Factsheet for measure
FI-1998-48/2606
–
Updated
– measures in Finland
Pay Security Act (866/1998)
Palkkaturvalaki (866/1998)
Background information
According to the Pay Security Act 866/1998 (Palkkaturvalaki), employees, including part-time and fixed-term workers, are entitled to pay security in the event of the employer's insolvency.
In the case of employer insolvency, wages and other claims of employees resulting from the employment contract are secured by the national pay security system, which is financed by the employers' contribution to unemployment insurance. An employer is considered insolvent if the employer is unreachable or has terminated the business activity; or if the employer has been declared bankrupt or else been established to be unable to pay its debts.
Content of measure
The guarantee covers claims that have become due within three months before applying for the guarantee, irrespective of the duration of the employment or the type of contract.
The pay security system is administered by the Centres for Economic Development, Transport and the Environment (ELY Centres). The Centres make decisions in pay security matters and handle other functions connected with enforcement of the Act. A guarantee application may also be handed in at a local job centre.
According to specialists at ELY Centres, employees applying for pay security sometimes do not know what and how much their employers are due, which complicates the process. Employers may lack adequate bookkeeping, making it impossible to prove potential debts.
Updates
The following updates to this measure have been made after it came into effect.
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11 November 2022
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The Act was amended in late 2022 as part of a pay security reform, to include a longer claims period applicable in cases of serious labour exploitation. If an employer is convicted to pay claims related to serious work-related exploitation, the victim may apply for pay security up to three months from the finalisation of the judgment.
In addition, a victim can apply for pay security in situations where there are reasonable grounds to believe that serious work-related exploitation has occurred, also without a criminal conviction. In these cases, the application period has been prolonged to 18 months from the termination of the employment contract.
The pay security authorities were also given more extensive rights to obtain information from employers and disclose information to authorities in charge of criminal investigation, prosecution, financial intelligence, tax administration, and occupational safety and health.
The amendments were prepared in a tripartite group.
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29 June 2021
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The maximum amount of the wage guarantee was changed 29 June 2021. The maximum amount paid per employee and employment contract with the same employer increased from €15,200 to €19,000 in 2021.
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Use of measure
The number of pay security beneficiaries was some 5,800 in 2017 and 5,200 in 2016.
On average, applications based on unilateral judgement amounted to 30 applications annually beetween 2017-2021.
Government spending on pay security has been between approximately €19.5 million and €24.9 million in 2018-2022, with the exception of in 2021 when the amount was down at €14.4 million.
By the end of July 2023 there were 19% more pay security procedures caused by bankruptcies than in 2022. The total amount of pay security payments rose by 15.6% in 2023 compared to 2022.
Target groups
Actors and funding
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Actors
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Funding
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National government
Local / regional government
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Companies
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Social partners
Social partners' role in
designing the measure
and form of involvement:
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Trade unions
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Employers' organisations
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Role
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Consulted
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Consulted
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Form
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Direct consultation outside a formal body
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Direct consultation outside a formal body
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Social partners' role in the
implementation, monitoring and assessment phase:
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No involvement
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Main level of involvement: Peak or cross-sectoral level
Involvement
Unknown
Views and reactions
Unknown
Sources
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27 November 1998: ELY Centres, 'Palkkaturva'
(www.ely-keskus.fi)
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23 May 2016: Yleisradio (2016), 'Keskitäminen ei lyhentänyt pitkiä käsittelyaikoja - isoissa kaupungeissa palkkaturvajonot edelleen lähes vuoden', 23 May.
(yle.fi)
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05 April 2017: Pay Security Act (866/1998) in English
(www.finlex.fi)
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29 June 2021: Pay Security Act (Palkkaturvalaki) (866/1998)
(www.finlex.fi)
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10 December 2021: Eurofound database on restructuring related legislation - Wage guarantee in case of insolvency
(apps.eurofound.europa.eu)
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08 July 2022: Työttömyysturvalaki (1290/2002)
(www.finlex.fi)
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19 September 2022: Government proposal to amend the Pay Secutiy Act (Hallituksen ehdotus palkkaturvalain muutoksesta)
(tem.fi)
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10 November 2022: Finnish Government (2022) Pay security reform improves the position of victims of serious work-based exploitation
(valtioneuvosto.fi)
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25 August 2023: Yle (2023) Valtion piikkiin maksettu 20 miljoonaa euroa palkkoja alkuvuodesta, koska työnantaja on mennyt konkurssiin
(yle.fi)
