Minister says cap would stop employers and workers agreeing ‘overgenerous’ terms, knowing taxpayers pay if company fails

This article is more than 6 years old

This article is more than 6 years old

Christopher Pyne has said the government is addressing the “moral hazard of overgenerous redundancy payments” with a cap of 16 weeks’ pay for workers who lose entitlements when their employer goes into administration.

Pyne was introducing the fair entitlements guarantee amendment bill, implementing a budget decision to change the arrangements for employees at companies that go into receivership, saving $80m over the next four years.

Under arrangements enacted by Labor, such workers were eligible for four weeks’ pay for each year of service. The Coalition is seeking to cap that at a maximum of 16 weeks.

Pyne said the uncapped scheme introduced a “moral hazard” because it encouraged employers and workers to agree to overgenerous redundancy entitlements, knowing taxpayers would foot the bill if the company failed.

He said payments under Labor’s scheme, a successor to the general employee entitlements and redundancy scheme introduced by the Howard government, were out of control – growing from $72m in 2006-07 to $261m in 2012-13.

“This trajectory of increase in the cost is not sustainable and to ensure its future sustainability changes must be paid,” Pyne said.

He said the uncapped scheme provided “an incentive for employers and unions to sign up to unsustainable redundancy entitlements safe in the knowledge that if the company fails the fair entitlements guarantee and the Australian taxpayer will pay for it”.

The legislation came as Liberal backbencher Alex Hawke told the ABC that penalty rates should be cut immediately so small businesses could afford to employ more young people.

Hawke said there was a “mounting case” for the pay rates on weekends and public holidays to be reduced in sectors like hospitality and tourism.

“The small businesses I speak to tell me that if you could reduce penalty rates on Sundays, weekends, public holidays, they would add that extra person,” he said.

The new arrangements would apply from 1 January.

The bill will join three others attempting to change industrial relations arrangements that have not yet passed the Senate:

• The fair work amendment bill 2014, in which Labor said the government “has clearly overstepped its election mandate to the disadvantage of employees”.

• The fair work (registered organisations) amendment bill, which seeks to implement the government’s promise to subject officials of registered organisations, including unions, to the same penalties that apply to company directors.

• Legislation to reintroduce the Australian building and construction commission (ABCC).