Business Daily Media

When companies go bust, temporary visa holders miss out and that's wrong

  • Written by Kevin Davis, Professor of Finance, University of Melbourne
When companies go bust, temporary visa holders miss out and that's wrong

The exclusion of temporary visa workers from reimbursement under Australia’s Fair Entitlements Guarantee (FEG[1]) scheme for lost wages and entitlements (annual leave etc) owed to them when their employer collapses[2] is not just unfair.

It is inconsistent with other important government guarantee schemes, such as the Financial Claims Scheme (FCS[3]) for bank deposits and insurance policies, where non-residents are eligible[4].

Read more: There's serious talk about a "job guarantee", but it's not that straightforward[5]

It is also inconsistent with the principle of non-discrimination expressed on the Fair Work Ombudsman website[6]:

all people working in Australia, including foreign workers, are entitled to basic rights and protections in the workplace.

Lost jobs and hardship

During the current coronavirus crisis many workers have experienced the hardships of both losing their job and then discovering that unpaid wages and other entitlements have been lost due to insolvency of their employer.

Australian citizens, permanent (and some other) visa holders are entitled to claim for compensation under the FEG, albeit with limits on the amount claimed.

But temporary visa holders, such as international students working in shops[7] or hospitality[8] to earn enough for rent and living expenses, are not eligible to claim.

Is it right to exclude them from the Australian taxpayer support provided by the FEG? Yes, if the objective of the scheme is solely to provide compensation for Australians suffering loss.

But no if the objective is to provide compensation for failings by bosses of Australian businesses to adequately provide for the amounts owed to any employees.

All workers should be covered

There is, in my mind, a very strong case for the latter answer, and thus inclusion in the FEG of temporary visa holders.

The FEG is an alternative to other methods of making sure employers adequately provide for amounts owed to employees. These could include an explicit, premium based, insurance scheme, or requirements for employers to maintain amounts in a trust account adequate to meet unpaid entitlements.

In the absence of such direct disciplining measures on employers, which would protect all workers, the FEG is a substitute to provide such protection.

Any of these approaches work to improve the efficient operation of the labour market by removing the need for potential and current employees to assess (and worry) whether an employer will be able to meet unpaid entitlements.

Not only is that a virtual impossibility for them, but their ability to take actions to reduce exposure to potential losses is highly limited (short of quitting and demanding immediate payment).

Other protections from businesses collapsing

It is worth comparing the FEG with the Financial Claims Scheme (FCS), which protects bank depositors and insurance policy-holders (up to maximum amounts covered).

Yes, an important feature is that it provides ex-post compensation for losses from a failed institution.

But a critical feature is that it enhances the stability and efficiency of the financial sector by removing concerns of those covered about risk of failure of their financial institution.

The resulting peace of mind also reduces the risk of “[runs[9]]” for example, where a large number of customers withdraw their deposits at the same time.

The FCS does not exclude non-residents with Australian dollar accounts, held in Australia, from its coverage. Just as Australian retail customers are generally unable to assess the financial health and risk of a bank or insurance company, so too are non-resident retail customers. Probably more so.

An important feature of the FCS is rapid access[10] to amounts owed by a failed institution. This reduces the disruption to customers relying on access to those funds for daily living and other expenses.

Read more: Cutting taxes for the wealthy is the worst possible response to this economic crisis[11]

The same arguments are relevant regarding coverage by the FEG. Covered workers need not worry about possible loss of unpaid entitlements if their employer fails.

Realistically, employees on temporary visas are even less likely than Australian employees to have the ability to assess risk of loss from employer insolvency. As casual or part-time employees they have less (if any) bargaining power.

The financial hardship resulting from loss of entitlements (on top of unemployment) of such relatively low-paid workers with limited access to other forms of financial support is undoubtedly severe.

Add to that the Fairwork principle of non-discrimination and the conclusion is obvious. The FEG should apply to such workers on temporary visas.

