Federal government safety net for employees
When an employee loses their job through the liquidation or bankruptcy of their employer, they will have recourse to a federal government safety net called the Fair Entitlements Guarantee (FEG) for protection of certain unpaid employee entitlements.
The entitlements that may be claimed by an eligible employee are:
- unpaid wages (up to 13 weeks)
- unpaid annual leave and long service leave
- payment in lieu of notice (up to five weeks)
- redundancy pay (up to four weeks per full year of service).
I note that unpaid superannuation contributions cannot be claimed through FEG.
To be eligible for FEG assistance an employee must:
- have lodged an effective claim within 12 months (of either the date of employment loss or the date of the liquidation or bankruptcy of the former employer)
- have lost their job within six months preceding their employer’s liquidation or bankruptcy
- be owed at least one of the entitlements mentioned above, and
- be an Australian citizen or the holder of a permanent visa or special category visa that allows them to stay and work in Australia at the time their employment ended.
An employee will not be eligible for FEG assistance if they:
- were employed as a contractor
- were a director of the company or a relative of the director of the company (only if the director was also an employee of the company) within 12 months before liquidation, or
- do not meet all of the conditions of eligibility set out in the Fair Entitlements Guarantee Act 2012.
The scheme is administered through the Department of Employment (DE). From 1 July 2016, DE streamlined the way they interact with insolvency practitioners to speed up the process of adjudicating employee claims. In addition, DE will now pay accepted claims directly to employees, whereas previously, insolvency practitioners would facilitate the payments.
Employees are hit hard and quite often without notice when their employer goes out of business. Not only have they lost their job but their employee entitlements accumulated through their period of service can be at risk. FEG is therefore an important safety net available to eligible employees and we welcome the recent changes that will facilitate faster payment to employees when they are most in need of assistance.
To lodge a FEG claim online, visit www.employment.gov.au/feg