EMCC European Monitoring Centre on Change

Insolvency guarantee fund

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Spain
Phase: Management
Type:
  • Response to COVID-19
  • Income support for workers
Last modified: 03 August, 2021
Native name:

FOGASA

English name:

Insolvency guarantee fund

Coverage/Eligibility

This instrument consists of a special insolvency state fund addressed to workers whose employer has been declared insolvent or bankrupt, or who had to stop paying wages due to certain economic reasons.

Anyone providing services for an employer and receiving wage for this, including part-time and fixed-term workers, irrespective of the duration of employment is eligible.

Domestic servants employed by families, artists, partners of worker cooperatives are exempted.

Insolvency is considered if it is for economic, technical and organisational reasons, when force majeure terminates employment contracts or when the assets found by a judicial execution proceeding are insufficient.

An employer is declared insolvent by law if there are not sufficient means to satisfy its obligations.

Main characteristics

The special insolvency state fund (FOGASA) is addressed to workers whose employer has been declared insolvent or bankrupt, or who had to stop paying wages for certain economic reasons. Law 22/2003 defines insolvency as the situation in which a debtor company cannot regularly meet its required debtor obligations.  

The insolvency law from 2003 establishes the workers’ privilege as creditors in cases where the company becomes insolvent. The claims of the workers of the company (wages for the 30 days before the opening of the collective procedures; wages for work after the start of the collective procedures; economic compensation related to termination of the employment contract etc.) have the priority, ranking ahead of all other claims.

The guarantee only becomes active if there are not enough assets available.

The guarantee covers wages, bonuses and fringe benefits as well as financial employee participation that arises up to one year before the insolvency.

In terms of wages pending to be paid, the fund pays an amount which is the outcome of multiplying the double of the daily National Minimum Wage by the number of days of wages pending to be paid. There is a maximum payment of 120 days since a change enacted by Royal Decree 20/2012 that entered into force the 15 July 2012 (before it was 150 days). Moreover, the government established a maximum period of three months for the resolution of cases by FOGASA during the COVID-19 crisis. (article 33 of  the Workers Statute (Estatuto de los Trabajadores)).

In terms of severance pay, there is a maximum payment of 12 months per year worked. However, the wage which is taken into consideration in order to calculate the severance pay cannot be higher than the double daily minimum wage (national minimum wage was set at €950 for 2020, according to Royal Decree 1077/2017). FOGASA covers only severance pay acknowledged by a court sentence or resolution of the labour authority when dismissal is applied if the company is considered insolvent or goes bankrupt.

The guarantee is managed by the guarantee institution FOGASA of the Ministry of Employment and financed by employer contributions.

Funding

  • National funds
  • Companies

Involved actors

National government
Ministry of Work and Social Economy
Employer or employee organisations
CEOE and CEPYME (employer organisations); UGT, CCOO, ELA/STV and CIG (trade unions)
Other
Guarantee institution FOGASA.

Effectiveness

in 2019, 19,768 companies and 72,369 workers were satified, while in 2020 (until May) 19,768 companies and 72,369 workers benefitted (Ministry of Work and Social Economy 2020).

In 2018, 81,790 workers and 21,607 companies were satified.

In 2017, claims of 23,714 companies and 90,321 were satisfied.

In 2015, claims of 43,112 companies and 165,288 were satisfied.

In 2013, claims of 82,373 companies (-2% compared to 2012) and 234,686 workers (-8%) were satisfied. 

Similarly, in 2012, 160,036 applications were solved, and claims of 84,257 companies and 254,931 workers were satisfied. That increase led the government to reduce the level of payment by means of the Royal Decree 20/2012.

In 2010, 135,577 applications were solved, and claims of 71,866 companies and 232,722 workers were satisfied.

In 2008, figures remained more or less stable: 49,792 applications were solved, and claims of 25,637 companies and 90,320 workers were satisfied.

In 2007, 39,032 applications were solved, and claims of 20,498 companies and 73,447 workers were satisfied.

Strengths

It offers protection to employees in case of company insolvency. It guarantees that employees recover part of the wages and severance pay pending (Roqueta 2017).

Weaknesses

In the past, FOGASA has been criticised for being too slow in the recognition and payment of the debts (El Mundo, 2011). Up to 2014, workers had to wait 18 months as an average in order to be paid. In 2014, the government worked to reduce that time to 3 months, as an average. In 2016, the supreme court determined that workers who apply to FOGASA may request interests in case of delay. Also in 2016, an audit carried out by the General Intervention Board of the State Administration (IGAE) on the accounts of FOGASA for 2014 concluded that the Ministry of Employment subcontracted staff without the proper training to manage the applications accumulated during years (Bernad 2018). However, the government established a maximum period of three months for the resolution of cases by FOGASA during the beginning of the COVID-19 crisis. Morever, the government streamlined FOGASA payments to avoid further collapses due to the increasing of restructuring cases. Specifically, the government has added in the Royal decree 19/2020 (May 2020) the tacit acceptance procedure when there is no resolution within a maximum period of three months.

Examples

No information available.
Sources
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