When a company goes bankrupt or insolvent, the employees of that company lose their jobs. These unlucky employees are most likely going to be concerned about how they can access any money that was owed to them by the company that has become insolvent or bankrupt.

There are a number of safeguards in place that aim to protect the rights of the employee. First and foremost, the employee will be made redundant immediately by the insolvent company.

Due to being dismissed via redundancy, an employee will be entitled to notice and redundancy payments. These payments will also include any wages, leave payments, superannuation and any other amounts of money which they are owed. There are also some statutory instruments that prioritise payments to employee creditors if there are any assets remaining.

In most cases, the Bankruptcy Trustee or the Liquidator are not liable for any debts that are owed to the employees. However, if they decide to continue to utilise the services associated with the employee, there might be rare circumstances where there will be some level of liability for the Bankruptcy Trustee or the Liquidator. 

Fair Entitlements Guarantee (FEG)

FEG can be best described as a scheme ran by the Australian Government that offers financial assistance to cover specific outstanding employee entitlements that arise from liquidation or bankruptcy. 

An employee can meet all the requirements associated with the Fair Entitlements Guarantee Act 2012 if all of the following conditions have been met. 

These conditions include; that the employment with the employer has ended, the individual’s former employer has entered liquidation or bankruptcy either on or after 5th December 2012.

Furthermore, the discontinuation of the individual’s employment; was due to the employer becoming insolvent, it has also occurred less than 6 months prior to the appointment of an insolvency practitioner for the employer, it must have also occurred on or after the date where the appointment of the insolvency practitioner was made by the employer.

The individual must also be owed the following entitlements such as; long-service leave or annual leave or payments in lieu of notice or a redundancy payment or wages entitlements.

The individual must have also taken reasonable steps necessary to provide evidence that indicates that there are debts in the winding up or the bankruptcy of their employer.

Furthermore, if the employee was owed employment entitlements prior to the occurrence of the insolvency, they must have taken reasonable steps to make sure that they were paid the money they were owed.

The individual must have also been an Australian citizen or a holder of a permanent via or special category visa at the time when their employment had ended. 

The individual or someone who is acting on behalf of the individual, must have also made a strong claim that the individual is eligible for an advance as outlined in under section 14 of the Migration Act 1958.

FEG Will Most Likely Pay

It is likely that FEG will pay a maximum of 13 weeks’ worth of unpaid wages, will pay the final 13 weeks of employment, or they will pay the final 13 weeks before the appointment of an insolvency practitioner was made (whichever of the three events has occurred first).

FEG will also most likely pay an unpaid annual leave or any unpaid long service leave which is owed to the employee.

They will also most likely pay any unpaid amounts in lieu of notice with a maximum of 5 weeks’ worth of pay. In terms of unpaid redundancy, they will most likely pay a maximum of 4 weeks for each completed year of service. There is also pro rata available for service that was undertaken for less than 12 months. 

Furthermore, superannuation entitlements will not be paid unless there is sufficient funds available to pay out any superannuation contributions. 

Any individual who is hoping to access FEG is required to submit a claim no later than 12 months following the day that their employment contract was terminated or 12 months following the day that the business became insolvent (whichever day has occurred later).