EMCC European Monitoring Centre on Change

Lithuania: Wage guarantee in case of insolvency

Lithuania
Phase: Management
Type:
Wage guarantee in case of insolvency
Sist endret: 19 August, 2021
Virkelig navn:

Darbo kodeksas Nr. XII-2603, Įmonių bankroto įstatymas Nr. IX-216, LR garantijų darbuotojams jų darbdaviui tapus nemokiam ir ilgalaikio darbo išmokų įstatymas Nr. XII-2604, Vidutinio darbo užmokesčio skaičiavimo tvarkos aprašas, patvirtintas LR Vyriausybės nutarimu Nr. 496

Engelsk navn:

Labour code No XII-2603, Enterprise bankruptcy law No IX-216, Law on guarantees for employees in the event of employer insolvency and long-term service allowances No XII-2604, Description of the procedure for calculating the average wage (resolution of the government of 21 June 2017, No 496)

Artikkel

Labour code (62, 149), Enterprise bankruptcy law (3), Law on guarantees for employees in the event of employer insolvency and long-term service allowances (4, 5, 6, 8), Description of the procedure for calculating the average wage (5)

Beskrivelse

According to the labour code (article 149), the employer is deemed insolvent upon becoming subject to bankruptcy proceedings or in other cases established by law. Employee claims related to employment relations are satisfied in first instance pursuant to the procedure established by the law on enterprise bankruptcy.

According to the law on enterprise bankruptcy, in the event of non-payment of remuneration and compensation for damage arising from employment relations, employees are entitled to request the discharge of the company's obligations and liabilities towards themselves (article 3).

If the insolvent company has sufficient funds to discharge its obligations to employees, dismissed employees are paid upon termination a severance pay in the amount of two times their average salary. The amount is reduced to half the average salary for employment relationships that last less than one year (article 62). The average pay for employees is calculated on the basis of their remuneration over the three calendar months prior to their dismissal in compliance with the description of the procedure for calculating the average wage (resolution of the government of 21June 2017, No 496).

According to the law on guarantees for employees in the event of employer insolvency and long-term service allowances, if the insolvent company lacks sufficient funds and fails to discharge its obligations to employees, the administrator files an application to the Guarantee Fund (article 8). The latter is a state fund intended to ensure guarantees for employees in the event of company insolvency (article 4). The main source of the Guarantee Fund is the employers' contributions, equal to 0.16% of the gross wage of the insured employee. The fund is as well financed through other sources, like voluntary contributions from natural and legal persons, other organisations and their subdivisions (article 5).

However, it should be noted that only limited amounts of compensations can be paid from the Guarantee Fund. According to the law, employees can claim (Art. 6):

  • wage compensation – up to three average wages in the country;
  • cash compensation for an unused annual holiday – up to the minimum monthly wage;
  • severance pay – up to two minimum monthly wages;
  • payment for idle time – up to the minimum monthly wage;
  • payment for damages caused by occupational accidents or diseases, as foreseen by law.

Kommentarer

In total, the Guarantee Fund handed out benefits for 7,461 employees in 2018 and for 7,524 employees in 2017. The total amount requested by employees amounted to €14.3 million in 2018 and to €13.9 million in 2017. From 2001 to 2015, approximately 10,000 employees per year received benefits from the Guarantee Fund. However, during the crisis this figure doubled or even tripled. Indeed, the number of beneficiaries was close to 6,600 in 2009, while it increased up to around 20,400 in 2010 and to around 28,100 in 2011.

Cost covered by
  • Companies
  • Employer
  • National government
Involved actors other than national government
  • Employer organisation
  • Trade union
  • Other
Involvement others
The Guarantee Fund is administrated by the State Social Insurance Fund Board under the Ministry of Social Security and Labour.
Thresholds
No, applicable in all circumstances
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