FEG - the employee’s safety net in Administration

The decision to call in a Voluntary Administrator is not an easy one for any Director to make.

There are many issues that can weigh heavily on their minds. One of the major issues when considering appointing a Voluntary Administrator is the employees and their entitlements.

Often the company owes the employees monies by way of wages, annual leave, long service leave, superannuation and redundancy entitlements.

Furthermore, if the company were to go into liquidation the assets may be insufficient to repay employees any monies owed.

Fortunately the Commonwealth has recognised this problem and provides some relief for employees who are affected by corporate insolvency. On 12th September 2001, the scheme now known as Fair Entitlement Guarantee (FEG) was set up as a safety net arrangement for employees who lose their jobs and employee entitlements.

FEG provides payments to employees for the following entitlements:

• Wages
• Accrued annual leave
• Long service leave
• Pay in lieu of notice
• Redundancy payments

FEG works closely with insolvency practitioners early on in an administration to meet these outstanding payments to employees as quickly as possible.

Because of this scheme company directors should be mindful that eligible employees could receive at least a portion of the amounts owing to them. This may make the calling in of a Voluntary Administrator a little easier for a company director to do.

Macks Advisory is a firm that practices exclusively in the areas of insolvency and business reconstruction and members with queries are invited to contact Peter Macks of Macks Advisory on 08 8231 3323 or pmacks@macksadvisory.com.au.