References

  1. ^ FEG (www.ag.gov.au)
  2. ^ owed to them when their employer collapses (www.theage.com.au)
  3. ^ FCS (www.apra.gov.au)
  4. ^ non-residents are eligible (www.apra.gov.au)
  5. ^ There's serious talk about a "job guarantee", but it's not that straightforward (theconversation.com)
  6. ^ website (www.fairwork.gov.au)
  7. ^ shops (www.sbs.com.au)
  8. ^ hospitality (the-riotact.com)
  9. ^ runs (dictionary.cambridge.org)
  10. ^ rapid access (www.apra.gov.au)
  11. ^ Cutting taxes for the wealthy is the worst possible response to this economic crisis (theconversation.com)

Authors: Kevin Davis, Professor of Finance, University of Melbourne

Read more https://theconversation.com/when-companies-go-bust-temporary-visa-holders-miss-out-and-thats-wrong-142281

Business Today

Hunt and Brew launches Australia-first cold brew coffee

Australian boutique coffee maker Hunt and Brew has announced it will be sourcing the beans for its new “Australia” cold brew coffee from far north Queensland in a move that will make the company one of the largest buyers of ...

What you need to know about the Defense Production Act – the 1950s law Biden invoked to try to end the baby formula shortage

Biden invoked the Defense Production Act to help end the shortage of baby formula. AP Photo/David J. PhillipU.S. President Joe Biden on May 18, 2022, announced he is invoking the Defense Production Act to help end the shortage of ...

Baby formula industry was primed for disaster long before key factory closed down

Cities are trying to address the baby formula shortage with community drives.AP Photo/David J. PhillipThe conditions that led to a shortage of baby formula were set in motion long before the February 2022 closure of the Similac fa...

Utilising communication tech to alleviate employee burn out

Hybrid work solidified into the business model in 2021 – plain and simple. Jabra research revealed 42 per cent of employees last year requested leadership to help make their virtual workspace more comfortable. Employees are ...

Space Machines readies for liftoff securing launch services deal with SpaceX

SpaceX to carry Space Machines' Optimus Orbital Transfer Vehicle as part of its April 2023 mission. Optimus is one of the largest spacecraft built in Australia and furthers Australia’s sovereign capabilities toward in-space...

Deliver business benefits through operational excellence

As Australian businesses emerge from the pandemic lockdowns and draw up plans for growth, increasing numbers are adopting a strategy of operational excellence. Operational excellence involves everyone in an organisation and f...

Business Daily Media Business Development

Hunt and Brew launches Australia-first cold brew coffee

Australian boutique coffee maker Hunt and Brew has announced it will be sourcing the beans for its new “Australia” cold brew coffee from far north Queensland in a move that will make t...

NewsServices.com - avatar NewsServices.com

Utilising communication tech to alleviate employee burn out

Hybrid work solidified into the business model in 2021 – plain and simple. Jabra research revealed 42 per cent of employees last year requested leadership to help make their virtual wo...

David Piggott, Managing Director ANZ at Jabra - avatar David Piggott, Managing Director ANZ at Jabra

Space Machines readies for liftoff securing launch services deal with SpaceX

SpaceX to carry Space Machines' Optimus Orbital Transfer Vehicle as part of its April 2023 mission. Optimus is one of the largest spacecraft built in Australia and furthers Australia’...

Business Daily Media - avatar Business Daily Media

India's employee hostels are often like prisons – but young women garment workers don't always see it that way

Kavitha, 18, earns a living at a clothing factory in the southern Indian state of Tamil Nadu. Like many of her colleagues, she lives in accommodation provided by the factory, where she share...

Andrew Crane, Professor of Business and Society, University of Bath - avatar Andrew Crane, Professor of Business and Society, University of Bath

Shortage of workers threatens UK recovery – here’s why and what to do about it

For the first time since records began, there are more job vacancies in the UK than unemployed people, according to the latest monthly labour market figures. This has been driven mainly by a...

Donald Houston, Professor of Economic Geography, University of Portsmouth - avatar Donald Houston, Professor of Economic Geography, University of Portsmouth

A central bank digital euro could save the eurozone – here's how

Blockchain bailout?4K_HeavenThe European Central Bank and its counterparts in the UK, US, China and India are exploring a new form of state-backed money built on similar online ledger techno...

Guido Cozzi, Professor of Macroeconomics, University of St.Gallen - avatar Guido Cozzi, Professor of Macroeconomics, University of St.Gallen



NewsServices.com

Content & Technology Connecting Global Audiences

More Information - Less Opinion