Who Should Bear the Costs of Workers' Entitlements?

Employee anger over the loss of their accrued entitlements by failed firms should at first instance be directed at Australia's industrial relations system.  In effect the IR system forces employees to give employers unsecured, non interest bearing loans.  Failed businesses physically lose the money but the IR system requires employers to turn employees into creditors against their will.

It works this way.  Through the IR system employers are forced by law to withhold employee income under the banners of holiday pay, sick pay, long service leave, redundancy and other entitlements.  The word "entitlements" is used but in fact the terms "loans" and "mandated worker risk" is more truthful.

The withheld money belongs to employees but takes the form of unsecured loans to employers.  Employees are reliant on the integrity and good management of employers but have no choice over how their money is managed or by whom or if the loans should occur in the first place.

This state orchestrated deal puts employees money at risk all to the alleged benefit of employers and unions.  It's a game!  Employers have a free source of credit and dictate to workers when to take leave at the employers' convenience.  Unions secure negotiable "benefit" issues as points of dispute thus substantiating the legal facade of inequality of bargaining power and justifying their position in the Australian corporate structure.

Even if employers don't want to withhold employee entitlements they can't.  Unions fiercely oppose "cashing out" of worker entitlements and campaign against casualisation.  These well known arrangements pay employees their entitlements in higher hourly and weekly rates than that paid to full time employees.  Entitlements never accrue because money is never withheld and workers are not exposed to credit risk.

Even where entitlements are accrued the problem of losses would never exist if all employers placed the monies in trust funds.  But the standard business practice is to view this as unproductive money.  Where trust funds exit they are inevitably raided and employee money becomes listed as an accounting liability to be paid from future earnings.

The system is clearly unjust.  In no other area of society are people forced to lend someone else money, let alone without security or interest!

It's bad business because when credit is provided without due diligence poor management becomes the norm.

The Ansett debacle is typical.  Through the IR system Ansett employees were forced to provide free credit to bad managers.  If Ansett hadn't had access to $500 million of easy money the reality of the business problems would have been forced to the surface much earlier.  Instead employee credit contributed to problem denial and the downward slide.

The solutions so far offered are inadequate.  Government compensation and the union idea of a nationalised trust fund address problem management but not prevention.  The only solution that gives workers safety is to give workers control of their money by cashing out entitlements.

This is how Australia's 1.6 million independent contractors operate.  They don't suffer employee type credit risk because money is not withheld from them.  If they provide credit to clients it's their choice and not required by law.  Employees deserve similar rights.

IR institutions should not have authority to order the withholding of employee money.  "Entitlement" withholding should only occur on the written authority of each individual employee.  Then employees, like the banks, could exercise their judgement on the credit worthiness of their employer.

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