Reductions in payments under the Fair Entitlements Guarantee

Budget Review 2014–15 Index

Anne Holmes

The Fair Entitlements Guarantee (FEG) replaced the General Employee Entitlements and Redundancy Scheme in 2012. The FEG is funded by the Commonwealth and provides a safety net for employees whose employers have become insolvent, where the employees’ entitlements cannot be recovered through other means.[1]

Assistance is available for wages (up to 12 weeks’ pay), annual leave, long service leave, payment in lieu of notice (up to five weeks) and redundancy payments (up to four weeks for each year of service). The wages that will be paid are capped at a maximum weekly rate. This was $2,364 when the scheme began and has been indexed by movements in average weekly ordinary time earnings. At present it is $2,451.

The Government has announced two changes to the FEG.

The maximum entitlement to redundancy pay from the FEG will be reduced to 16 weeks. (At present the FEG pays all accrued redundancy entitlements, subject to the cap on weekly earnings.) The description of the measure in Budget Measures: Budget Paper No. 2: 2014–15 says that this will bring the payment ‘in line with the maximum set by the [National Employment Standards]’.[2] This is not accurate. The Fair Work Act 2009 sets out a scale of redundancy pay where the highest entitlement, for nine years of service but less than 10 years, is 16 weeks.[3] However, the National Employment Standards are minimum standards.[4] Sixteen weeks’ pay is therefore the minimum redundancy pay an employee is entitled to by law when he or she has served nine years with an employer—not the maximum.

Other entitlements under the FEG are not set at the minimum National Employment Standard. They are set in relation to the worker’s entitlements under the relevant award, agreement or contract.

The perceived generosity of the maximum redundancy entitlements was controversial when the Fair Entitlements Guarantee Bill 2012 was being debated. The Coalition Opposition moved an amendment to cap the entitlements at 16 weeks, arguing that the Government was trying to increase, by stealth, the acceptable community standard for redundancy payments.[5]

The second change is to freeze the indexation of the maximum weekly wage rate for calculating entitlements from 1 July 2014 to 30 June 2018. Over the period, this would make a difference of around $300 a week to the wage used for calculating entitlements for workers earning above the maximum.

As the description of the measure points out, employees are able to take legal action as creditors to attempt to recoup any outstanding entitlements.

The measure is estimated to generate savings of $87.7 million over four years. It has generated only passing comment to date, perhaps because it has no immediate effect on individuals.[6]

[1].           Details of the Fair Entitlements Guarantee are from Department of Employment, ‘Fair Entitlements Guarantee’, Department of Employment website, accessed 15 May 2014.

[2].           Australian Government, Budget measures: budget paper no. 2: 2014–15, 2014, p. 95, accessed 15 May 2014.

[3].           Fair Work Act 2009, Section 119, accessed 15 May 2014.

[4].           Fair Work Act 2009, op. cit., Section 61.

[5].           P Pyburne, Fair Entitlements Guarantee Bill 2012, Bills digest, 2012–13, Parliamentary Library, Canberra, 2012, p. 12, accessed 15 May 2014.

[6].           For example, M Dunckley, ‘Budget 2014: Workers' safety net cut’, Australian Financial Review, 14 May 2014, p. 8, accessed 15 May 2014.


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