14 May 2014

Budget sets new maximum payment for redundancy pay under the Fair Entitlements Guarantee

One of the many changes to be implemented as part of the Federal Budget delivered last night was a change to the Fair Entitlements Guarantee (FEG) (previously known as the General Employee Entitlements and Redundancy Scheme or GEERS), which  guarantees certain unpaid employee entitlements in the event of insolvency or bankruptcy of that person's employer.

As result of the change, from 1 January 2015, the maximum payment for redundancy pay under the FEG scheme will be 16 weeks. This brings the FEG scheme in line with the maximum set by the National Employment Standards contained in the Fair Work Act 2009 (Cth).  Previously, redundancy pay was capped at a maximum of four weeks per full year of service.

It is expected that the Government will achieve savings of $87.7 million over four years (beginning with $10 million in 2015-16 and building to $29.5 million by 2017-18).

From 1 July 2014, indexation of the maximum weekly wage used in calculating entitlements for claimants earning above the maximum weekly wage of $2,451 will be paused until 30 June 2018.

The changes will apply only to liquidations and bankruptcies that occur on or after 1 January 2015.

Employees seeking to claim an entitlement above the maximum set by the NES will maintain rights as unsecured creditors to recover any outstanding entitlements through the winding up of their employer’s business.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.