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Push to end ‘excessively generous’ redundancy payments

Lucy Dean
·2-min read
Image: Getty
Image: Getty

A national employer group representing more than 1 million people has called for a radical restructure of the Australian redundancy payments system, warning it is on the brink of collapse.

In its budget submission, the Australian Industry Group said many businesses will be forced to make staff redundant after 28 March when JobKeeper ends.

It said it was concerned the recovery wasn’t self-sustaining, and that Australian businesses face having to pay out redundancy payments en masse.

“There is a significant risk of a marked increase in insolvencies when the JobKeeper scheme ends,” the submission read.

It claimed that the Fair Entitlements Guarantee safety net, which ensures staff are paid their entitlements if a business goes under, was “excessively generous” in that workers under enterprise agreements are owed hundreds of thousands of dollars under the Guarantee. Under national standards, other staff would get smaller payments.

The Government then generally tries to collect the sums from employers after paying workers and has historically recovered around one-third of the money its spent on redundant workers.

“Unless the scheme is restructured, the increased cost of [Fair Entitlements Guarantee] to the budget is likely to be very substantial, due to the increase in insolvencies as a result of the pandemic,” AI Group said.

According to the Attorney-General department’s forecasts, if 120,000 workers lose their jobs over the years to 2024, the Government will face a $1.3 billion redundancies bill. In this financial year alone, that’s forecast to hit $500 million - more than two and a half times the regular size of the bill.

AI Group said the economy will need new measures to prevent an insolvency avalanche once JobKeeper ends, suggesting industry specific support was in order for tourism, transport and event groups.

"There is no sign that adopting such measures would place prices or wages pressure on the economy," it said.

AI Group’s pitch comes amid a fraught industrial relations bill that unions warn will create insecurity and trigger exploitation and wage cuts.

“At a time when we need certainty, security and wages in the pockets of working people, this bill would push us in the opposite direction – cutting pay and increasing insecurity,” ACTU secretary Sally McManus said.

“The RBA as made it very clear that wage growth is the key to the recovery – but instead the Morrison Government is listening to the employer lobby who want to cut wages to increase profits.

“Cutting wages for the workers who carried us through the pandemic will be bad for small business and prolong the recovery.”