EMCC European Monitoring Centre on Change

Work Compensation Fund (FCT); Guarantee Fund for Work Compensation (FGCT)

Portugal
Phase: Management
Тип:
  • Income support for workers
Last modified: 15 September, 2020
Име (на собств. език):

Fundo de Compensacão do Trabalho (FCT); Fundo de Garantia de Compensacão do Trabalho (FGCT)

Име на английски:

Work Compensation Fund (FCT); Guarantee Fund for Work Compensation (FGCT)

Coverage/Eligibility

These special funds are in place to ensure that workers who lose their jobs because of bankruptcy receive outstanding wages or salary.

Main characteristics

The Wage Guarantee Fund (Fundo de Garantia Salarial - FGS) pays any credits (e.g. wages, holiday payments, bonuses, severance pay) that are due in the six months following the filed insolvency or the requisition of a recovery process. The FGS only guarantees payments claimed within one year of the termination of contract. These credits are paid up to the equivalent amount of six months’ wages which should not exceed three times the statutory minimum wage.

In this framework, in 2013 two other national compensation funds were established. The Work Compensation Fund (Fundo de Compensação do Trabalho - FCT) and the Guarantee Fund for Work Compensation (Fundo de Garantia de Compensação do Trabalho - FGCT).

The FCT and FGCT aim to ensure the workers’ right to receive half of the compensation owed to them in case of termination of their employment contracts. This amount is calculated according to article 366 of the labour code, which establishes that:

  • The amount of compensation is equal to 20 days of basic salary and seniority bonus for each full year of seniority or fraction thereof.
  • The amount of monthly basic salary and seniority bonus to be considered for the basis of calculation may not exceed 20 times the minimum guaranteed wage (€635, in 2020).
  • The total amount of compensation may not exceed 12 times the monthly basic payment and seniority bonus of employee or, when the limit specified above is taken in consideration, 240 times the minimum guaranteed salary.

Employers are required to contribute 1% of pay (0.925% to FCT, 0.075% to FGCT) for employees hired after 1 October 2013.

The labour compensation fund and labour compensation guarantee fund entered legally into force in November 2015. The funds are available to work contracts signed after this day or terminated from this day.

FCT and FGCT are now obliged to inform the Authority for Working Conditions of any non-compliance by the employer within 30 days.

Since September 2015, labour relationships derived from work contracts of a duration up to two months are excluded from the application scope of the rules governing FCT and FGCT.

Under these new rules, the employer is required to pay to the FCT 0.925% of the base retribution and seniority payments owed to each worker under this regime. The amount payable by the employee to FGCT equals 0.075% of the base retribution and seniority payment. Every year there are 12 payments, for each month, within the time limits laid down for settlement of social security contributions, for each worker (one for each 12 monthly base retributions and seniority payments).

Funding

  • Companies

Involved actors

Public employment services
Institute of Management of Capitalisation Funds of the Social Security (Instituto de Gestão de Fundos de Capitalização da Segurança Social, I. P. - IGFCSS); Institute of Financial Management of the Social Security (Instituto de Gestão Financeira da Segurança Social - IGFSS).

Effectiveness

In 2017, the fund was financed by 225,303 employers (they were 106,753 in 2014) and originated applications to the amount of €172, 643, 229.21, representing an increase of €152,130,727.52 compared with 2014. These payments are linked to 1,273,493 employment contracts. In 2017, a total payment of €27,808,814.97 was addressed to the refund of employers, following the termination of employment contracts (in 2014 the refund payment was €2,278,121.35) (Institute of Management of Funds, 2017).

Strengths

Ensures that employees are paid at least part of the total compensation (50%) to which they are entitled on termination of employment contracts.

Weaknesses

No information available.

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