Employee entitlements (including wages, superannuation, leave, and termination amounts, etc.) are treated as a priority dividend—as a priority creditor in the insolvency appointment—under the Corporations Act 2001 and Bankruptcy Act 1966 ahead of other types of creditor claims.
The federal government has a scheme to protect some employee entitlements in the event of a company being placed into liquidation—known as the Fair Entitlements Guarantee (FEG) scheme. This scheme’s funding assists to satisfy and pay outstanding wages, leave entitlements, and termination amounts (subject to some limits) that employees are owed when the business cannot afford to pay these debts. Contact us to find out more.