Wage Guarantee Act

Lönegarantilag

Country	Sweden , applies nationwide
Time period	Open ended, started on 04 June 1992
Context	Restructuring Support Instruments
Type	Legislations or other statutory regulations
Category	Employment protection and retention – Income support for people in employment (e.g., short-time work)
Author	Anna-Karin Gustafsson and Elina Härmä (Oxford Research) and Eurofound
Measure added	23 June 2022 (updated 15 November 2024)

Background information

The Wage guarantee act 1992:497 [lönegarantilagen] gives employees up to 8 months worth of salary after their employer goes bankrupt. It gives the employee time to look for other jobs. The payments towards the employees are realised by each regional county administrative board, which is independent of the employer paying the contributions.

Content of measure

In case of the employer's insolvency, all employees are eligible for wage guarantee except workers who have been hired with the intervention of the public employment service and those who, alone or together with close relatives, own at least 20% of the company.

Claims are not only guaranteed in case of employer insolvency (permanent inability of the employer to pay the debts), but also if the company undergoes restructuring (current or foreseeable inability of the employer to pay the debts at the due date, but there are activities to make the company survive a temporary crisis and avoid insolvency).

The wage guarantee is independent of the duration of the employment contract. It covers all claims that arose within the last three months before registering for insolvency and one month after the decision of the insolvency court.

The maximum amount in 2020 is SEK 189,200 per person (around €19,000). The amount for 2021 has been revised to around €18,600 (SEK 190,400).

The guarantee is financed by the payroll tax and the state. There is no specific fund, but the financial means are registered as a special element in the national budget.

Updates

The following updates to this measure have been made after it came into effect.

18 March 2024

The maximum amount to be paid out in wage guarantees is updated yearly. In 2024 the amount is SEK 229,200 (€ 20,200). The maximum amount covers all claims that can be covered by the guarantee. The wage guarantee is only paid for a total employment period of maximum eight months.

In December 2023, the government initiated a review of the wage guarantee, resulting in a proposal to amend the Wage Guarantee Act 1992:497 (Lönegarantilagen) and the Public Access to Information and Secrecy Act 2009:400 (Offentlighets- och sekretesslagen).

According to the proposal, the paying authority's control in connection with payments from the wage guarantee ought to increase. The aim is to prevent incorrect payments and misuse of the wage guarantee. The proposal means for example that the paying authority must control the decision or notification of a wage guarantee against information in the Swedish Tax Agency's taxation database and against other information occurring in the paying authority's activities connected to the wage guarantee. This is to be done before the guarantee amount is paid out. The amendments are proposed to enter into force on 1 February 2025.

Use of measure

Between 2017 and 2019, 310 wage guarantee processes were completed. In 2019, SEK 2.3 billion (approximately €220 million) were paid out. For example, in April 2018, the company Rydbergs AB announced that they were going bankrupt and that all employees (approximately 100 people) would have received a wage guarantee.

Cases of exploitation of the Wage guarantee act have been identified and several people have been convicted for fraud. In 2020, the Enforcement Authority who is responsible for supervising bankruptcies in Sweden and other involved authorities estimated that 7-10% of the sum that is paid out through this instrument goes to fraud cases ([Kronofogden, 2020]

An assessment from 2017 shows that that lack of coordination between the different authorities involved in the process is a factor that makes the wage guarantee system vulnerable for fraud.

A review of the wage guarantee published in 2022 and done by the Swedish National Audits Office (Riksrevisionen) (RiR 2022:4) estimated that 6-9% of wage guarantee payments done in connection to bankruptcies could be linked to suspected misuse. It corresponded to SEK 100-150 million in an average year. Indications of misuse and fraud are higher in bankruptcies than in cases of company reconstructions.

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 Local / regional government	Companies 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