Employee Entitlements in Liquidation: What Queensland Employees Are Owed and How to Claim It

If your Queensland employer has just gone into liquidation, your employment is terminated from that date and any entitlements you are owed, wages, annual leave, long service leave, redundancy and payment in lieu of notice, become debts of the company that are paid according to a strict priority order under section 556 of the Corporations Act 2001 (Cth). The Federal Government’s Fair Entitlements Guarantee (FEG) exists as a safety net when the company cannot pay.

1. What Happens to Your Job the Moment a Company Goes Into Liquidation?

When a liquidator is appointed to a Queensland company, the business does not merely pause, it is being wound up permanently. That distinction matters enormously for employees.

In voluntary administration (Part 5.3A, Corporations Act), the administrator may continue trading while the company’s future is assessed. You may keep working. However, in liquidation, whether a creditors’ voluntary liquidation (CVL) under Part 5.5 or a court ordered winding up under Part 5.4, the company is being terminated. Employment contracts are typically terminated from the date the liquidator is appointed or from the date trading ceases, whichever comes first.

You will ordinarily receive a letter from the liquidator advising that your employment has ended. If you do not, contact the liquidator directly. Their appointment is registered on the ASIC companies register, and their details must be disclosed to employees under section 421A of the Corporations Act.

From that point, you become an unsecured creditor of the company, but one that sits in a preferred position under the statute. Understanding where you rank in the payment waterfall is the single most important thing you can do to manage your expectations about what you will recover.

If you are employed by a company that enters receivership rather than liquidation, the position is different again. A receiver appointed by a secured creditor may continue trading in order to realise the secured creditor’s security. You may keep your job during receivership. That does not mean you are safe, but your employment is not automatically terminated at the point of receivership appointment. Our insolvency lawyers in Brisbane can advise you on which process your employer has entered and what that means for your entitlements.

2. What Are You Owed? The Types of Employee Entitlements in a Liquidation

When employment ends on liquidation, you may have claims for any or all of the following entitlements:

Unpaid Wages

Any wages earned but not yet paid at the date of liquidation are a debt of the company. This includes base salary, overtime, penalty rates, allowances and commissions. There is no statutory cap on the company’s obligation to pay outstanding wages, but as we explain below, FEG imposes a cap of 13 weeks on the government advance if the company cannot pay.

Accrued Annual Leave

Under section 87 of the Fair Work Act 2009 (Cth), you accrue annual leave progressively throughout your employment. Accrued but untaken annual leave must be paid out at the rate you would have been paid had you taken the leave. Annual leave loading (if applicable under your award or agreement) is also payable. FEG covers annual leave with no specific week cap separate from the overall FEG entitlement structure.

Long Service Leave

In Queensland, long service leave is governed by Chapter 2, Part 3 of the Industrial Relations Act 2016 (Qld). You accrue a right to long service leave after 7 years of continuous service with the same employer (or related employer group). If your employment ends, whether by termination on liquidation or otherwise, after 7 years, you are entitled to a prorated long service leave payout. FEG covers long service leave that is accrued under state law.

Payment in Lieu of Notice

Under sections 117 and 119 of the Fair Work Act 2009 (Cth), you are entitled to a period of notice before termination. Liquidation typically does not give rise to that notice period being worked out, you are paid in lieu of notice instead. The NES scales the minimum notice period from 1 week (less than 1 year service) up to 5 weeks (more than 5 years service). FEG covers up to 5 weeks of payment in lieu of notice.

Redundancy Pay

Under section 119 of the Fair Work Act 2009 (Cth) and the NES, genuine redundancy pay scales from 4 weeks (1-2 years service) up to 16 weeks (10+ years service). However, small business employers (fewer than 15 employees) are exempt from NES redundancy pay. Your award or enterprise agreement may provide higher redundancy entitlements. FEG covers redundancy pay up to 4 weeks per full year of service (with no maximum total cap under FEG, though individual years are capped at 4 weeks each).

Superannuation

Unpaid employer superannuation contributions are not covered by FEG. This is a critical point that many employees miss. Super is a separate legal obligation enforced by the ATO, not the liquidator and not DEWR (the department administering FEG). We explain what to do about unpaid super in section 7 below.

