The entitlement iceberg: What you don’t see can hurt your business the most

In March 2016, more than 500 workers lost their jobs at Queensland Nickel. This was a significant event for the sacked workers at the Townsville refinery and nationally.

Almost $74 million of employee entitlements could not be paid from Queensland Nickel’s assets as the company was basically insolvent. The Commonwealth government arranged to make this sum available (under the Fair Entitlements Guarantee scheme) so workers could receive their entitlements.

Queensland Nickel was a large business. The company should have been aware of its liabilities and responsibilities through its accountants and auditors. Existing contingent liabilities are provided for in the balance sheets of most businesses of any size. However, small and micro businesses with simpler accounting and reporting requirements may not know their liabilities for employee entitlements at any given time.

There are two kinds employee entitlements:

  1. Visible entitlements (generally paid out in a 12-month period), eg. PAYG, superannuation contributions and annual leave.
  2. Invisible entitlements, eg. sick leave, long-service leave, parental leave and carer leave.

The tip of the iceberg

Visible entitlements are often just the tip of the iceberg when it comes to a business’s liabilities. The invisible entitlements become visible when a long-term employee falls ill, when the business is sold or during redundancy or termination. Is your business aware of its invisible entitlements?

Keep on top of legislative and rule changes

Employment law is constantly changing. Ensure you have a competent HR consultant who will keep you up to date so you can proactively manage or avoid liabilities in the future.

Being aware of employee entitlements and providing for the amounts due gives business owners a reality check about their profits. It is insufficient to simply create a reserve without funding it. This can cause huge problems for the business down the track.

How to avoid an entitlement shock:

  1. Get a HR consultant to advise you about invisible employee liabilities and entitlements.
  2. Get all liabilities and entitlements quantified at least every two years.
  3. Ensure your staff take annual leave regularly. They should only have one week of leave outstanding at the anniversary of their employment date.
  4. Set up a separate bank account and fund it for the amounts due. This should be separate to any account you have for BAS liabilities.

Many ships were torpedoed by submarines and sank without a trace during World War II. Don’t let unfunded entitlements torpedo your business’s financial security. Remember that if you do end up over providing for employee entitlements and liabilities, you can transfer the excess back at any time.

If you need help navigating your business’s liabilities and employee entitlements, email me at



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