Your Company Can Fail. Your Team In Manila Is Still Somebody's Employee.

What happens to my offshore team if my business closes turns on who legally employs them, not on how much money is left. Where an employer of record holds the contract, your insolvency ends a service agreement and their employer does not change. Where you engaged those people yourself, their entitlements become a claim against a company with no money.

Most founders have never checked which of the two they are in.

Disclosure: the model that puts employment with an employer of record exists partly for this. Outstaffer sells it.

Who employs them decides what happens when the business closes

ASIC recorded 14,153 companies entering external administration for the first time in 2025-26, down 4 per cent on 14,722, in Corporate Insolvency Update issue 41. Against 3,747,130 registered companies that is an appointment ratio of 0.38 per cent.

The sale case is the easy one: an agreement with a provider survives a change of owner because the people under it were never your employees. Closure runs that logic the other way. The provider stays the employer, the fee becomes an unsecured debt, and an administrator decides whether to keep paying it. Your team may lose the work. They do not lose an employer.

The guarantee reaches overseas and then stops at citizenship

Australia has a safety net for employees of an insolvent employer and almost everyone misreads its edge. Section 9 of the Fair Entitlements Guarantee Act 2012 extends it to payments to persons outside Australia. Geography is not the bar.

Does the Fair Entitlements Guarantee cover an employee in the Philippines?

Almost never, and the reason is section 10(1)(g). A person is eligible only if, when the employment ended, they were an Australian citizen or, under the Migration Act 1958, the holder of a permanent or special category visa. A Filipino national in Cebu fails on status, not distance.

So the scheme covering your Sydney staff for unpaid wages, leave, notice and redundancy does nothing for the people you hired overseas. If you have called them contractors to keep the question shut, the five-question test Fair Work actually applied decides whether that label survives.

Closing in good order costs more than collapsing

Article 298 of the Philippine Labor Code, renumbered from 283, sets the floor where a local employer exists. On a closure not due to serious business losses or financial reverses, separation pay is one month pay, or at least one-half month pay per year of service, whichever is higher.

Run it. Six people with two years each: the half-month formula reaches exactly one month, the floor binds, and you owe six months of payroll at once. Give those six five years each and it overtakes the floor at two and a half months apiece. Fifteen months of payroll, on the day you can least find it.

Is separation pay owed when the closure is a collapse?

The formula is written for closures not due to serious business losses, so a closure that is due to them sits outside the sentence. The business that winds down tidily carries the bill. The one that hits the wall may not. Both bodies of law turn on your own facts, so get advice on yours rather than on this paragraph.

Related reading

• Employer of Record vs Setting Up Your Own Entity Is Not a Cost Question
• Your Payroll Now Runs On Two Clocks And Only One Forgives You

What an offshore team is owed, and who stands behind it

The honest counter: almost none of this fires. The ratio is 0.38 per cent and falling, and planning a business around its own failure is a poor use of a Tuesday.

A better counter sits underneath it. If you never opened a Philippine entity, Article 298 has no local employer to bite, so that separation pay was never a bill with your name on it. Which is the point rather than the escape. It sits with whoever the employer actually is, and if that is not you, you should be able to say who.

Write it down while the question is free. Two lines: who employs each person abroad, and what becomes of their entitlement if you stop trading on Friday. If nobody has checked, run one role through a structure where holding the employment is somebody’s job.

If your business closed this week, who would send your team their payslip on the fifteenth, and have you asked them?