3. The Priority Waterfall: Where Do Employees Sit Under Section 556?

Section 556 of the Corporations Act 2001 (Cth) establishes the order in which creditors are paid from a company’s assets in liquidation. The order is fixed, it cannot be changed by agreement, and it applies regardless of what individual creditors believe they are owed.

The statutory priority order is as follows (for a full analysis of creditor priorities, see our detailed guide on priority of creditor claims in liquidation):

Priority	Creditor Type	Legal Basis
1st	Secured creditors (up to value of their security)	PPSA; general law
2nd	Costs and expenses of the winding up (liquidator’s fees, legal costs)	s 556(1)(a) Corporations Act
3rd	Employee wages and superannuation (post-liquidation, wages earned during the liquidation if trading continues)	s 556(1)(e) Corporations Act
4th	Unpaid employee entitlements (wages, leave, redundancy, owed pre-liquidation)	s 556(1)(h) Corporations Act
5th	FEG subrogation (Commonwealth is subrogated to employee claims after paying FEG advances)	s 110(1) FEG Act 2012
6th	General unsecured creditors (suppliers, trade creditors)	s 555 Corporations Act (pari passu)
Last	Shareholders	s 563A Corporations Act

The practical consequence of this waterfall is stark. Most Queensland companies that go into liquidation are insolvent, meaning their assets are insufficient to pay all their debts. Secured creditors (typically the bank, with a charge over all present and after acquired property) frequently absorb the lion’s share of recoverable assets. Liquidation costs are then paid. What remains, if anything, is distributed to employees under s 556(1)(h).

In many liquidations, employees recover little or nothing from the company’s estate. That is why FEG exists.

Part 5.8A of the Corporations Act (sections 596AA to 596AC) contains additional protections relating to employee entitlements in external administration, restricting directors from reducing employee entitlements in the period leading up to insolvency. If you believe entitlements were deliberately stripped out before liquidation, that may be relevant to ASIC’s phoenix enforcement and the liquidator’s investigation.

4. The Fair Entitlements Guarantee: Your Government Safety Net

The Fair Entitlements Guarantee Act 2012 (Cth) (the FEG Act) is a Federal scheme administered by the Department of Employment and Workplace Relations (DEWR). It operates as a legislated safety net, a government advance of your unpaid entitlements when the company cannot pay and you cannot recover through other means.

Who Is Eligible?

To be eligible for FEG assistance, you must:

• Be a former employee (not a contractor or labour hire worker placed by a third party) whose employment ended because of the liquidation or bankruptcy of your employer;
• Have an unpaid entitlement that falls within the categories covered by FEG (wages, leave, notice, redundancy, not super);
• Not be a temporary resident (temporary visa holders may have limited eligibility, check with DEWR);
• Not be able to recover the entitlement through other means (such as an industry based redundancy fund).

What FEG Covers (and the Caps)

FEG covers the following entitlements, subject to caps:

• Unpaid wages: up to 13 weeks of unpaid wages (section 24 of the FEG Act).
• Annual leave: all accrued annual leave (including annual leave loading where applicable under a governing instrument), section 20.
• Long service leave: all accrued long service leave under applicable state or territory law, section 21.
• Payment in lieu of notice: up to 5 weeks, section 22.
• Redundancy pay: up to 4 weeks per full year of service, section 23.

Importantly, all FEG entitlements are calculated using your actual weekly rate of pay, but capped at the FEG maximum weekly wage. For the 2024-25 financial year, this was $2,793 per week gross. If your actual weekly wage exceeds that rate, FEG assistance is calculated at the maximum weekly wage, not at your actual rate. This is a critical limitation for higher income employees.

What FEG Does NOT Cover

• Unpaid superannuation guarantee amounts;
• Entitlements owed by a liquidator appointed receiver (different legal relationship);
• Contractors, labour hire workers, or employees of a different entity to the one in liquidation;
• Entitlements already paid by an industry redundancy fund or other scheme.

