the employee would have remained in the relevant employment but for the termination of their employment, ie the anticipated period of employment.
- Deduct any remuneration earned by the employee since their dismissal until the end of the anticipated period of employment. Workers compensation payments are deducted but not social security payments. The failure of an applicant to mitigate his or her loss may lead to a reduction in the amount of compensation awarded.
- Deduct an amount for contingencies. This is a calculation of future economic loss.
- Consider the impact of taxation and adjust the figure accordingly.
- Assess the figure against the compensation cap. If the amount is more than the compensation cap it should be reduced to the compensation cap.