In the aftermath of the corporate collapses of HIH, OneTel and Ansett, the Opposition Leader, Kim Beazley, has announced a policy to protect employee entitlements.
The plan involves “a small contribution of around 0.1 per cent of payroll from large companies, applied to a comprehensive national insurance scheme for all workers entitlements.”
Beazley says Labor will also amend the Corporations Act “to ensure companies cannot avoid employee entitlements by contrived arrangements such as those used in the infamous Patrick Stevedores case.”
“In addition to the Entitlements Guarantee, Labor will require superannuation payments to be made by employers quarterly rather than annually. Keeping these payments up-to-date will offer far stronger protection of superannuation entitlements than present arrangements.
“Labor will also maintain 100% protection of superannuation savings from theft and fraud.”
Security At Home – Labor’s Plan To Secure Employee Entitlements And Superannuation
The coming election will be focused on the vital issues of security at home and abroad.
In turbulent times, Australians want in particular to be reassured about the security of their jobs, their living standards, and their future.
The Howard Government has caused unprecedented insecurity for working Australians. Not only have its harsh industrial relations policies made people’s wages and conditions less secure, it has presided over repeated company collapses involving the wholesale loss of workers’ entitlements.
It remains the case that the only workers to receive 100 percent of their entitlements from the Government were those who worked for National Textiles, the company chaired by John Howard’s brother Stan.
Despite subsequent collapses like One.Tel and HIH, and despite the turmoil engulfing Ansett currently, the best the government can come up with is 8 weeks redundancy payout for workers often with more than 25 years’ service.
Today I announce Labor’s plan to protect all employee entitlements, across the country. Labor’s plan will:
- Protect all employees;
- Protect all entitlements;
- Keep the burden off small business; and
- Minimise the cost to taxpayers.
Labor’s plan is based on a small contribution of around 0.1 per cent of payroll from large companies, applied to a comprehensive national insurance scheme for all workers entitlements.
Small employers would not even pay that: the Government will make this contribution on their behalf.
Labor will also amend the Corporations Act to ensure companies cannot avoid employee entitlements by contrived arrangements such as those used in the infamous Patrick Stevedores case.
In addition to the Entitlements Guarantee, Labor will require superannuation payments to be made by employers quarterly rather than annually. Keeping these payments up-to-date will offer far stronger protection of superannuation entitlements than present arrangements.
Labor will also maintain 100% protection of superannuation savings from theft and fraud.
The Howard Government has backed and filled, patched and stitched, and still can’t protect all workers and all entitlements — unless they happen to work for the Prime Minister’s brother.
In contrast, Labor all along has argued for this fair, comprehensive, consistent and sensible solution to guarantee all workers their entitlements. Labor’s solution will give workers the security they want and deserve and is yet another indication of how Labor offers security at home and abroad in these difficult times.
The Failure of the Howard Government
A procession of ever larger, ever higher-profile corporate failures has demonstrated the Government’s unwillingness or incompetence in protecting the entitlements of workers in such situations.
Pressure from the Labor Party and the union movement on behalf of the workers caught in this predicament has forced the Government to respond.
John Howard has made policy on the run on this issue for the last 2 years. We have seen ad hoc policy decisions with no direction and no focus – a total of 7 different policy positions over that time.
John Howard’s Positions On Employee Entitlements
Event/Policy version number
June 1999 Version 1: John Howard opposes any support for Oakdale Mine workers and defends the ability of business to use employee entitlements for company cash flow purposes. August 1999 Version 2: Under pressure, John Howard and Peter Reith introduce legislation to enable Oakdale miners to be paid full entitlements from the coal industry long service leave fund. August 1999 Version 3: Peter Reith announces the government will legislate a national scheme by 31 December 1999. No legislation ever tabled in Parliament. January 2000 National Textiles under the Chairmanship of John Howard’s brother Stan Howard placed into administration. Workers entitlements unlikely to be paid. February 2000 Version 4: Peter Reith announces administrative arrangements that require State and Territory Governments to partially fund an inadequate, capped, so called ‘safety net’ scheme – Employee Entitlements Support Scheme (EESS). February 2000 Version 5: National Textiles get special additional Federal funds to provide 100 per cent entitlements for National Textile workers. No other worker in any company in any city or town has ever received this extra support from John Howard. September 2001 Version 6: John Howard announces a special scheme will apply for Ansett workers. Government announces new travel tax on all airline passengers. September 2001 Version 7: Details of a new general employee entitlements scheme become public. This scheme still fails to protect 100 per cent of employee entitlements and places the total burden on taxpayers to meet the costs of corporate mismanagement. The government leaves open the option of imposing additional taxes to pay for future employee entitlement losses.
Version 7 of John Howard’s entitlements scheme still fails to provide thousands of Ansett workers with their full redundancy entitlements. For example: George Kerry has been an Ansett employee for 29 years, and stands to lose nearly $80,000 under John Howard’s latest scheme.
Nearly two years ago at the time of the collapse of National Textiles, the company run by his brother Stan, John Howard said:
- “I think if I were in their shoes I would feel that I was entitled to every last cent of that redundancy.”
Under the special deal done for National Textiles, those workers finally got all of the money owed to them with a special extra payment from the Federal Government, something that Ansett workers are not able to hope for.
The Government still has not set up a national system which protects all that is owed to workers if their employers fold. It still will not set up a system which requires employers to bear their share of the responsibility in such cases.
