Period of guarantee
The fund guarantees claims which fell due in the last 18 months before the day the employer’s bankruptcy proceedings were accepted or rights earned for that period. The deadline may be preferred if that leads to better results for the claimant.
In special circumstances the fund may guarantee claims which fell due outside the period guaranteed if it is demonstrated that standard attempts have been made to collect the claims. This will though not lead to a guarantee of a longer period than 18 months.
The fund’s guarantee of payments
The fund guarantees wages for the last three working months spent with the employer before the date of insolvency which are within the period guaranteed. Wages include payments for work according to an agreement such as bonus payments in proportion to the period guaranteed by the fund.
The fund also guarantees wage earner’s claims for compensation for lost wages in case of a cancellation of an employment contract in the termination notice period for up to three months. The requirement for the fund’s guarantee is that the employer has been declared bankrupt.
The obligations of the fund for lost wages or compensation for lost wages in the termination notice period which fell due after 1. July 2018 shall not amount to a greater sum in respect of a one-month period than ISK 633.000.
Payments from the employer before the bankruptcy shall be deducted from the wage claims. In the same way unemployment benefits and income in the termination notice period shall also be deducted from the claims.
Pension fund premiums in arrears
The Wage Guarantee Fund is liable for claims by pension funds for pension fund premiums which fell due in the last 18 months before the date of insolvency. The deadline may be preferred if that leads to better results for the claimant.
The liability is limited to 15,5% minimum and 4% for personal pension savings according to an agreement of additional insurance protection and collective agreements.
Wage earners are entitled to payments of earned vacation pay that has fallen due in the last 18 months before the day the employer was accepted for insolvency proceedings.
The limit of payments for vacation pay is ISK 1.014.000.
Compensation in respect of damage
The Wage Guarantee fund is liable for a wage earner’s claim for compensation in respect of damage in case of a work-related accident or to a person who has the right to compensation in respect of the death of a wage earner when the employer’s insurance does not cover the claim for compensation.
Vacation pay due to financial difficulty
The Wage Guarantee Fund guarantees payments of vacation pay under Act. No. 30/1987 when employers are not able to pay, without their estate having been declared for bankruptcy. The fund’s guarantee covers vacation pay earned for the last 18 months.
The wage earners themselves or unions on their behalf can fill out an application (claim for vacation pay). The claim’s legitimacy has to be confirmed and payments will only be made before a filing for bankruptcy. If nothing prevents payment of the claim the process of applications usually takes four to five weeks.
Liability before bankruptcy proceedings
The fund’s management board may, in special circumstances, guarantee claims without prior bankruptcy proceedings having taken place, providing it is clear that the enterprise concerned has demonstrably ceased operations and the claimant’s efforts to bring about bankruptcy proceedings have been unsuccessful or the cost of carrying out bankruptcy proceedings would, in the opinion of the fund’s management board, be inordinately great.
Exemption from liability
Claim from managers and board members of the bankrupt company are not guaranteed by the Wage Guarantee Fund, the same applies to those who have held a substantial share capital in the company.
The fund may reject claims from spouses and other relatives of the manager, board members or owners if it is demonstrated that their claims are unjustified in view of those relations.
The guarantee fund may also reduce payments if the claim is considered to be unusually large with regard to the claimant’s occupation, period of work and the wage agreements common in the field or in the insolvent company.
A person who presents a payment claim against the guarantee fund may not engage in any activity which could reduce the guarantee fund’s right of recourse against the estate. If employees assign their payment claims against their employer before the employer’s estate is accepted for bankruptcy proceedings, the claim shall not be guaranteed by the fund. This shall not apply if the claim was assigned to the employer´s trade union or the Unemployment Insurance Fund.
If payment from the fund has been obtained by giving incorrect information, or if information is kept concealed which, if revealed, would have resulted in payment from the fund being refused or reduced, the party who received the payment shall repay the amount that was wrongfully received.
These exemptions apply to both wage claims and pension claims.
Contractors do not have the right to receive payments from the fund since their claims are not recognized as privileged claims under the Insolvency Act No. 21/1991.