24/10/2005, Workers' entitlements remain at risk despite IR reforms
SYDNEY, October 24, 2005. If bargaining were transferred to the workplace level in line with the Government’s industrial relations vision, workers’ entitlements would remain at risk when a company collapsed, according to the general insurance company Assetinsure.
Assetinsure says this issue remains surprisingly absent from the current IR debate on how to achieve best outcomes for employees and employers. Yet each year over 6,000 Australian companies become insolvent and around 4,000 of these end up in the hands of liquidators or receivers. Companies in Australia are not obliged to make provision in their accounts for redundancy payments, as long as they are a going concern.
Despite strong economic growth, figures from credit rating agency, Corporate Scorecard Pty Ltd, rates 12 per cent of all Australian companies – about 150,000 businesses - as category “CCC+” or lower. This rating indicates that their probability of collapse during the next three years is higher than 44 per cent.
The Government’s General Employee Entitlements and Redundancy Scheme (GEERS) is limited in its scope, with significantly capped payouts. Experience of recent collapses shows the loyal and long term workforce, together with better paid white-collar workers, are at most risk when there are no assets left to fund employee entitlements.
That is why Assetinsure, an Australian owned insurance company, is convinced that the Government’s so-called safety net on employee entitlements needs a more secure and generous safety net beneath it. Assetinsure has introduced an insurance bond that provides comprehensive protection. The insurer’s new Employee Entitlements Cover (EEC) covers the full entitlements detailed in employment contracts.
Assetinsure CEO Mr Peter Wedgwood says: “A recent announcement by the Minister for Employment and Workplace Relations, Kevin Andrews, of measures to strengthen GEERS, essentially has the opposite effect.”
“These changes to its operational arrangements actually make it significantly more difficult for redundant workers to access their entitlements because it mandates that a company has to go into liquidation, rather than receivership or administration, before they become eligible. Depending on the complexity of the formal administration, this will create delays of anything from 3 to 12 months before workers receive their entitlements. It will cause their families real hardship.”
Mr Wedgwood adds: “While GEERS can take months to pay employers, our EEC insurance bond ensures that entitlements are paid in full within 30 days of retrenchment by the Insolvency Practitioner.”
The recent announcements do not alter material shortcomings in the Government scheme which include:
- GEERS is a discretionary and unlegislated scheme. There is no guarantee of payment, therefore it is inherently unreliable.
- Payment calculations are based on a maximum annual wage of $90,400 a year.
- GEERS pays only eight weeks retrenchment, when many awards stipulate 16 weeks or more.
- Superannuation contributions are not covered.
Assetinsure believes that taking out the company’s EEC bond makes good business sense, as it allows firms to provide a benefit to staff and to the loyal workforce in particular. This can make a big difference in an environment increasingly characterised by shortage of skilled labour. It also protects directors of companies that might face public scrutiny over why they have not protected their workforce, which is often described as a company’s most valuable asset.
For these reasons, Assetinsure’s entitlements scheme has received positive feedback from the Department of Employment and Workplace Relations, the ACTU, Australian Chamber of Commerce & Industry and the Australian Institute of Company Directors, as well as leading insolvency practitioners.
Peter Wedgwood comments:”There is general consensus that the Assetinsure EEC is a real safety net for Australian workers”.
He adds: “One would expect unions to push for this protection in future. When companies collapse and GEERS payments fall far short of actual entitlements, Government officials are likely to deflect any criticism to the workers and their representatives, as they should have known that full protection was available. When this happens, the IR debate will be re-ignited with a new focus on how to best protect employees’ entitlements in corporate default situations, as part of fair remuneration structures.
About Assetinsure’s Employee Entitlements Cover (EEC)
EEC is an insurance bond that covers the full entitlements detailed in employment contracts. EEC includes unpaid wages, accrued annual leave, long service leave, payment in lieu of notice, redundancy and superannuation contributions.
Cover under Assetinsure will be taken out in the employer’s name, but paid directly to employees by the Insolvency Practitioner. Key aspects include:
- The EEC is an insurance bond.
- Cover is surprisingly affordable - only 0.2 to 0.5 per cent of a company’s payroll, compared to 2.8 per cent plus for Work Cover.
- Cover is highly flexible and can be adjusted to suit individual company needs.
- Cover is simple to implement. Information requirements are limited to readily available corporate details.
About Assetinsure
Launched in April, 2004 Assetinsure is an APRA regulated, Australian-owned company that brings additional choice to the Australian insurance market by providing specialist insurance products such as Professional Indemnity Property, Construction, General Aviation and Financial Risk. The company is owned by Assetinsure Holdings Pty Limited which has Babcock & Brown as a 50% shareholder.
For more information
Peter Wedgwood
Chief Executive Officer
Assetinsure Pty Limited
T: (02) 8274 2832
F: (02) 9251 8061
E: peter.wedgwood@assetinsure.com.au
Gregor Pfitzer
Chief Operating Officer
Assetinsure Pty Limited
T: (02) 8274 2832
F: (02) 9251 8061
E: gregor.pfitzer@assetinsure.com.au
Neil Maltby
National Manager Employee Entitlements
Assetinsure Pty Limited
T: (02) 8274 2889
F: (02) 9251 6387
E: neil.maltby@assetinsure.com.au
Or employee.entitlements@assetinsure.com.au
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