Christopher Pyne (Sturt, Liberal Party, Minister for Education) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

Today I rise to introduce the Fair Entitlements Guarantee Amendment Bill 2014.

This bill will make some changes to the Fair Entitlements Guarantee scheme to not only ensure its smooth operation, but importantly, its future sustainability.

The Fair Entitlements Guarantee is a basic payment scheme of last resort that covers certain unpaid employment entitlements when employees lose their job through the liquidation or bankruptcy of their employer. The scheme is the successor to the General Employee Entitlements and Redundancy Scheme, or GEERS, which was introduced in 2001 by the Howard government to protect employee entitlements.

This government supports the Fair Entitlements Guarantee. After all, it was the Howard government that introduced protection for employees' entitlements, the first time any Commonwealth government had done so. The Fair Entitlements Guarantee provides protection for Australian workers who have earned and accrued entitlements. The Fair Entitlements Guarantee pays those entitlements, where, through no fault of the employees, the employer enters bankruptcy or liquidation and cannot pay the entitlements themselves.

Over time, the costs borne by the scheme have increased significantly. Demand has increased from 8,626 claimants being paid $72.97 million in 2006-07 to 16,019 claimants being paid $261.65 million in 2012-13. This trajectory of increase in the cost of the scheme is not sustainable. To ensure the future sustainability of the scheme, changes must be made.

The Fair Entitlements Guarantee currently provides assistance for redundancy entitlements up to a maximum of four weeks' redundancy pay per year of service, with no cap on years of service.

This level of protection is very generous by community standards. It creates a moral hazard—it provides an incentive for employers and unions to sign up to unsustainable redundancy entitlements, safe in the knowledge that if the company fails, the Fair Entitlements Guarantee and the Australian taxpayer will pay for it.

To secure the financial sustainability of the scheme, the bill will reinstate the previous 16-week cap on redundancy payments made under the scheme, which will apply to employer liquidations or bankruptcies that occur on or after 1 January 2015.

It is very important to note that capping the assistance for redundancy pay entitlements to a threshold of 16 weeks' pay will align redundancy payments under the Fair Entitlements Guarantee with the maximum amount payable under the National Employment Standards.

As well as addressing financial sustainability, this amendment will also address the moral hazard that overly generous redundancy entitlements create.

It will put beyond doubt that the accepted standard for redundancy pay is what is contained in the National Employment Standard s— a maximum of 16 weeks ' pay. For the sake of consistency, it is important that the National Employment Standards and the Fair Entitlement Guarantee standards are the same.

This bill will only affect people who lose their job when their employer is liquidated or becomes bankrupt on or after 1 January 2015.

While the Fair Entitlements Guarantee payment for redundancy pay will not go beyond 16 weeks' pay, employees will still be able to pursue their employer for any remaining unpaid entitlements through the winding-up process, which is what employees currently do for entitlements not covered by the Fair Entitlements Guarantee.

Let me make it abundantly clear—the government is firmly of the belief that it is the responsibility of employers to meet the cost of their employees. This includes making adequate provision for redundancy pay when employees are made redundant. It is not the job of government and the Australian taxpayer to prop up particular businesses when they are failing or encourage employers to shirk their responsibilities. The government's job is to ensure the economy is as strong as possible and to provide a framework for business to succeed.

This bill also progresses three technical amendments to the Fair Entitlements Guarantee legislation to clarify that:

The bill also:

This bill will allow the Fair Entitlements Guarantee to continue in a sustainable fashion. It will ensure that the National Employments Standards are consistent with the Fair Entitlements Guarantee.

The government supports the Fair Entitlements Guarantee. And this bill ensures that it can continue to be supported.

I commend the bill to the House.

Debate adjourned.