Limited liability provides business owners with protection against total loss of their income, thus pushes the consequences of loss of business to workers. Mandatory income insurance will still give owners the flexibility and security of limited liability, but ensures a margin of safety for those not yet paid.
This is a similar model to having mandatory superannuation, in that it reduces the strain on the current welfare system, much like how superannuation reduces the strain on the pension system.
Additional cost will make companies less competitive against international companies that do not care about workers income protection.
Workers may prefer to take the risk of no income protection.
Full: Covers unpaid wages and also provides a few more months of slowly tapering down income. Allows for workers to adapt to new financial budget. (e.g. downsizing)
Partial: Just cover unpaid wage.
Side Note: Could also make it optional if you are not a limited liability corporation, since you are taking direct risk yourself anyway.
These workers can seek compensation from the Fair Entitlements Guarantee (FEG), the Australian Government’s fund for employees who have lost their job as a result of their employer’s liquidation or bankruptcy.
Workers will be able to claim up to 13 weeks of unpaid wages, plus the outstanding value of their annual leave and long service leave.
Essentially, this is compensation funded by Australian taxpayers’ money.
Quick research in reddit shows that the FEC while it does payout, takes ages. And this may not be ideal for those struggling financially in low paying jobs to have to wait half a year to a year before getting the safety net to kick in.
FEG claims are hard to make. You can make claims online, but the process is onerous. It takes a long time before they can be processed because it’s entangled with the wrapping up of the defunct business.
There might be some potential to switch the process around to let claims happen early then bulk reclaim from the remains of the business when it’s done.
Don’t confuse any of this with income insurance though. That’s about sickness or injury making individuals incapable of performing their work. If you wanted to make this more common, it could be considered as an improvement to existing workers compensation coverage, that would be an employer responsibility.
Australia introduced the dole so this nonsense wouldn’t necessary, just like introducing the pension meant worrying about whether you would be able to survive in old age became unnecessary.
The problem is not workers lacking income insurance, the problem is we’ve slashed the dole well below the poverty line and let Governments abandon their commitment to Full Employment. So now when you get the sack, you can’t just walk into another job the next morning - as opposed to 50 years ago when that was the norm. We should not accept precarious work and mass unemployment (with the resulting income insecurity) as a normal part of life. Sure if high income earners want to take out private income insurance that’s fine, but it’s the Government’s responsibility to maintain Full Employment and income safety nets.
Then there’s universal healthcare etc. that exists too, and should probably be expanded alongside ending the subsidies/corporate welfare for private health insurance given how much cheaper it would be to increase funding to the public system.
Private income insurance products also already existing superannuation for those who want them.