“Super” Recalibration of the FEG Recovery Program

What is it?

Under the Fair Entitlements Guarantee Act 2012, The Fair Entitlements Guarantee Recovery Program (FEG) was introduced by the Department of Employment and Workplace Relations. The FEG programme is a government initiative which provides financial assistance to employees who have lost their job through bankruptcy or insolvency of their employer.

In simple terms, this essentially means that the government can provide a temporary grant to the company so that they can pay their employees when they have insufficient funds to do so.

Under the Bankruptcy Act 1966 (Cth) “Bankrupt” is defined as a person a) against whose estate a sequestration order has been made; or b) who has become a bankrupt through a debtor’s petition.

Under the Corporations Act 2001 “a person is insolvent if they are unable to pay their personal debt when they fall due”.

This process then makes the FEG an active creditor who can then hold meetings and collaborate with liquidators to make sure all the correct processes are followed, and the employees get back as much of what is owed to them as possible.

 

Role and responsibilities of the FEG Active Creditor

The FEG active creditor has several duties in their role as an engaged creditor which include, attending meetings, participating in Committees of Inspection, reviewing distributions, as well as engagement with insolvency practitioners on legal issues that concern the recovery of FEG advances as well as outstanding superannuation.

 

What’s changed?

The FEG aims to recover employment entitlements and as of 1 July 2024, the program was recalibrated to include unpaid superannuation guarantee charge (SGC) amounts owed by insolvent employers during the liquidation or bankruptcy process.

 

So, what does this mean?

This means that that any retirement savings due to be paid out may also be recovered so not only will they receive their unpaid wages, but they will also be paid any unpaid superannuation.

This is a positive step forward as it provides more comprehensive financial support to the employer and the employee. In turn, this helps workers to support themselves and their families during a tough time until they find employment elsewhere.

 

Why does it matter?

Previously, employees might have missed out on pension funds worth thousands of dollars that had taken years of hard work to accumulate. This advancement ensures improved retirement outcome for Australians across the country. Therefore, the recent recalibration overall, will improve the long-term outcomes for employees of insolvent employers.

 

Am I Eligible?

There are certain conditions which need to be met in order to qualify for eligibility under the FEG programme.

These are outlined in Part 2 of the Fair Entitlements Guarantee Act 2012 which states:

• Firstly, the employment has ended
• The employer must have entered into liquidation or bankruptcy after 5 December 2012
• The termination of the employment was a direct result of the insolvency of the employer, 6 months before an insolvency practitioner was appointed or on or after the practitioner was appointed.
• The employee is owed employment entitlements
• Reasonable steps have been taken to prove these debts in the winding up or bankruptcy of the employer
• That the employment entitlements were owed before the insolvency occurred and reasonable steps were taken to have them paid
• That you were an Australian Citizen (or hold an appropriate visa allowing an indefinite stay in Australia) at the time of termination of employment.
• Finally, an effective claim has been made.

It is important to note here that all conditions must be satisfied in order to qualify for FEG assistance.

 

This article was prepared with the assistance of Abbey Beaton.