Employee entitlements during voluntary administration are treated as priority claims, but payment depends on the company’s financial position and available assets. Employees may recover wages, leave, and redundancy through the administration process or, if necessary, through the Fair Entitlements Guarantee (FEG), subject to caps and eligibility.
On This Page
- Introduction
- What Employee Entitlements Can Include
- How Entitlements Are Paid
- What Happens if a Company Cannot Pay Entitlements?
- Important Points to Remember
- Next Steps
- FAQs
Introduction
When a company enters voluntary administration, employees are often left with immediate concerns—unpaid wages, accrued leave, redundancy, and uncertainty about what comes next.
In many cases, there is confusion around what entitlements are protected, when payments will be made, and whether the company has the funds to meet its obligations. Delays, partial payments, or reliance on government schemes can further complicate the situation.
In most cases, employees are considered priority creditors. This means certain entitlements are paid ahead of unsecured creditors if funds are available.
However, payment is not always immediate, and it depends on the company’s financial position.
This blog explains how employee entitlements are handled during voluntary administration, what employees can expect, and the steps they should take to protect their position moving forward.
What Employee Entitlements Can Include
- Outstanding wages and salaries — including unpaid work up to the date of administration
- Accrued annual leave and long service leave
- Pay you receive instead of working your notice period.
- Redundancy pay (depending on the circumstances and available funds)
- Superannuation contributions (though these may be treated separately in recovery processes)
How Entitlements Are Paid
- Payments are made from the company’s available assets, as controlled by the administrator.
- Wages earned during administration are usually paid first, as part of the cost of running the business.
- Pre-administration entitlements (like unpaid wages or leave) are paid later, if sufficient funds remain after securing creditors and administration costs.
- In most cases, employees receive payment in stages, rather than as a single lump sum.
- If the business is sold, some entitlements may be transferred to the new employer, depending on the terms of the sale.
What Happens if an Employee Cannot Pay Entitlements?
If the company cannot meet its obligations, employees may need to rely on the Fair Entitlements Guarantee (FEG), a government scheme that can cover certain unpaid entitlements. FEG typically includes:
- Unpaid wages (up to a capped period)
- Annual leave and long service leave
- Payment instead of notice period
- Redundancy pay (subject to limits)
Note: It’s important to note that not all entitlements are covered in full, and strict eligibility criteria apply.
There are some important limits and conditions to be aware of:
- Weekly pay caps apply – FEG will only pay up to a maximum weekly amount (indexed annually), even if your actual earnings were higher.
- Redundancy and notice payments are capped – both in terms of weeks payable and the capped weekly rate.
- Superannuation is not fully covered – unpaid super is generally not included in FEG payments and must be pursued separately.
- Time limits apply – you must lodge your FEG claim within 12 months of your employment ending or the liquidation date.
- Eligibility rules are strict – for example, directors, contractors, and some related parties may not qualify.
It’s also important to understand that FEG is not automatic:
- You must submit a formal application through the Fair Entitlements Guarantee (FEG) online portal
- You’ll need supporting documents (such as payslips, contracts, or termination letters)
- The process can take time while your claim is assessed
Important Points to Remember
- You must formally lodge a Proof of Debt (POD) form with the Administrator to ensure your unpaid entitlements are accurately recorded and to secure your right to vote.
- Employees are legally considered creditors and have the right to attend meetings and vote on the company’s future, including whether to accept a Deed of Company Arrangement (DOCA).
- FEG does not cover superannuation in full, and unpaid super may need to be pursued separately through the ATO.
- There are strict eligibility criteria for FEG, including that your employment has ended and the employer is in liquidation or bankruptcy (not just administration).
- If the business is sold during administration, your employment may transfer, which can affect your entitlement to redundancy pay.
- Any payments received through FEG or the Administrator are still subject to PAYG withholding tax, which may result in a lower “take-home” amount than expected.
- Once administration begins, there is a legal freeze that prevents you from suing the company or continuing existing legal action for unpaid wages without court or administrator permission.
Next Steps
Understanding your employee entitlements during voluntary administration is critical. For employees, the next step is to:
- Identify what entitlements you are owed (wages, leave, notice pay, redundancy)
- Confirm whether the company is still trading or has moved into liquidation
- Keep records of payslips, contracts, and leave balances to support your claim
- Lodge a Proof of Debt (POD) with the administrator if payments are outstanding
- Monitor communications from the administrator regarding next steps and timelines
Acting early helps ensure your entitlements are properly recorded and reduces the risk of delays or missed claims as the process moves forward.
