"The loophole that permits wide scope for the misuse and milking of employee redundancy funds by self-interested unions and employee associations should be slammed shut," Mr Innes Willox, Chief Executive of Ai Group, the national association of employers said today.
Ai Group has released its submission to the Australian Securities and Investments Commission (ASIC) on ASIC's proposal to extend the current exemption of employee redundancy funds from the oversight that would follow if these funds were subject to the existing licencing and managed investment provisions of the Corporations Act.
"While there is no question that redundancy funds fit the definition of a managed investments scheme and a financial product, the existing exemption shrouds the administration of employee redundancy funds in secrecy and allows unscrupulous union and employer associations who control the funds to avoid accountability for managing the vast sums involved," Mr Willox said.
"Worse, the exemption effectively permits the fund controllers to appropriate the investment returns on employees' funds for their own purposes instead of paying the returns directly to the employees on whose behalf the redundancy funds have been established.
"Many Australian employers make mandated contributions to these funds which have been set up to secure redundancy entitlements that employees rely on in time of need. Typically, contributions exceed $100 per week per employee and assets of the funds now hold more than $2 billion in cover for employees who lose their jobs.
"While some employee redundancy funds are run to the highest standards, unfortunately this is not always the case and too often they are being used as cash cows for the organisations entrusted with running the funds.
"Amazingly, the exemption from appropriate regulation that permits this misuse has been analysed in detail by no less than three Royal Commissions.
"It's time to put an end to the misuse of employee redundancy funds and to redirect the benefits of these funds to the employees they are intended to protect. ASIC should recommend to the Federal Government that it should remove the exemption from regulation that permits this misuse and the Government itself should ensure the exemption is removed," Mr Willox said.
Ai Group's submission can be accessed here.
