The Fair Entitlements Guarantee Act 2012 (FEG) became law on 5 December 2012.
This legislation was introduced to replace the Government’s General Employee Entitlements Redundancy Scheme (GEERS), which has been in operation since 2001. FEG will apply to certain employees whose employment ends due to an ‘insolvency event’ of their employer and have outstanding entitlements that are not able to be paid through other avenues.
FEG will operate in relation to insolvency events that occur from 5 December 2012. For other events prior to this date the GEERS scheme will continue to be in operation.
Essentially FEG replicates the assistance provided under GEERS. The benefits available are as follows:
- Wages (maximum of three months under GEERS and up to 13 weeks under FEG)
- Annual leave
- Long service leave
- Payment in lieu of notice (up to five weeks)
- Redundancy pay (up to four weeks per year of service).
One key component relating to employees entitlements that remains unchanged is the exclusion of superannuation. While FEG aims to reduce the gap between paid entitlements and simplifies the application processes associated, it does not remove the heartache of unpaid superannuation.
Other differences include:
- Claims must be lodged within 12 months of the end of their employment or the date of the ‘insolvency event’ – whichever is the later.
- Claimants have the right to an external review, if not satisfied after an internal review is conducted.
- Claimants must be an Australian Citizen, permanent resident or holder of a special category visa under the Migration Act at the time their employment ends.
- FEG entitlements are paid up to the end of employment, rather than the ‘insolvency event’ date.
- FEG benefits apply under deeds of company arrangement and personal insolvency agreements.
For more information on the schemes refer to www.deewr.gov.au/feg.
The following extract from our November 2012 e Update is worth repeating
To date the federal government has spent about $1 billion on GEERS. The last financial year saw over $15 million worth of entitlements paid, with GEERS working very closely with insolvency practitioners in assessing claims. This new bill has met some criticism not only on the principles of redundancy and enterprise agreements, but ultimately the cost to taxpayers.
We have observed that since the introduction of the scheme that some directors have become more open to external administration with the knowledge that their employees will be covered. We have said previously that such an initiative (as GEERS) should be commended as it provides relief first and foremost to the ‘innocent individuals’ in our communities and perhaps a more honest and proactive reaction from the directors whom face insolvency. As might be expected there are several requirements and limitations, one of which specifically excludes the payment of outstanding superannuation. It also limits the entitlements of directors or relatives of directors to statutory limits under the Corporations Act.