If you are paid wages, a salary or commission, and engaged by a company under an award, Certified Agreement, Australian Workplace Agreement, or a contract of employment, then you are considered an employee. This is whether you are employed by a company or a person.
Contractors are not employees.
When a company is unable to pay its debts when they are due, it is considered insolvent. The company may then be placed into external administration voluntarily (by the directors) or involuntarily (by its creditors or the courts).
When a person is unable to pay their debts when they are due, they are considered insolvent. The person may then become bankrupt or enter into a personal insolvency agreement.
Documents detailing the different types of insolvency administrations
for people and companies can be downloaded at the bottom of this page.
An independent person, who must be either a registered liquidator or a registered trustee, and who ideally should be a Professional Member of ARITA , takes control of the company or person's assets and has a responsibility to maximise the amount of money that can be realised to repay debts.
If the business continues to trade, they must pay ongoing wages and other employee entitlements. Any wages and entitlements due prior to the appointment are considered pre-appointment entitlements: how and when these entitlements may be paid will depend on the type of appointment and money available.
In general employee entitlements are paid in priority to other debts and are grouped into classes and paid in the following order:
1. outstanding wages and superannuation
2. outstanding leave of absence (including annual leave and sick leave, where applicable, and long service leave), and
3. retrenchment pay (including redundancy).
If your employment has been terminated due to the liquidation or bankruptcy of your employer, you may be eligible for help from the Fair Entitlements Guarantee (FEG) .
You are not eligible for FEG assistance unless your former employer is in liquidation or bankruptcy.
FEG is administered by the Department of Employment and more information is available from its website .
An external administrator must prepare a Separation Certificate for any employee whose employment is terminated during their appointment. They are not obliged to prepare one for terminations of employment that occurred prior to the external administration.
ARITA, ASIC and AFSA provide a range of information sheets
for further information.