After the collapse of Ansett Airlines and National Textiles in 2001 — both of which owed their employees millions of dollars in unpaid entitlements — the then-John Howard government was forced to introduce legislation establishing the General Employee Entitlements and Redundancy Scheme, which guaranteed basic entitlements for workers if a company went broke.
Manufacturing unions had long demanded that workers’ entitlements to annual leave, long service leave, sick leave, bereavement leave and agreed redundancy provisions be set aside by employers in a trust fund account to ensure that they complied with their legal obligations.
But Howard’s scheme was taxpayer funded, and since being established has cost taxpayers more than $1 billion to bail out companies that have illegally used their workers’ money for their own ends. These costs are set to soar.
Last week the Perth-based mining contractor, Forge, went into administration leaving about 1500 workers without their final pay or any other legal entitlements. Companies that supplied contractors to Forge are unlikely to recover the money owed to them, leaving taxpayers to once again foot the bill for more workers’ unpaid wages.
Atlantic, another mining industry company based in Perth that employs 200 workers, is also in trouble. It has missed a $5 million debt repayment to its bondholders who are owed more than $300 million. Scores of creditors are demanding to be paid the more than $25 million owed them. The company’s employees have said that they have not yet been paid their wages which were due on February 14.
With the resource boom coming to an end, official unemployment has already hit a 10-year high of 6%. The 720,000 unemployed is the highest number since 1998 — and there will certainly be more on the dole queue as the year progresses.
On February 18, workers at Geelong’s Point Henry aluminium smelter received the news that they will no longer have a job come August, after Alcoa announced the closure of the plant and two rolling mills. This will put 1000 people out of work.
Geelong has already been hard hit by the demise of the vehicle building industry. The last three car builders in the country, Toyota, Ford and Holden will all shut up shop by 2017.
This is going to put immense pressure on vehicle component makers, who face the daunting challenge of creating export markets in a global recession.
It is made even more difficult due to the provisions of the Automotive Transformation Scheme, which provides a co-payment of 50 cents to companies in the sector for each dollar they spend on research.
However, this is only available for research on products sold in the domestic market. The $250 million that the scheme makes available for all component makers until 2020 is capped at 5% of their sales in the local market. After the three vehicle makers have left in 2017, the scheme will in effect come to an end.
According to insolvency firm PPB Advisory, there are many companies in the component sector that need to reduce their workforce by 20- 30% to stand a chance of survival. A substantial number apparently don’t have enough money to pay workers their entitlements and the banks won’t lend them any money for redundancy payouts.
But help may be at hand for companies that have expropriated their employees’ redundancy pay.
PPB Advisory has proposed to the Productivity Commission that the current employee entitlements scheme, the Fair Entitlements Guarantee, be changed to allow companies that have already spent their employees’ redundancy pay to now have access to the scheme.
This will mean that companies can make part of their workforce redundant with taxpayers’ money. They will then soldier-on as best they can. When they eventually go belly-up, they can access the scheme again to avoid their commitments to their remaining workers.
If the submission to the Productivity Commission is approved, employers will be subsidised not only by taxpayers but also by their own long-term employees. There is a cap on the amount payable under the scheme which means that these workers will not receive their full entitlements to annual leave, long service leave and the provisions of registered redundancy agreements.
Innovative industry policy has been absent from the two big political parties in Australia since the reduction and phasing out of tariffs began in earnest in the early 1970s.
Subsidising shonky employers has long been part of the problem. It is a testament to the stupidity of policymakers that it is now proposed as a solution.
A reading of the tea-leaves of economic trends would suggest that it might be prudent for workers in the vehicle component industry to take note of their legally unenforceable entitlements. And then enquire of their employers as to their guaranteed safekeeping.
