Background information

This regulation is enshrined in the Unemployment Insurance Act. The provision on pay guarantee protects the payment of workers in the event that the employer cannot pay wages. Specifically, if an employee has a financial claim against an employer who is permanently unable to fulfill its payment obligations, they may benefit from the income guarantee in case of:

• bankruptcy (declared by court);
• suspension of payments (surseance van betaling);
• debt sanitation (if private persons after the finalisation of bankruptcy proceedings are still confronted with debts they are unlikely to pay in future, the debtor has to do everything possible to collect the money needed to pay creditors for up to three years);
• permanent cessation of payments.

Legally, no recent changes have taken place to the law’s articles 61 to 68, the provisions on the pay guarantee. Part-time and fixed-term workers are covered by the guarantee, and there is no minimum duration of the employment relationship.

Content of measure

In cases of bankruptcy, employees’ pay and unpaid premiums constitute debts which are paid directly out of the estate with preference over the claims of other creditors. Benefits awarded may comprise pay (over the last 13 weeks immediately preceding the date of notification of the dismissal and the period of notice for dismissal), holiday payments and holiday bonuses.

The UWV (Institute for Employee Benefits Schemes) operates as the guarantor. Benefits are paid through the general unemployment fund, which is funded by premiums paid by employees and employers. There is no direct link between payment of these premiums and the right to receive benefits.

Until recently, the UWV reimbursed the full pay (including expense allowances, pension premiums and so on). There was no limit to the level of the pay. However, as from 1 January 2016 the reimbursement is limited to 1½ times the amount of the maximum daily wage (which also serves as the basis for the unemployment benefit). Employees with a higher gross pay therefore no longer receive their full pay.

Use of measure

No further information on effectiveness available after the information from 2016. There is no explicit research on the arrangement itself. Research focuses mostly on abuse of the bankruptcy legislation to the extent that this occurs, as well as fraudulent claims to avail of benefits that are made. As of 2022, no recent evaluations of the law or the provision on the pay guarantee scheme were publicly available.

In spring 2016, employees of a number of very large companies in the retail sector and in the health care sector appealed to the pay guarantee regulation as a result of the bankruptcy of their employer. Due to this, in 2016 UWV provided many more benefits in the framework of this regulation than in 2015 (to almost 61,000 individuals compared with 42,000). To be able to process the large amount of applications quickly and correctly, UWV increased its capacity. With the help of this extra capacity and by making optimum use of the salary administration in good cooperation with the HR divisions of the bankrupt companies, UWV was able to provide employees with an advance on their benefits. In addition to providing the benefits, UWV also organised meetings with tens of thousands of employees to provide them with relevant information. During these meetings, UWV informed the employees about the consequences of the bankruptcy for their income and when and under what conditions they could expect to receive benefits from UWV.

Strengths of this pay guarantee scheme are that workers are protected from unforeseen developments affecting their employer. Workers enjoy added legal protection of their wages in difficult situations where multiple creditors want payment from a given employer. In terms of weaknesses, a relevant observation is that the arrangement is a non-issue in politics, legislation, case law and academic debates.

Target groups

Workers	Businesses	Citizens
Employees in standard employment	Applies to all businesses	Does not apply to citizens

Actors and funding

Actors	Funding
National government Public employment service	Employees Employer National funds

Social partners

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

	Trade unions	Employers' organisations
Role	Unknown	Unknown
Form	Not applicable	Not applicable

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

• Unknown
• Main level of involvement: Unknown

Involvement

Unknown

Views and reactions

Unknown

Sources

• 04 October 2022: UWV - Ik word werkloos (www.uwv.nl)
• 23 September 2024: Werkloosheidswet (wetten.overheid.nl)