Seeking legal or financial advice at this stage can help you understand your position, assess whether you are eligible for FEG, and take the right steps to recover what you are owed.
At Halo Advisory, we with the director. Financial expert Greg Bartels offers a no-obligation, confidential conversation to help you understand where you stand, what risks exist, and what options are realistically available before deadlines reduce control. Get in touch today.
FAQs
Can I resign as an employee during voluntary administration and still claim my entitlements?
Yes, you can resign, but doing so may affect certain entitlements—particularly redundancy pay and your eligibility under the Fair Entitlements Guarantee (FEG).
In most cases, redundancy is only payable if your employment is terminated by the employer, not if you resign voluntarily. Before making a decision, it’s important to understand your position and speak with the administrator or seek advice.
More on this: Fair Entitlements Guarantee – Department of Employment and Workplace Relations, Australian Government
What happens if I was on leave when the company entered administration?
Your employment generally continues as normal, even if you are on annual leave, personal leave, or long service leave. Your accrued leave entitlements remain intact, but payment depends on the company’s financial position.
If the business continues trading, leave may proceed as planned. If employment is terminated, those leave balances become part of your entitlement claim.
Can I claim expenses owed to me (e.g. reimbursements)?
Yes, but employee reimbursements (such as travel or work-related expenses) are usually treated as unsecured claims. This means they are paid after priority claims like wages and leave—if funds remain.
You should still submit a Proof of Debt (POD) form to ensure these amounts are recorded.
Further read: Voluntary administration: A guide for creditors | ASIC
Will I be paid for public holidays during administration?
If the business continues operating and you remain employed, you are generally entitled to public holiday pay in line with your employment conditions.
However, if your employment ends before the public holiday, entitlement will depend on your contract and applicable industrial instrument.
Also read: Public holidays – Fair Work Ombudsman
What happens if my payslips or records are missing or incorrect?
You can still lodge a claim, but you will need to provide alternative evidence. This may include bank statements, employment contracts, emails, or tax records.
The administrator or FEG assessor will use available documentation to verify your claim, so it’s important to gather as much supporting evidence as possible.
You can find more information about FEG requirements here: Document Requirements | Making a Fair Entitlements Guarantee claim | Department of Employment and Workplace Relations
Can I take legal action against the company for unpaid entitlements?
Not immediately. Once a company enters voluntary administration, a legal moratorium applies. This prevents employees and other creditors from starting or continuing legal action without court or administrator approval.
Instead, entitlements are handled through the administration or liquidation process. If necessary, legal advice can help you understand your options. Book a confidential, no-obligation consultation with voluntary administration expert Greg Bartels to discuss your options.
More information: Voluntary administration: A guide for employees | ASIC
What if I was recently promoted or had a pay increase?
Your entitlements are generally calculated based on your most recent agreed salary or wage. However, if you need to rely on FEG, payments will be subject to capped weekly limits regardless of your actual earnings.
It’s important to provide documentation confirming any changes to your pay.
Visit The claim assessment process – Department of Employment and Workplace Relations, Australian Government for more details.
Do bonuses or commissions get paid during administration?
Bonuses and commissions are only paid if they are contractually owed and funds are available. In many cases, they are treated as unsecured claims rather than priority entitlements.
This means recovery depends on the company’s remaining assets after priority payments are made.
What happens if I am on probation when administration begins?
Being on probation does not prevent termination. If your employment ends, you may still be entitled to unpaid wages and accrued leave, but redundancy pay is typically not applicable due to minimum service requirements.
Your exact entitlements will depend on your contract and applicable laws.
Read more: What happens if my employer goes bankrupt or into liquidation? – Fair Work Ombudsman
Can I be rehired by the new owner if the business is sold?
Yes. If the business is sold, the new owner may choose to retain employees. However, your employment may transfer under new terms, and your prior entitlements (such as redundancy or leave) may be handled separately depending on the sale agreement.
It’s important to clarify whether your service is recognised and how entitlements are treated before accepting new terms.
Further read: Employee entitlements on a transfer of business – Fair Work Ombudsman
