What is the Fair Entitlement Guarantee scheme?

What is the Fair Entitlement Guarantee scheme?

The Fair Entitlements Guarantee (“FEG”) is a scheme introduced by the Australian Government for employees who have lost their job due to their employer being either declared bankrupt or placed into liquidation. In circumstances where the insolvent employer is unable to meet outstanding entitlements owing (excluding superannuation), the FEG scheme will act as a safety net for these employees and will pay these entitlements in accordance with the Fair Entitlements Guarantee Act 2012 (FEG Act).

The FEG scheme is administered by the Attorney-General’s Department (“AG”), which provides general information for claimants in the following link.

https://www.ag.gov.au/industrial-relations/fair-entitlements-guarantee-feg/feg-fact-sheets

What can be claimed?

FEG will pay to employees the following entitlements pursuant to the FEG Act:

·         Unpaid Wages – capped at 13 weeks;

·         Annual Leave (inc any leave loading);

·         Long Service Leave;

·         Payment in Lieu of Notice; and

·         Redundancy Pay – capped at 4 weeks per full year or service.

All entitlements are capped at a maximum weekly wage rate of up to $2,451 per week (gross).

Unpaid Superannuation Contributions are not covered under the FEG scheme. Further, any remaining unpaid entitlements (i.e. entitlements owed above the maximum weekly wage rate or subject to the above mentioned caps) will form a priority claim in the liquidation or bankrupt estate of the employer and will only be paid if sufficient funds become available.

How do employees lodge their claim?

If employees require information about their entitlements to assist with lodging a claim with the AG, in the first instance they should contact the office of the relevant insolvency practitioner (“IP”) handling the external administration of their former employer. In most cases the IP will be able to assist the employee (subject to being in possession of sufficient records to provide this information).

In situations where the IP may not have access to the employer’s payroll records (or such records may not have been properly maintained) employees may have to lodge their claim based on the information available to them i.e. payslips, bank statements, etc.

Claims are submitted online directly with the AG who can provide further assistance in this regard.  

What happens next?

Upon receipt of a valid claim, the AG will seek information from the IP and will then make a determination about the entitlements owing to the employee, at which time it will remit payment directly to the employee (less any PAYG withholding tax).

Once employees have been paid pursuant to the FEG scheme, the AG will effectively stand in place of the employees as a priority creditor of the insolvent employer.

If you would like more information about the FEG scheme, are experiencing difficulty, need advice about your business’s way out of the Covid-19 crisis, or would like to know more about the help on offer, please contact Shane Cremin on (03) 9670 8700.

Article by Andre Nguyen & Matthew Fairthorne.

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