Pay security

The pay security system will secure the payment of an employee’s claim arising from an employment relationship in a situation in which the employer has gone bankrupt or is otherwise insolvent. All claims that the employer would be liable to pay can be paid as pay security. If a claim is unpaid, the employee shall contact the TE Office or Centre for Economic Development, Transport and the Environment (ELY Centre).

The pay security application shall be filed within three (3) months from the due date of the claim. Application forms are available in TE Offices and ELY Centres. The form can also be found on the ELY Centre website and the suomi.fiwebsite. The easiest way to find the form is to type “application for pay security” in the search field. Private individuals shall use the form Application for pay security A.

The application can be left in the local TE Office or sent directly to the ELY Centre of Uusimaa which makes the decision in pay security issues.

1) The claim is based on work done in an employment relationship. An employment relationship is constituted when an employee performs work for an employer under the employer's direction and supervision in return for pay.

2) The employer has not paid the claims by the due date. There is a due date for each claim based on the law, collective agreement or employment contract by which the employer is obliged to pay the claim.

3) The application has been submitted to the TE Office or ELY Centre on time. The application shall be submitted within three months from the due date of the claim.

4) The employer is insolvent, i.e., for example, bankrupt. The employer is insolvent e.g. when it is unable to pay its liabilities in execution proceedings, has neglected to pay tax withholding or employer contributions on time.

Because the claim shall be based on work performed in an employment relationship, pay security shall not be paid to independent sole traders, partners of a general partnership, responsible partners of a limited partnership, or the managing director of a limited liability company or co-operative.

The maximum amount of claims payable as pay security is 15 200 euros based on work performed for the same employer.

For a justified reason the pay security authorities have the right to deny the pay security or consider the amount of the pay security in the following cases:

• the employee’s claim is based on an agreement or arrangement which has been made for receiving pay security
• the claim applied for as pay security is disproportionate to the amount that can be considered reasonable regarding the work performed and other circumstances
• the employee repeatedly applies for claims concerning the same employer as pay security.

The application for pay security is handled and the decision in the case is made by the ELY Centre of Uusimaa. The ELY Centre will send the application for pay security for information to the employer/bankrupt’s estate of the employer and will reserve them a chance to give a statement due to the application. At the same time, the employer’s insolvency will be investigated from Suomen Asiakastieto Oy’s credit information database, the execution authorities and the tax authorities.

The handling times of the application vary depending on the reachability of the employer, unambiguity of the claims etc. The expected handling time of applications for pay security is around 8 months from the submitting of the application.

Pay security will be paid to the applicant’s bank account within a week from issuing of the decision.

Petition for appeal

The decision is subject to appeal. The necessary instructions for appeal will be included in each decision.

Taxation

The withholding tax for claims paid as pay security is 30% up to 5 000 euros, and 50% for the exceeding share. If the applicant’s personal tax percentage differs considerably from the statutory withholding percentage, it is possible to request a tax card for the said pay security payment from the tax administration. No withholding is payable for the interest paid.

The ELY Centre will forward the information on the pay security paid to the tax administration, so the employee need not report the pay security received in their tax return. If the payment of pay security has been made through a bankrupt’s estate, in that case the employee needs to report it in their tax return.

Employee’s pension contribution and unemployment insurance contribution will be deducted from the claim paid as pay security.

TE Offices and ELY Centres will provide advice on issues related to pay security.

Further information is also available on the pay security section of the ELY Centre website.

In case of bankruptcy, the estate administrator usually applies for pay security on behalf of the employees. In such a case you should contact the estate administrator.

You can ask about the falling due of a claim, collective agreement or other matters related to employment relationships from your local occupational safety and health administration. You will find the contact information of your local office on the tyosuojelu.fi website.

If you need help from a lawyer, you can contact the OpusLex network of attorneys. The lawyers of the network provide advice on labour law by telephone on weekdays from 9 a.m. – 5 p.m. at 0600 -199 33 (€ 1/min. + local network charge).

Links

Finlex – collective agreements 
OpusLex network of attorneys – legal services
Employment and Economic Development Offices – contact information
ELY Centre – instructions for pay security   
Occupational safety and health divisions – contact information