It is only when the hardship caused by lost entitlements embarrasses John Howard personally – as in the case of National Textiles, where his brother was on the board – that the workers affected are fully compensated.
The all-too common fate of workers in cases of company failure is that the money they were entitled to expect in their sudden unemployment to provide for their mortgage or their retirement has all but disappeared.
Labor’s Plan To Secure Employee Entitlements And Superannuation
Protecting Workers’ Entitlements
Since 1996, Labor has sought to provide protection for employees’ entitlements in a series of Private Member’s Bills.
These Bills proposed a system in which employers would take out insurance to protect their employees’ entitlements in the event of insolvency. Rather than debate these Bills, the Liberal and National parties have used their numbers to prevent the Parliament from even considering them.
The great majority of employers arrange to meet their liability for accrued employees’ entitlements in the event of insolvency. There has been a succession of cases over the past few years, however, in which companies becoming insolvent have not put aside sufficient assets which would guarantee their employees their entitlements.
In most of these cases, employees have been owed many thousands of dollars, causing great hardship to them and to their families. Moreover, much of this hardship has occurred in regional and rural areas already suffering disproportionate economic and social disadvantage.
Through all of this, Labor’s plan has remained the most efficient, practical and equitable way to protect employee entitlements.
Most employers are required now to pay the Superannuation Guarantee into the appropriate superannuation funds of their employees. This is a tried and true system for collecting these funds. Payment of around an additional 0.1% of wages with the Superannuation Guarantee payable from employers with more than 20 employees would fund a compulsory insurance scheme for employee entitlements.
This premium payment would be passed on to an accredited insurer who would offer the insurance product. Employees in the event of insolvency could make a claim for their entitlements directly from the insurer. The insurer would assess the claim and make the payment through the superannuation fund.
There is precedent for this. Currently, some superannuation funds offer death and disability insurance. These funds are able to negotiate this form of insurance with a third party provider on a group basis. This enables the funds to negotiate the lowest possible premiums on behalf of their members. The third party enters into a contract with the trustees of the fund to provide death and disability insurance cover for fund members.
Employers with fewer than 20 employees will be exempt from Labor’s scheme, the Federal Government assuming responsibility for their insurance premiums.
Taxpayers will thus be required only to subsidise the cost of exempting small business employees and to cover the small number of employees who earn less than the minimum threshold required for inclusion in the Superannuation Guarantee scheme.
A number of workplaces and some industries have already established satisfactory arrangements to protect employee entitlements. Employers who offer an equivalent degree of protection for employee entitlements will not be required to contribute to Labor’s scheme.
Given the growth of job insecurity under the Howard Government, Labor believes Australian workers also deserve stronger protection of their superannuation.
Superannuation is about secure living standards for Australian workers. Current protections are not strong enough. On the Government’s own admission, the value of employers’ Superannuation Guarantee payments that are outstanding is $76 million. The Australian Taxation Office received some 8,000 complaints regarding Superannuation Guarantee compliance last year. It estimates that some 800 employers paid no superannuation at all last year. In any effective entitlements protection scheme, this issue must be dealt with.
Under the existing provisions of the Superannuation Guarantee Administration Act, employers are required to make one only Superannuation Guarantee contribution on behalf of their employees per year. This payment must be made by 28 July, at the end of each financial year. This annual payment effectively allows some employers to make use of their employees’ superannuation entitlements for up to 12 months. The risk to employees’ superannuation contributions in the event of the employer becoming insolvent is obvious, with some employees likely to lose up to 12 months contributions if their employer becomes insolvent.
Regular superannuation contributions payable on a monthly, bimonthly or quarterly basis have the added advantage of ensuring that employees’ retirement savings begin earning interest immediately they enter members’ accounts and also provide immediate access to death and disability insurance. If an employee entitlement insurance scheme were established through a superannuation fund, quarterly contributions would ensure that employees received continuous coverage.
In October 2000, Labor moved a Private Member’s Bill to alter the minimum requirement for superannuation guarantee payments from annual to quarterly. Unfortunately, the Government refused to debate the Bill and it lapsed. Labor has again listed the Bill for debate.
A Labor Government will require that Superannuation Guarantee payments be made quarterly, rather than annually as at present.
Most employers already pay more often than once a year, many paying every quarter or even every month. They should not be at a competitive disadvantage to the few employers who do not pay their employees’ superannuation so conscientiously or even at all.
Furthermore, Labor will maintain the system in which 100% protection from theft and fraud is given to superannuation savings rather than winding it back as the Government has sought to do.
Improving Corporate Behaviour
Any scheme to protect employee entitlements, no matter how well planned, will be undermined so long as the law allows company directors to misbehave as they have in some of the instances in which employees of insolvent companies have been denied their due entitlements.
Labor believes that the courts should be authorised to retrieve workers’ entitlements from related companies in corporate structures where asset stripping or similar manoeuvres leave workers employed by a part of the corporate group without their legally due entitlements.
The most scandalous of these manoeuvres was the attempt by Patrick Stevedores – during the Howard Government’s waterfront confrontation – to sack its workforce by shifting it into a shelf company.
A Labor Government will amend the Corporations Act to provide the Court with a discretion to order, when it is just to do so, that a parent company or related body corporate of an insolvent company pay the whole or part of a debt owed to an employee of an insolvent company.
This will prevent unscrupulous employers circumventing Labor’s strong employee entitlements protection measures.