Crackdown on redundancy rorters as taxpayers pay $1 billion in five years

Employment Minister Michaelia Cash and Financial Services Minister Kelly O'Dwyer have accused dodgy business owners of deliberately using the federal government's Fair Entitlements Guarantee scheme to shut up shop, and shirk payments owed to employees.

The scheme, which was designed to help employees when companies go bust, has blown out since it was first established after the collapse of Ansett in 2001.

It has paid out $2.3 billion in entitlements, with $1 billion in the past five years alone.

Employment Minister Michaelia Cash has accused dodgy businesses of using taxpayer funds to shut up shop and shirk the payments they owe to employees.  Photo: The Canberra Times

Employment Minister Michaelia Cash has accused dodgy businesses of using taxpayer funds to shut up shop and shirk the payments they owe to employees. Photo: The Canberra Times

Up to 1300 company directors have forced their employees to access the scheme multiple times since 2007, according to a Treasury consultation paper. The number of employees accessing the scheme has doubled since then, from 7808 workers in 2007-08 to 14,341 in 2015-16.

"It is clear that some company directors are misusing the scheme to meet liabilities that can and should be paid directly by the employer rather than passed on to Australian taxpayers," Senator Cash said.

"The scheme is an avenue of last resort that assists employees when their employer's business fails and the employer has not made adequate provision for employee entitlements."

Senator Cash and Ms O'Dwyer will introduce legislation that would penalise company directors who reduce their liability for employee entitlements, and sanction those who have repeatedly relied on the publicly funded scheme to pay out employees.

Under the current arrangements, workers who lose their jobs can access up to four weeks' redundancy payments for every year served.

A string of recent collapses has heaped pressure on the scheme; none more so than Clive Palmer's Queensland Nickel.

The federal safety net paid out $66.8 million to 759 of Palmer's staff in July after liquidators sued the failed refinery company for $106 million.

But the scheme also helps the employees of much smaller enterprises.

In September, GJ Gardner Homes in Bathurst collapsed owing $1 million to creditors, seven of its employees are now relying on the scheme to salvage some of their entitlements.

The Treasury consultation paper found the costs of the scheme have been increasing due to the adoption of sharp corporate practices by select employers.

"This has resulted in cost-shifting to the scheme and through it, to taxpayers."

This story Crackdown on redundancy rorters as taxpayers pay $1 billion in five years first appeared on The Sydney Morning Herald.