17 July 2025
By Joseph Kelly, Kelly Workplace Lawyers
What Happens To My Employment Entitlements If My Employer Goes Bankrupt ?
If your employer goes bankrupt, your employment entitlements are protected by a statutory scheme under the Fair Entitlements Guarantee Act 2012 (Cth) (known as FEGS).
FEGS provides for the Commonwealth to pay advances to former employees for certain unpaid employment entitlements if the employer is insolvent or bankrupt and the end of employment is connected with that insolvency or bankruptcy.
The eligible entitlements under FEGS include annual leave, long service leave, redundancy pay, payment in lieu of notice, and unpaid wages. Superannuation contributions, however, are not covered under the scheme and must be pursued separately.
To be eligible for an advance under FEGS, all of the following must be satisfied:
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Your employment must have ended.
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After your employment ended, an insolvency event (such as your employer becoming bankrupt under the Bankruptcy Act 1966 (Cth)) happened to the employer.
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The end of your employment was due to the insolvency, occurred within 6 months before the appointment of an insolvency practitioner, or occurred after the appointment of an insolvency practitioner.
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You are owed debts attributable to employment entitlements.
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You have taken reasonable steps to prove those debts in the bankruptcy or winding up.
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You were an Australian citizen or held a permanent or special category visa at the time employment ended.
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You have made an effective claim under FEGS.
A claim must usually be made within 12 months after the later of the insolvency event or the end of your employment, and it must be in an approved form with the required documents. Failing to meet the deadline could mean losing access to the scheme, so acting promptly is critical.
When calculating the amount of the advance, any amounts already paid to you for the entitlement (from any source) are deducted. The Commonwealth may also recover some or all of the advance if you later receive payment for those entitlements through the bankruptcy process.
It is important to note that FEGS has caps and exclusions. For example, wages are only covered for up to 13 weeks, and redundancy pay is capped at a maximum of 4 weeks per year of service. This means that while FEGS offers a valuable safety net, you may not recover the full amount you were contractually entitled to from your employer.
In practice, many employees rely on FEGS as it can provide payments more quickly than waiting years for a liquidator to distribute funds. However, the process can be technical, and providing the correct documents (such as payslips, employment contracts, and proof of termination) is essential to avoid delays.
In summary, if your employer goes bankrupt, you may be able to claim unpaid employment entitlements through FEGS, subject to eligibility requirements and exclusions. Acting quickly, gathering your paperwork, and understanding what is and isn’t covered will give you the best chance of recovering what you’re owed.
If you are in doubt, make an appointment with one of our workplace specialists through our booking tab.
