Background information

Since 1974, the state guarantees for wages and holiday pay in cases of insolvency. This is according to the Wage Guarantee Act

The background for the establishment of the wage guarantee fund was a recommendation by the Nordic Council to the governments of Denmark, Finland, Iceland and Norway to implement a satisfactory wage guarantee system in cases of insolvency. There was a public investigation of this in 1972 (NOU 1972:20), which eventually led to the Wage Guarantee Act. Sweden adopted a wage guarantee system in 1970.

Key words: Employer bankruptcy, public administration of insolvent estates, compulsory liquidation and public administration of insurance companies or banks.

Content of measure

In the case of bankruptcy, any outstanding pay and pay for the notice period, as well as any accrued holiday pay, are paid to employees by the state through a guarantee system. The scheme is administrated by the Norwegian Labour and Welfare System, NAV, and employees have to make a claim to NAV in order to get compensation.

The guarantee applies to all employees who are in an employment relationship where the employer is to pay social security contributions to the national insurance scheme. Self-employed and shareholders (who own at least 20% of the company) are not covered.

The following claims can be covered:

• Pay (wages and other remuneration) for a maximum of six months. The pay claim must not have been due for payment more than 12 months before the bankruptcy proceedings commenced.
• Holiday pay accrued in the same year as the final date of claim (i.e., when bankruptcy proceedings commenced in court) and the year before.
• Pension benefits for a maximum of six months.
• Compensation for lost remuneration for the performance of work for maximum six months.
• Interest.
• Reasonable costs linked to filing a petition for bankruptcy.

Maximum coverage is limited to a gross amount equivalent to two times the national insurance basic amount (about €20,000). Reasonable costs linked to filing a petition for bankruptcy are in addition to this. Claims are covered for maximum one month from the date on which bankruptcy proceedings commenced, even if a longer redundancy notice applies through agreement or by law.

Use of measure

For 2020, the scheme had a budget of NOK 945 million (€90.78 as of 31 August 2020), which was subsequently increased with NOK 40 million in response to COVID-19.

The number of employees making claims under this scheme in 2013 was around 18,000, and the scheme paid out in total around NOK 820 million (€78.77 million). This was an increase from the previous years, a result of an increase in bankruptcies due to low oil prices.

Target groups

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

Actors and funding

Actors	Funding
National government Public employment service	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. Most likely supportive of the measure.

Sources

• 01 January 1974: Lønnsgarantiloven (lovdata.no)
• 01 March 2010: Prahl-Larsen, O. (2018). Lønnsgarantiordningen. Magma (www.magma.no)
• 11 May 2010: Eurofound, EMCC support of restructuring (www.eurofound.europa.eu)
• 25 April 2017: Master thesis: Arbeidstakers rettigheter og plikter ved konkurs - lønnsgarantiordningen plikter ved konkurs - lønnsgarantiordningen Herunder endringen i lønnsgarantilovens § 1 som trådte i kraft 01.01.2014 og dens virkninger plikter ved konkurs - lønnsgarantiordningen Herunder endringen i lønnsgarantilovens § 1 som trådte i kraft 01.01.2014 og dens virkninger (www.duo.uio.no)
• 10 February 2021: ERM database on restructuring related legislation (www.eurofound.europa.eu)
• 27 August 2021: Act on state guarantee for wage claims in the event of bankruptcy, etc. [Wage Guarantee Act] (lovdata.no)
• 09 September 2022: Salary Guarantee (www.nav.no)
• 12 October 2022: Bankruptcy Council (Ansatt i virksomhet som går konkurs) (www.konkursradet.no)