How to Make a FEG Claim

1. Confirm your employer is in liquidation or bankruptcy (ASIC companies register or the Australian Financial Security Authority).
2. Gather your records: employment contract, payslips, leave balance records, any correspondence about the termination.
3. Lodge your FEG claim at employment.gov.au (the DEWR FEG portal) or by calling the FEG hotline on 1300 135 040.
4. Provide the liquidator’s name and contact details, DEWR will liaise with the liquidator to verify entitlements.
5. Allow up to 16 weeks for processing (this can be longer during periods of high demand, such as economic downturns with multiple large insolvencies).

If you are unsure whether you are eligible or if you believe your entitlements have been miscalculated, our Brisbane insolvency lawyers can review your position and assist you in lodging or disputing a FEG claim.

5. Superannuation: A Separate Claim Requiring Separate Action

Many employees discover after liquidation that their employer has not been paying superannuation contributions for months, sometimes years. This is a separate legal problem from your FEG entitlements and must be dealt with differently.

FEG does not cover unpaid superannuation. Full stop. Your super is a statutory obligation owed by your employer under the Superannuation Guarantee (Administration) Act 1992 (Cth). The mechanism for recovering it is through the ATO, not DEWR.

Here is what to do:

1. Contact your superannuation fund first, request a statement showing what contributions have actually been received. Compare that to what your payslips say should have been paid. The gap is the unpaid super.
2. Report to the ATO, lodge an online report at ato.gov.au. The ATO has priority tax recovery powers (s 260-45 of the Taxation Administration Act 1953 (Cth)) and can pursue the company’s assets even in liquidation.
3. Director penalty notices, in some circumstances, the ATO can hold individual directors personally liable for unpaid superannuation guarantee amounts through director penalty notices (DPNs) under Part 4-15 of the Taxation Administration Act 1953. If the company had employees and the directors failed to ensure super was paid, this is a potential personal liability issue for those directors.
4. Lost super search, if you have worked for multiple employers, check the ATO’s MyGov portal for any lost or unclaimed super that may have been transferred to the ATO.

If the company had a director who knew super was not being paid and continued to incur the obligation, that director may have personal exposure, both through ATO enforcement and through potential civil liability. Our director disputes lawyers can advise on the scope of director personal liability for unpaid super in this context.

6. What to Do in the First 7 Days: Your Action Guide

If you have just learned your employer has gone into liquidation, here is your priority list:

Day 1: Confirm the liquidation. Search ASIC’s companies register (asic.gov.au, “Search for a company”) to identify the liquidator, their firm, and the date of appointment. Write down the liquidator’s name and contact details.

Day 1-2: Gather your records. Print or download your last 6 payslips, your employment contract, any written correspondence about pay or entitlements, and any leave balance statements you can access. If you cannot access systems, note what evidence you have and tell the liquidator.

Day 2-3: Contact the liquidator in writing (email preferred). Ask them to: (a) confirm the date employment was terminated; (b) confirm what entitlements are recorded in the company’s books; and (c) advise the likely timeline for distributions to employees. Keep a record of all correspondence.

Day 3-4: Check your super. Log into MyGov and check what your fund has actually received. If there is a gap, lodge a report with the ATO immediately, do not wait.

Day 4-5: Assess your FEG eligibility. If the company is unlikely to have enough assets to pay your entitlements in full, begin the FEG claim process. You can lodge a FEG claim early, you do not need to wait for the liquidation to be completed.

Day 5-7: Get independent advice if anything is unclear. If your entitlements are significant, if you believe your entitlements have been understated by the company’s records, or if you are a higher income earner affected by the FEG weekly wage cap, speak to a lawyer. Early advice often prevents errors in the FEG claim that can reduce what you receive.

7. Director Personal Liability for Unpaid Employee Entitlements

Directors of Queensland companies cannot use liquidation as a shield against employee entitlement claims in every case. There are several mechanisms that can reach through the corporate veil to the people who ran the business.

Insolvent trading (s 588G, Corporations Act): If directors allowed the company to incur debts, including payroll obligations, when the company was already insolvent (unable to pay its debts as and when they fell due, as defined in s 95A), those directors may be personally liable for those debts. The liquidator can pursue an insolvent trading claim. If successful, the proceeds are available for distribution to creditors, including employees.

