If a company goes bankrupt – don’t be surprised if wage payments suddenly stop and you have to claim unpaid wages
The employee can apply for any salary claims with the help of pay security. Photo: Gettyimages
According to PAM’s lawyer Henry Vähtäri, employees should know a few basics about bankruptcies now that it has become easier for companies to file for bankruptcy.
“It remains to be seen if there will be more bankruptcies in service sectors if creditors start requesting bankruptcies”, wonders PAM’s lawyer Henry Vähtäri.
A temporary amendment to the Bankruptcy Act ended at the end of January. This made it harder for creditors to file bankruptcy proceedings against companies.
Wage payments end within two weeks
According to Henry Vähtäri, employees should know a few basics about bankruptcies. First of all, in a bankruptcy the payment of wages ends within two weeks:
“When a company is declared bankrupt by the district court, all employment contracts are terminated at 14 days’, or two weeks’, notice. The length or type of the employment relationship doesn’t matter”, Vähtäri says.
“It remains to be seen if there will be more bankruptcies in service sectors if creditors start requesting bankruptcies”, wonders PAM’s lawyer Henry Vähtäri.
A temporary amendment to the Bankruptcy Act ended at the end of January. This made it harder for creditors to file bankruptcy proceedings against companies.
Wage payments end within two weeks
According to Henry Vähtäri, employees should know a few basics about bankruptcies. First of all, in a bankruptcy the payment of wages ends within two weeks:
“When a company is declared bankrupt by the district court, all employment contracts are terminated at 14 days’, or two weeks’, notice. The length or type of the employment relationship doesn’t matter”, Vähtäri says.
Secondly, employees can claim any unpaid wage amounts from pay security. Pay security is a system that pays unpaid wages from tax revenues.
“If, for example, you are expecting your last wages and holiday compensation and the bankruptcy estate doesn’t pay the unpaid amounts, employees should claim them from pay security”, Vähtäri says.
“Pay security always has to be applied for within three months of the unpaid amount falling due. If an application is late by just one day, it is rejected.”
Final wages and holiday compensation fall due when an employment relationship ends, and must be claimed within three months of the end of employment. If you have unpaid wages from earlier, these must be claimed within three months of the date when the wages should have been paid.
The maximum amount you can get from pay security per employment relationship is 15,200 euros.
Wave of bankruptcies held back by temporary law
The purpose of the temporary Bankruptcy Act, which expired at the end of January, was to prevent bankruptcies by companies that had got into payment difficulties due to the coronavirus epidemic. The law was in force from May 2020. And bankruptcies were prevented:
“According to Statistics Finland, there were 18.6 per cent less bankruptcy filings last year than the year before”, says Mari Aalto, legal adviser at the Ministry of Justice.
To prevent a wave of bankruptcies from February onwards, a second temporary Bankruptcy Act has been brought in. This will be in place from the start of February until the end of September. The new temporary law grants companies a long period to negotiate their debts with their creditors. Although the so-called insolvency assumption in the event of payment default was reinstated for companies, companies have up to 30 days from a payment reminder to negotiate payment of their debts.
“The new temporary law doesn’t prevent creditors from petitioning for bankruptcy, but it smooths the transition to the normal rules being applied”, Aalto estimates.
How to apply for pay security
Video by PAM’s Henry Vähtäri on how to fill in a pay security application with subtitles in English.