The Fair Entitlements Guarantee
The Department administers the Fair Entitlements Guarantee and the legacy General Employee Entitlements and Redundancy Scheme. These schemes provide a safety net to workers who have lost their jobs as a result of the liquidation or bankruptcy of their employer where the employer has insufficient funds to meet its employee entitlement obligations. The Fair Entitlements Guarantee is a legislative scheme that covers people whose employers entered liquidation or bankruptcy on or after 5 December 2012; the General Employee Entitlements and Redundancy Scheme applies to employer liquidations and bankruptcies that occurred before that date.
Both schemes cover five employment entitlements—unpaid wages (up to 13 weeks), annual leave, long service leave, payment in lieu of notice (up to five weeks) and redundancy pay (up to four weeks for each year of service). Payments are subject to a maximum weekly wage cap, which for 2016–17 was $2,451.00.
After payments are made under the Fair Entitlements Guarantee, the Commonwealth steps into the shoes of the redundant worker as a creditor in the insolvency process. As assets are recovered, the Commonwealth can recoup its outlay through dividends paid under the company liquidation. The Fair Entitlements Guarantee Recovery Program started as a pilot on 1 July 2015 and became an ongoing program on 1 January 2017. It has enabled the Department to proactively pursue actions and increase the recovery of funds, and its success is reflected in a continued strong increase in the proportion of funds recovered in 2016–17 compared with previous years.
To support the ongoing integrity of the Fair Entitlements Guarantee scheme, the Department (jointly with the Department of the Treasury) held public consultations on proposed law reforms to deter misuse of the scheme and facilitate the recovery of payments. Submissions were invited in response to the discussion paper ‘Reforms to address corporate misuse of the Fair Entitlements Guarantee scheme’, and stakeholder roundtables were hosted in Sydney and Melbourne.
The following occurred during 2016–17:
- The Department continued to maintain strong improvements in the time taken to process claims.
- A total of $186.02 million was paid to 12,354 claimants under the Fair Entitlements Guarantee.
- A total of $47.98 million was recovered from liquidated companies on behalf of the Commonwealth through creditor dividends in the winding-up process.
- The Fair Entitlements Guarantee hotline handled 24,940 telephone calls and responded to 12,179 emails about the operation of the two schemes.
- The Department initiated an internal review of 1,160 Fair Entitlements Guarantee claim decisions under section 37 of the Fair Entitlements Guarantee Act 2012 (8.8 per cent of the total number claiming assistance).
- Claimants made formal requests for review of 660 decisions under section 38 of the Fair Entitlements Guarantee Act (5.0 per cent of the total number claiming assistance).
No new claims were received under the General Employee Entitlements and Redundancy Scheme.
Section 38 of the Fair Entitlements Guarantee Act enables redundant workers to seek a departmental review of a decision on their claim. If they remain dissatisfied after that review, they can apply to the Administrative Appeals Tribunal for further review. In 2016–17, 16 applications were lodged with the Administrative Appeals Tribunal, representing 2.5 per cent of the total section 38 review decisions made under the Act. Of 39 matters finalised by the Administrative Appeals Tribunal in 2016–17:
- In 12 matters the Department’s decision was set aside.
- In seven matters the Department and the claimant reached an agreed outcome.
- In 15 matters the Department’s decision was affirmed or the claimant’s application was dismissed by the tribunal.
- In five matters the claimant withdrew their application.
The Commonwealth Ombudsman
No inquiries were raised by the Commonwealth Ombudsman in relation to the Fair Entitlements Guarantee or the General Employee Entitlements and Redundancy Scheme.
In administering the Fair Entitlements Guarantee and the General Employee Entitlements and Redundancy Scheme, the Department has worked closely with insolvency practitioners to verify unpaid employment entitlements. In 2016–17, $4.2 million was paid to insolvency practitioners for verification services. Two major business improvement initiatives were delivered during the year to reduce the administrative burden and improve interactions with insolvency practitioners under the Fair Entitlements Guarantee. From 1 July 2016, the Fair Entitlements Guarantee insolvency practitioner online portal provided a new and innovative solution to the Department’s case-related interactions with insolvency practitioners. Introduction of this reform led to a 38 per cent decrease in the timeframe for verifying employee entitlements advanced under the program, resulting in claimants receiving payments earlier. From 1 July 2016, the Department began paying Fair Entitlements Guarantee amounts directly to claimants—relieving insolvency practitioners of this task and further reducing the waiting time for these redundant workers.
During the year the Department also:
- developed its first internal version of an annotated Fair Entitlements Guarantee Act, which provides interpretative guidance and analysis for departmental assessors, based on scheme experience and Administrative Appeals Tribunal decisions
- adapted its customer service approach to better target service delivery under the program
- expanded its information sharing capability with the Australian Taxation Office
- implemented new approaches to support high engagement and performance across Fair Entitlements Guarantee team members.
Program assurance and compliance
To support the integrity of program expenditure, in 2016–17 the Department implemented a new quality assurance process for claims decisions made under the Fair Entitlements Guarantee program. The random-sample process examines initial claims decisions and those under review for accuracy. This contributes to internal quality control and ongoing assurance. A new random-sample assurance of taxation calculations for payments is also done monthly to support direct payments to claimants.
Supplementing the new quality assurance activities, a program of active data analysis was initiated to identify indicators of potential non-compliance and fraud. This program complements other non-compliance and fraud prevention and detection measures already in place, such as program-specific fraud detection training and mechanisms for receiving and responding to tip-offs.
The Fair Entitlement Guarantee in Bendigo
On 23 November 2016, Radius Disability Services entered liquidation. It employed about 200 people, including 130 with disability. A large proportion of these employees had unpaid employment entitlements and needed to rely on the financial assistance paid under the Fair Entitlements Guarantee.
By working closely with the insolvency practitioner appointed to the case, the Department learnt that some former employees with disability were experiencing difficulty with the online claim lodgement process. In response, the Department set up a temporary claim drop-in centre at the business location in Bendigo. This allowed departmental staff to provide direct and timely information about the program and customised assistance with completing and submitting claims for assistance to people with disability who had found themselves in the difficult situation of being made redundant. The Department advanced more than $1.25 million to eligible workers who had been made redundant.