- Response to COVID-19
- Income support for workers
Workers in an employment relationship of at least 18 months before the insolvency of their employer (the last working day before the employer filed for insolvency) are eligible, including employees with fixed-term contracts, part-time workers and employees working externally according to assignments in their contracts. However, employees of the state, public organisations, support organisations, national funds and municipalities, as well as domestic workers in a family business or people working for their family relatives who have not entered into an employment relationship are not eligible.
An employer is considered insolvent if they have filed for insolvency at the court.
In the context of the COVID-19 pandemic, the government has amended Act No. 461/2003 on social insurance to reduce the pressure on the employers' cash flow. This measure concerns small and medium sized as well as large employers.
In cases of an employer's insolvency, workers' claims are guaranteed through the Act No. 461/2003 on social insurance, as amended (S. 103,116,135,165 and 234) and the Act No. 7/2005 on bankruptcy and restructuring, as amended.
The guarantee covers non-paid wages, bonuses, holiday remuneration, severance payments and travel expenses. The benefit covers employees wage claims for a maximum duration of three months. In 2019, the average payment for an employee was €2,173.
To get access to the wage guarantee benefits, the employee has to apply within 60 days after the insolvency or termination of the employment relationship. The Social insurance Agency (SP), which administers the guarantee fund, has to decide and pay the benefit within 60 days from the application. The fund is financed by employers' contributions.
In the context of the COVID-19 pandemic, the government has amended Act No. 461/2003 on social insurance with a view to helping many businesses affected by the outbreak of the pandemic to stay aflot. The amendments postponed the deadline for compulsory payments from employers and self-employed to insurance funds. Since March 2020, any employer and self-employed paying compulsory monthly contributions to social insurance funds, and whose revenue from business decreased by at least 40%, in comparison with March 2019, 2019 average or February 2020, are entitled to pay these contributions not until 31 July 2020 - the new deadline is 31 December 2020. The same deadline is for payments for April, May, June and July. Besides, employers and self-employed, of which at least one business unit was compulsory closed at least for 15 working days, does not need to pay any contribution for April.
- National funds
Legal framework and institutional support (courts)
Social Insurance Agency (SP), employers paying compulsory contributions to the guarantee fund at the SP, and the respective court dealing with the bankruptcy of the employer and the bankruptcy trustee.
During the economic crisis, the number of beneficiaries peaked to 676 in 2009, but all expenditures could be covered. Since then, the number of beneficiaries has been decreasing and rested at 121 in 2017. However, the number of beneficiaries has been increasing to 248 in 2019. But the total value of annually paid benefits increased much more significantly, from about €2.3 million in 2017 to about €6.5 million in 2019.
Revenue comes from the insurance paid by employers. While this is not very high, neither are the benefits paid to employees. In 2016 and 2017, the average paid benefit to an employee was €1,620 and €1,587 respectively. As companies wanted to remain active rather than going bankrupt, there was only minor increase in claims between 2016 and 2017. In 2018, there was a minor decrease, but it increased again to €2,173 in 2019.
This instrument ensures compensation to employees who have not been paid by their employer, where the company has become bankrupt.
Payment of compensation is limited to a three-month period and the administration of claims is rather complex.