Cap introduced on bankrupt companies’ unpaid redundancy pay

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Cap introduced on bankrupt companies’ unpaid redundancy pay

The government has introduced its legislation to cap redundancy pay entitlements under the Fair Entitlements Guarantee scheme in line with the maximum redundancy payment in the National Employment Standards.

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As flagged last month, the government yesterday introduced its legislation to cap redundancy pay entitlements under the Fair Entitlements Guarantee (FEG) scheme in line with the maximum redundancy payment in the National Employment Standards.

The FEG scheme covers certain unpaid employee entitlements in the event of insolvency or bankruptcy. The new maximum redundancy pay entitlement will be 16 weeks pay. (The current assistance available under the Act provides for redundancy pay at four weeks per full year of service.)

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

The changes will apply only to liquidations and bankruptcies that occur on or after the commencement date, slated to be 1 January 2015.

Other technical amendments are made by the Bill, including clarifying that where a claimant owes a debt to his or her employer (eg annual leave taken before it is accrued) and this is greater than the employment entitlement being claimed under the scheme, it can be offset proportionally against the latter.

View the Bill and Explanatory Statement
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