Fund for ensuring workers’ claims in the event of an employer’s

Croatia
Phase: Management
Тип:
  • Income support for workers
Last modified: 11 November, 2020
Име (на собств. език):

Fond za osiguranje radnickih trazbina

Име на английски:

Workers' claims insurance fund

Coverage/Eligibility

Employees (regardless of their employment contract) whose employer has been declared insolvent or bankrupt.

Main characteristics

The Croatian bankruptcy law guarantees the payment of workers’ claims for three earned, yet unpaid, gross salaries. Other claims arising from the employment contract for the last three months before the initiation of a bankruptcy process, regardless of the type of employment contract are also included. An employee whose contract was terminated during the three months before the opening of bankruptcy proceedings, but has not been successfully compensated for wages earned, is also entitled to avail of this instrument.

The fund for ensuring workers’ claims in the event of an employer’s bankruptcy is a special fund established by an agency (Agencija za osiguranje radnickih potrazivanja u slucaju stecaja poslodavca) and financed from the state budget to cover bankruptcy costs if the funds available from the bankruptcy estate are not sufficient. Claims can be paid to workers provided that they have reported them to the agency or the governing office of the Croatian employment service within 30 days of the governing court's decision on the bankruptcy estate or starting from the 8th day after the announcement of the bankruptcy process in the Official Gazette.

The amounts guaranteed to workers are:

  • up to the minimum average monthly salary in Croatia for each month for which the salary has not been paid or for which an employee has the right to receive remuneration for sick leave
  • up to half of the minimum salary for remuneration claims for unused annual leave days
  • up to half of the legally prescribed employer’s obligation for severance pay
  • up to a third of non-appealable remuneration for indemnification

The agency decides on the specific claim within 15 days of its submission and the relevant and final decision on the claim's validity is, in the case of complaints made by subsequent workers, made by the governing ministry of labour and pension system within 30 days of submission of the complaint. Within 20 days of the decision, the agency must pay the claims either directly to the workers if the company has been closed down or to the company's account designated for this purpose, and whose transactions are monitored by the bankruptcy manager. The bankruptcy manager must then transfer the received funds to the workers within eight days.

In 2017, the agency changed the name to the Agency for Insurance of Workers' Claims. 

Funding

  • National funds

Involved actors

National government
Legal framework; funding
Други
Agency for Insurance of Workers' Claims

Effectiveness

According to the latest data as at April 2020, the Agency paid for 61 workers' claims HRK 849,900 (€ 113,300) and 44 workers a part of unpaid salaries of HRK 152,000 (€ 20,300).

The Agency responsible for the fund in its annual report for 2019  states that there were 2,589 paid demands for a total amount  of HRK 58.4 million (€ 7.8 million), while the total received from bankruptcy procedures was HRK 12.3 million (€ 1.6 million).

According to the annual report for the Agency responsible for the fund, in 2018,  there were 1,775 paid demands for a total amount of HRK 33.1 million (€ 4.4 million), while the total received from bankruptcy procedures was HRK 9.2 million (€ 1.3 million). 

According to the Annual report for the Agency responsible for the fund, in 2017,  there were 1,110 paid demands for a total amount of HRK 18.7 million (€ 2.5 million), while the total received from bankruptcy procedures was HRK 13.7 million (€ 1.8 million). The number of requests decreased from 2,526 in 2016 to 940 in 2017, which is relatively decrease for 62.8%. Particularly high expenditures were in July 2017, HRK 6.1 million (€ 0.81 million) for 331 workers. 

According to the Annual report for the Agency responsible for the fund, in 2016  the biggest 5 demands covered 1,106 workers. For 2016, there were 2,245 paid demands for a total amount of HRK 37.6 million (€ 5 million) while the total received from bankruptcy procedures was HRK 10.4 million (€ 1.4 million).

In May 2015, the agency paid out HRK 422,000 (€ 56,300) for 26 workers.

In May 2016, the agency paid out HRK 3,91 million (€0.52 million) for 442 workers.

In May 2014, the agency paid out HRK 7.7 million (€1 million) to ensure payments for 476 workers.

Strengths

It offers protection to employees in case of employer insolvency. The agency becomes a bankruptcy creditor of the bankrupt company for the workers' claims that it has taken over. In Croatia, employees’ claims arising from their employment before the opening of the bankruptcy proceedings have priority over all other creditors and claims. 

Weaknesses

The financing of the system reflects the uneven relationship between money paid out from and paid in (returned to) the state budget. There are three main reasons for this:

  • A low percentage of bankruptcy receivables, due to unforeseen opening of bankruptcy proceedings and low value of assets of bankrupt firms;
  • Inability to collect bankruptcy receivables in the event of the opening and closing of the bankruptcy proceedings due to the absence of bankruptcy divisions; and
  • Very little possibility of collecting bankruptcy receivables in case of bankruptcy proceedings and deletion of bankruptcy debtor from the register of legal persons.

In addition, there is a disparity in the payment dynamics and the return of funds: the payment is made at the beginning and the refund during the bankruptcy proceedings, sometimes with a delay of several years. Therefore, due to the long duration of the bankruptcy procedures, money received by the fund mostly relates to payments made in earlier years. 

Examples

Estare culto, Tempo Inzenjering, Inkop obuca, TLM-TPP, NCP-Remontno Brodogradilište Šibenik, Viadukt, Konstruktor-Inženjering Split
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