Govt stopping abuse of staff entitlements

The federal government is introducing laws to stop bosses abusing a scheme that assists employees when a business fails and the employer has not made adequate provision for staff entitlements.

Costs under the fair entitlements guarantee (FEG) have increased dramatically in recent years, totalling more than $1 billion between 2012/13 and 2015/16, Employment Minister Michaelia Cash and Minister for Revenue and Financial Services Kelly O'Dwyer said in a statement on Thursday.

"It is clear that some company directors are misusing the FEG scheme to meet liabilities that can and should be paid directly by the employer rather than passed on to Australian taxpayers," they say.

The suite of measures include penalising company directors who engage in activity that prevents, avoids or reduces employer liability for employee entitlements.

They will also strengthen the ability to sanction directors and company officers with a track record of insolvencies where the scheme is repeatedly relied upon.

"The proposed changes will provide a significant disincentive for employers to exploit the taxpayer-funded scheme and avoid their responsibilities to their employees," the ministers said.