FEG: What is it, who is covered and how does it work?
Exploring who can make a claim, what FEG covers, the process and how long it takes to receive payment
March 15, 2019
Employees who are Australian citizens or permanent citizens can make a claim through FEG. Any Directors of the insolvent company (or their related parties), contractors and non-resident foreign workers will be required to lodge a formal proof of debt in the insolvent estate and join the list of priority creditors.
Should there be enough funds resulting from the Liquidation or Bankruptcy process to distribute to creditors, those excluded parties will receive a dividend, as will FEG itself by ‘standing in the shoes’ of the claimant employee that it has made payments to.
FEG assistance is paid for five categories of unpaid employment entitlements, which are set out below:
- Up to 13 weeks of unpaid or underpaid wages
- Annual leave
- Long service leave
- Pay in lieu of notice to a maximum of 5 weeks
- Redundancy pay – where redundancy is payable under the governing instrument, the amount legally owing is payable but is subject to a cap of 4 weeks per full year of service
When calculating FEG assistance, there is an indexed maximum weekly wage cap that is applied to entitlements, which currently sits at $2,451 per week. Any unpaid entitlements above the threshold are claimable by the employee from the insolvent estate.
FEG does NOT cover unpaid superannuation entitlements. Superannuation claims must be made directly with the Australian Taxation Office.
How does the process work and how long does it take to receive payment from FEG?
The claim process is quite simple (made easier these days by employee portals and electronic forms), but it can take up to 16 weeks from start to finish. Once a claim is received, FEG will review the claim and if it is eligible, FEG will request information including employer circumstances, history and the impacts of insolvency for employees from the Insolvency Practitioner (IP).
The IP will also provide FEG with a verification spreadsheet with employee entitlement data based on the books and records of the insolvent employer. Following the receipt of all information, FEG will assess the claims, resolve discrepancies with the IP and once satisfied, will make payment of the claim direct to the employee.
FEG will provide the IP a formal proof of debt claim to join priority creditors. FEG will also issue PAYG payment summaries.
Where can I get further information?
The FEG program is in place to protect perhaps the most exposed creditors; employees. As a result, there are lots of helpful resources available to assist employees caught out by the Bankruptcy or Liquidation of their employer.
Visit https://www.jobs.gov.au/fair-entitlements-guarantee-feg for further information about the scheme.
About the author
Laura Jackson assists with the day-to-day management of HLB Mann Judd Insolvency WA’s insolvent files. Laura regularly oversees FEG processes and procedures and assists employees of insolvent companies make effective claims. Laura also works with the Australian Taxation Office to quantify unpaid superannuation entitlements once a company enters liquidation.
If you have any queries about the FEG scheme or employee entitlement matters, please feel free to get in touch with Laura on 08 9215 7900 or via email to email@example.com.