The Employment Gap Failing Migrants
What Happens to Migrant Workers When a Company Goes into Liquidation?
By Carla Fischer
Australia prides itself on fair work laws and a strong regulatory system. But when it comes to insolvency, migrant workers are often treated as second class employees, denied access to protections that their local counterparts receive. I worked legally, paid tax, and contributed to my employer's success, yet when I was laid off from two cafes in Sydney, I was left behind. The two businesses declared themselves insolvent, due to debts they were unable to repay. As a result, I was never given my final wages or superannuation. Meanwhile, my Australian colleagues were able to recover their unpaid wages through a government scheme which I did not qualify for.
The FEG Exclusion:
The Fair Entitlements Guarantee (FEG) is a safety net offered by the Australian Government that covers unpaid wages, redundancy pay, and accrued leave when an employer goes into liquidation or becomes bankrupt. But FEG comes with one glaring limitation. FEG only applies to Australian citizens, permanent residents, or certain special visa holders (e.g. protected New Zealand citizens).
If you are on a temporary visa, such as a temporary skilled visa, or those issued for students or people on working holidays, you are not eligible. Even if you have worked legally, paid taxes, and contributed to the Australian economy just like everyone else. This creates a two-tiered system that unfairly discriminates against migrant workers, leaving many of us with no legal recourse when our employers collapse.
What About Superannuation?
Under Australian law, employers must pay superannuation for all eligible employees, regardless of their residency status. Even temporary visa holders are entitled to super contributions. If your employer fails to pay super, you can report it to the Australian Taxation Office (ATO). The ATO may then recover the unpaid super under the Superannuation Guarantee (Administration) Act 1992. In my case, the ATO acknowledged the debt as part of the liquidation. But here’s the catch: there was no dividend paid to any class of creditors. This means no money was left in the company to pay anyone, not even the ATO. My super, while legally owed, became virtually unrecoverable.
Understanding the Law:
Here is how Australian insolvency law works, and why many employees, including migrants, lose out: companies usually enter liquidation because they are insolvent, meaning they owe more than they own. By the time a liquidator steps in, bank accounts are often empty, assets may be minimal or already pledged to secured creditors, or there is little or nothing to distribute. Under the Corporations Act 2001 (Cth), debts are paid first to the liquidator, followed by other legal costs, then secured creditors (e.g., banks with asset claims), then unsecured creditors (suppliers, contractors, etc.), and then employee entitlements. After this process, the remaining funds are given to the directors. But if there’s no money left after paying the first few categories of creditors, the rest, including super and unpaid wages, don’t get paid. If the liquidator declares that no dividend is available to creditors, no payments are made regardless of the debt being legally owed.
Can the Business Owner Be Held Personally Liable?
In most cases, no. If the business was a Pty Ltd company (a type of private company), the directors aren’t personally responsible for company debts. However, there are exceptions. Directors must not let the company incur debts if it’s insolvent. If superannuation was not reported or paid on time, the ATO can issue a Director Penalty Notice (DPN), making directors personally liable. If there was fraud, dishonesty, or gross negligence, individuals can sue directors for civil penalties or even criminal charges. Lastly, repeatedly shutting down and restarting businesses under a similar name or model to avoid debts (including wages or super) is illegal and punishable by ASIC or the ATO. The Phoenix Taskforce can also investigate and prosecute directors.
Raise Awareness
This issue needs more attention. It is a legal loophole that disproportionately impacts vulnerable workers, and it's time for reform to ensure equal protection regardless of visa status. This requires certain protections to be put in place for migrants who are working just as hard as Australians.