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Employee creditors
Last updated August 2023
This chapter explains how employees can recover money you owe them, and penalties you face for not meeting your pay obligations.
When does an employee become a creditor?
The Fair Work Act 2009 (Cth) (FW Act) requires you to pay an employee everything payable in relation to the performance of work at least monthly.
If you fail to comply with this requirement, the employee becomes a creditor.
Definition: Creditor
A creditor is a person or company to whom money is owed.
A creditor is a person or company to whom money is owed.
Important: This includes any variable remuneration such as bonuses and incentives.
Example
Jane has been working as a salesperson for Edder Co. for 6 months. Her employment contract states that she is entitled to 10% commissions on her sales in addition to her salary. However, Edder Co. has not paid her these commissions. That makes Jane a creditor of Edder Co.
Jane has been working as a salesperson for Edder Co. for 6 months. Her employment contract states that she is entitled to 10% commissions on her sales in addition to her salary. However, Edder Co. has not paid her these commissions. That makes Jane a creditor of Edder Co.
What action can an employee creditor take against you?
If you don’t pay money you owe an employee, the employee can lodge legal claims against you for breach of:
- a civil remedy provision; or
- contract.