Government departments and schemes are, by their very nature, bureaucratic. As a result we tend to regard any scheme promoted and run by a government department as being bound by red tape and ineffective.

But, in our view an exception to the general rule is the government funded and managed GEERs scheme which meets and even exceeds taxpayer’s expectations.

As an employee of any business it is well within our rights to expect payment ‘rain, hail or shine’ on the basis of which we are engaged.

Unfortunately when a permanent black cloud settles over an organisation as its insolvent state is realised, employees are in most cases the first creditor to be affected and certainly are hit the hardest as their primary source of income is depleted. Prior to the establishment of the GEERs scheme in 2001 employees of insolvent business were often simply not paid their entitlements with no effective redress.

The Federal Government’s General Employee Entitlements Redundancy Scheme (GEERS) was introduced in 2001 by the Department of Education, Employment and Workplace Relations in response to some of the shocking failures of major public companies.

It was established as a mechanism for the payment of outstanding wages, leave and redundancy payments of insolvent companies or individuals.

In 2010-11 GEERS ‘advanced more than $150 million to 15,412 Australian workers who lost their jobs as a result of their employers’ insolvency as part of the GEERS program’. Of these claimants ‘90.5 percent were paid 100 percent of their verified employee entitlements’.

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. GEERS work very closely with insolvency practitioners in assessing claims and they were able to recover over $15 million worth of entitlements in 2010-11.

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.

Such an initiative 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.

Further details on just how the GEERS scheme works can be obtained from Worrells web site or from one of our Insolvency Guides.