The increase of company collapses while owing their workers redundancy payments has resulted in the cost of the federal government scheme (GEERS) to soar in the past five years, raising claims that employers are exploiting the workers fund.
The iconic Australian chocolate manufacturer and retailer Darrell Lea are the latest company to announce voluntary administration, putting 700 jobs at risk. Although the company aims to save as many jobs as possible by selling the company as a going concern, the administrator Mark Robinson of PPB, said he was “confident of finding a buyer, GEERS would be available for employees if the business has to be wound up”.
The General employee Entitlements and Redundancy Scheme (GEERS) provides support to eligible workers who have lost their employment as a result of the insolvency of their employer and are owed certain employee entitlements.
Over the past 11 years the government has spent about $1 billion towards the taxpayer funded scheme but has only recovered $150 million from failed companies.
Insolvency data compiled by the Australian Securities and Investments Commission shows collapsed companies owing more than $500,000 in unpaid redundancies has more than doubled from 24 in 2008-2009 to 55 in 2010-11.
Despite GEERS having the support of both sides of politics, industry, unions and insolvency practitioners, the trend of failed companies in retail, manufacturing and construction sectors relying on the scheme to pay workers their entitlements is a growing concern as the government is forced to continue putting money into the fund.
Minister for Employment Bill Shorten has expressed his disappointment at the Hastie Group which collapsed in May, “that these potential job losses have been brought about by poor financial management in the company”.
The director of national workplace relations at Ai Group, Stephen Smith said the increase in redundancy benefits under GEERS last year was “very risky” and “that the insolvency of even one large company with a generous redundancy scheme could create a huge budget shortfall”.
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