Background information

The first Law of the Republic of Lithuania on Guarantee Fund (Law No VIII-1926) entered into force on 1 October 2000, establishing the procedure for allocating funds from the Guarantee Fund (GF) to employees of undertakings under bankruptcy or bankrupt undertakings, who have terminated employment relationships with such undertakings, as well as to the employees who continue employment relationships with an undertaking under bankruptcy when the undertaking is indebted to them.

This law was replaced in Lithuania by Law No XI-2079 amending the Law of the Republic of Lithuania on the Guarantee Fund as of 1 January 2013, defining in detail the types and amounts of payments from the GF, and adjusted the procedure for allocating them. As of 1 January 2017, the latter law also became invalid and was replaced by Law No XII-2604 on Guarantees for Employees in the Event of Employer Insolvency and Long-term Service Allowances.

The purpose of this law is to ensure a minimum level of protection for employees in the event of their employer’s insolvency and to establish additional financial guarantees for employees with long-term continuous service in the event of their dismissal.

Content of measure

According to the Law on guarantees for employees in the event of employer insolvency and long-term service allowances (article 3), if the enterprise in insolvency lacks the necessary funds and fails to discharge its obligations to employees (set in the article 62 of the Labour Code), the administrator shall apply to the GF. GF is a fund of state resources intended to ensure guarantees for employees in the event of the insolvency of their employer (article 4).

However, it should be noted that only limited amounts of compensations could be paid from the GF. According to article 7 of the mentioned Law, employees can claim for the unpaid amount which is due in relation to employment relationships and on which state social insurance contributions are calculated, within the limits of minimum monthly wage (MMW) for six months (in 2022, MMW in Lithuania is €730). Were the amount claimed by an employee does not exceed the limit of six MMWs, the employee is paid an allowance in the amount of the approved claim. Were the amount claimed by an employee exceeds the limit of six MMWs, the employee is paid an allowance equal to six MMWs.

Allowances are paid to all employees in spite of their type of employment contract (i.e. part-time employees, fixed-term employees, temporary agency workers, etc.). The protection of employees is guaranteed in the event of the insolvency of their employer, irrespective of whether the employment relationships continue or have ceased upon termination of the employment contract in accordance with legislation regulating employment relationships.

Allowances from the GF are not paid to public employees, as budgetary/public institutions do not pay contributions to the GF.

The main source of the GF are the employers' contributions (equal to 0.16% of the gross wage of the insured employee). In addition, the GF is also financed through other sources, such as the state budget and other funds. The GF is administrated by the State Social Insurance Fund Board (SSIFB) under the Ministry of Social Security and Labour (MSSL) and supervised by the Guarantee Fund Council (GFC), consisting of representatives of employee and employer organisations and state institutions. If the employer had failed to provide the contributions to the Guarantee Fund, the employees are nevertheless eligible to receive an allowance from this fund.

Use of measure

In 2021, benefits from the Guarantee Fund were paid to 4,303 employees (in 2020 - 6,554). The requested sum of benefits for employees in 2021 amounted to €8.3 million (in 2020 - €11.2 million). The average support was approximately €1,900 per person in 2021.

Target groups

Workers	Businesses	Citizens
Employees in standard employment Workers in non-standard forms of employment	Applies to all businesses	Does not apply to citizens

Actors and funding

Actors	Funding
National government Social partners jointly Company / Companies Social insurance	Companies National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Consulted	Consulted
Form	Any other form of consultation, institutionalised (as stable working groups or committees) or informal	Any other form of consultation, institutionalised (as stable working groups or committees) or informal

Social partners' role in the implementation, monitoring and assessment phase:

• No involvement
• Main level of involvement: Peak or cross-sectoral level

Involvement

GF is administrated by the State Social Insurance Fund Board (SSIFB) and supervised by the Guarantee Fund Council (GFC), consisting of representatives of employee and employer organisations and state institutions.

Views and reactions

No information available.

Sources

• 14 September 2016: Law on guarantees for employees in the event of employer insolvency and long-term service allowances (e-seimas.lrs.lt)
• 19 September 2016: Labour code (www.e-tar.lt)
• 01 January 2022: Annual Report of the Guarantee Fund 2021 (www.sodra.lt)