CHAPTER 1
Reference
1.1
On 4 September 2014 the Senate referred the provisions of the Fair
Entitlements Guarantee Amendment Bill 2014 (bill) to the Senate Education and
Employment Legislation Committee (committee) for inquiry and report by 24
September 2014.[1]
Conduct of the inquiry
1.2
Details of the inquiry were made available on the committee's website.[2]
The committee also contacted a number of organisations inviting submissions to
the inquiry. Submissions were received from 14 organisations, as detailed in
Appendix 1.
1.3
A public hearing was held in Melbourne on 17 September 2014. The witness
list for the hearing is available in Appendix 2.
Background
1.4
The bill proposes to amend the Fair Entitlements Guarantee Act 2012
(the Act) to provide financial assistance (an 'advance') to cover certain
unpaid employment entitlements for eligible employees who lose their job due to
the liquidation or bankruptcy of their employer.[3]
1.5
The Fair Entitlements Guarantee Scheme (the Scheme) is the successor of
the General Employee Entitlements and Redundancy Scheme (GEERS) that was
introduced in 2001 by the Howard government to protect employee entitlements.[4]
Rationale for the bill
1.6
The bill implements the government's 2014–15 Budget announcement to
align the maximum redundancy pay entitlement under the Scheme with the maximum
set by the National Employment Standards contained in the Fair Work Act 2009.[5]
It also restores the level of redundancy pay entitlement that was available
under the GEERS Operational Arrangements that were in effect from 22 August
2006 and
31 December 2010.
1.7
Since the Scheme's introduction, the demand for advances has increased
significantly. In 2006–07 there were 8626 claimants being paid $72.97 million.
In 2012–13 there were 16 019 claimants being paid $261.65 million.[6]
In response to the increasing demand for entitlements under the Scheme and
community expectations, the government is seeking to amend the Act to ensure
its smooth operation and the Scheme's future sustainability.[7]
Overview of the bill
1.8
Currently, where eligible employees lose their job due to the
liquidation or bankruptcy of their employer, they are provided financial
assistance under the Scheme to cover certain unpaid employment entitlements. Presently
this includes:
-
assistance for up to 13 weeks of unpaid wages;
-
unpaid annual and long service leave;
-
up to five weeks' payment in lieu of notice; and
-
redundancy pay, capped at four weeks per full year of service,
with no cap on years of service.[8]
1.9
Item 5 of the bill would provide that where a claimant did not take
reasonable steps before their employer's insolvency event to be paid debts
relating to their unpaid employment entitlements, the Secretary may reduce the
amount of the claimant's amount by those debts.[9]
1.10
The explanatory memorandum emphasises that this approach is intended to
ensure that employees are still required to actively protect their own
interests by pursuing debts, but also allow payments to be made for debts that
the employee took reasonable steps to pursue.[10]
1.11
Item 6 of the bill would reinstate a claimant's redundancy pay
entitlement to 16 weeks' pay in total.[11]
1.12
In his Second Reading Speech, the Hon. Christopher Pyne MP, Minister for
Education, explained that while the advance for redundancy pay under the
proposed Scheme will not exceed 16 weeks, employees will still be able to
pursue their employers for any remaining unpaid entitlements through the
winding-up process.[12]
1.13
The bill also makes a number of technical amendments to clarify the
operation of the Act. These amendments will:
-
clarify where a claimant is eligible for financial assistance
under the Scheme, the claimant’s initial entitlement under the Act will be
calculated without reference to any amounts required to be withheld by law,
such as pay as you go tax withholding;
-
clarify that the death of a person does not prevent the person
being eligible for financial assistance, to enable the next of kin or estate to
pursue a claim; and
-
clarify when a debt owed by a claimant to his or her employee is
greater than the employment entitlement to which it relates, it can be offset
proportionally against any of the claimant’s other employment entitlements
under the Scheme.
1.14
The bill also seeks to establish a funding source in the legislation for
certain legal costs associated with applications to the Administrative Appeals
Tribunal for review of decisions made by the department. This was suggested by
the previous government.
1.15
The bill would commence on 1 January 2015 or the day after the bill has
received Royal Assent, whichever is later. However, the amendment relating to
the department's funding arrangements would apply from 1 July 2015 to align
with the start of the 2015–16 financial year.[13]
Human rights implications
1.16
The explanatory memorandum details the bill's engagement of the right to
social security, including social insurance, under Article 9 of the International
Covenant on Economic, Social and Cultural Rights (ICESCR). The committee on
Economic, Social and Cultural Rights has stated that the right to social
security encompasses the right to access benefits without discrimination in
order to secure protection from lack of work related income caused by
unemployment.[14]
1.17
The explanatory memorandum states that the bill is compatible with human
rights because:
... it seeks to maintain the sustainability of the Scheme of
financial assistance without compromising minimum entitlements and to the
extent that the amendments may limit rights, those limitations are reasonable,
necessary and proportionate to that legitimate objective.[15]
Financial Impact Statement
1.18
The explanatory memorandum submits that the bill would have a financial
impact, resulting in an estimated saving of $79.4 million over the forward
estimates, as illustrated by the table below.[16]
Table 1 - Explanatory Memorandum, Financial Impact Statement[17]
|
2014–15
$m
|
2015–16
$m
|
2016–17
$m
|
2017–18
$m
|
Total
$m
|
|
9.2
|
20.8
|
23.3
|
26.1
|
79.4
|
Acknowledgement
1.19
The committee would like to thank those individuals and organisations
who contributed to the inquiry by preparing written submissions and giving
evidence at the hearing.
Notes on References
1.20
References in this report to the Hansard for the public hearing are to
the Proof Hansard. Please note that page numbers may vary between the Proof
Hansard and the official transcript.
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