Employee entitlements in liquidation

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Paying employees and helping with GEERS

When a company is facing insolvency and possibly liquidation, quite rightly, one of the main concerns of a director is to ensure that employees, and contractors, are treated as best they can. There are a few things the Corporations Act has to say about employees and their entitlements and there is an excellent government scheme called GEERS.

Priority Creditors

When a company goes into liquidation, the Corporations Act 2001 allows the employees of that company to hold a priority claim before other unsecured creditors. Should there be assets available for a distribution and if there are still funds after paying off liquidation costs, they will be distributed amongst employees provided that they submit their Proof of Debts detailing their claims to the Liquidator.

The only exception is if you are an “excluded employee”. An excluded employee is an employee who is, or was within the twelve months prior to liquidation, a director, a spouse of the director, or a relative of a director. If you are an excluded employee, you are only entitled to a maximum priority claim of $2,000 for wages, including superannuation, and $1,500 in leave entitlements. The remaining amount will be assessed with other unsecured creditors.


General Employee Entitlements and Redundancy Scheme (“GEERS”)

If a company has no funds to distribute to employees, employees may be able to claim some of their entitlements with the Department of Education, Employment and Workplace Relations (“DEEWR”) by making a GEERS claim. GEERS claims may cover the following entitlements:

  • up to 3 months unpaid wages for the 3 month period preceding the appointment of the liquidator;
  • unpaid annual leave;
  • unpaid long service leave;
  • up to a maximum of 5 weeks unpaid payment in lieu of notice; and
  • up to a maximum of 4 weeks unpaid redundancy entitlement for each completed year of service you have with your employer.

GEERS will not cover the 9% superannuation guarantee.

Once you have lodged your claim, DEEWR will contact the Liquidator to verify the employee’s eligibility and verify each component of the claim. DEEWR will then notify the employee once their claim has been processed and will arrange payment via the liquidator.

How to Make a GEERS Claim

To lodge a GEERS claim, you will need to complete and lodge a GEERS Claim form. For a copy of the form, or for more information about GEERS, please visit the GEERS website.

If you have any questions in relation to employee claims in a liquidation, please contact us now.

Related Topics

If the above advice has not answered your questions you might want to review the following pages and downloadable Information Sheets:

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