Director penalty notices for super (Part 4-15, TAA): As noted in section 5, the ATO can issue DPNs to directors for unpaid super. A lockdown DPN (where the company failed to report quarterly) means there is no 21-day window to remit or put the company into administration, the personal liability is crystallised immediately.

Phoenix activity (s 588GAA, Corporations Act): If directors stripped assets out of your employer and transferred them to a related new company before the liquidation, that is a creditor defeating disposition under s 588GAA and can be unwound by the liquidator or ASIC. ASIC has been active in pursuing phoenix conduct in Queensland, particularly in the building and construction sector.

Personal guarantees: If you entered any arrangement where a director personally guaranteed payment of your entitlements (unusual, but not unheard of in certain employment agreements), that guarantee may be enforceable regardless of the corporate insolvency.

8. When to Get Legal Advice

Not every employee affected by a liquidation needs a lawyer. If your entitlements are straightforward, clearly documented in payslips and records, and within FEG caps, the FEG process may be sufficient.

You should get independent legal advice if:

• Your total unpaid entitlements exceed the FEG weekly wage cap calculation, a lawyer can advise whether there are additional avenues to recover the balance;
• You are a senior employee and believe entitlements were deliberately understated or concealed by management before liquidation;
• You suspect phoenix activity, a related entity has taken over the business and is conducting essentially the same operations;
• You are a contractor and are unsure whether you qualify as an employee for FEG purposes (this is a genuine legal question requiring assessment);
• The liquidator has rejected or reduced your proof of debt claim and you wish to dispute that decision;
• You have received a letter from the liquidator asking questions about your conduct as a contractor or manager (you may have your own exposure to investigate);
• Your super has not been paid for an extended period and the amount is significant.

Acting quickly matters. Proofs of debt have filing deadlines set by the liquidator. FEG claims should be lodged promptly. Director penalty notice disputes have strict time limits. The longer you wait, the narrower your options become.

Frequently Asked Questions

Q: Does liquidation automatically end my employment in Queensland?

A: In most cases, yes. When a liquidator is appointed to wind up a Queensland company, employment contracts are terminated at or around the date of appointment (or cessation of trading). You should receive written notice from the liquidator. If you do not, contact the liquidator directly to confirm the termination date, as this affects your entitlements to notice pay and accrued leave.

Q: How long does a FEG claim take to process?

A: DEWR aims to process FEG claims within 16 weeks of receiving a completed claim with all supporting documentation. Processing times can be longer during periods of high demand. To avoid delays, provide complete records (payslips, employment contract, leave balances, the liquidator’s contact details) when you lodge. You do not need to wait for the liquidation to be finalised before lodging.

Q: What happens to my unpaid super if the company goes into liquidation?

A: Unpaid super is not covered by FEG. You must lodge a report with the ATO at ato.gov.au. The ATO has priority recovery powers and can pursue the company’s assets in liquidation. If the amount is significant and you believe directors were knowingly failing to remit super, speak to a lawyer, directors can be personally liable for unpaid super through ATO director penalty notices.

Q: Can I claim redundancy pay if the company goes into liquidation?

A: Generally yes, if your employer had 15 or more employees (meaning the small business redundancy exemption under s 121 of the Fair Work Act does not apply). Redundancy pay entitlements under the NES scale with years of service. FEG will cover redundancy pay up to 4 weeks per full year of service. If your award or enterprise agreement provides for higher redundancy entitlements, FEG covers the NES amount, any excess is a debt of the company provable in the liquidation.

Q: What if I think the directors transferred assets to a new company before the liquidation?

A: Report your concerns to the liquidator in writing. Liquidators have powers under Part 5.7B of the Corporations Act to investigate and recover assets transferred for less than market value (voidable transactions, sections 588FA to 588FE) and creditor defeating dispositions under section 588GAA. You can also report suspected phoenix activity to ASIC via asic.gov.au/report. Our insolvency lawyers can assist employees who have identified potential phoenix conduct by their former employer’s directors.

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This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.