Many businesses have struggled during the coronavirus pandemic, and a significant number have closed or declared bankruptcy. Workers wonder what their rights are when the workplace shuts down. Employees in this situation should apply to the Wage Guarantee Fund (Ücret Garanti Fonu) to claim unpaid wages.
Rights of Employees When a Workplace Closes
Employer insolvency or payment difficulties have become more common, especially during recent pandemic waves. In such cases, up to three months of unpaid wages can be covered by the Wage Guarantee Fund. To receive payments from the fund, certain conditions and documentation must be met. Employees who present the required documents can claim up to three months of unpaid wages that arose because their workplace closed or the employer went bankrupt.
A percentage of employer contributions paid into the Unemployment Insurance Fund (specifically 1%) is allocated to the Wage Guarantee Fund. The fund exists to support workers when employers fail to pay wages because of bankruptcy, closure, or similar situations. The fund pays the last three months of wages that the employer did not pay. Unlike unemployment benefits, which are capped at a percentage of the gross minimum wage, Wage Guarantee Fund payments are calculated based on net wages. Payments are made based on the earnings declared to the Social Security Institution (SGK) as subject to premiums. Therefore, the amount shown on payroll determines the fund payment: the higher the declared earnings, the higher the payment. Workers whose earnings are underreported on payroll may suffer losses, including when applying to the Wage Guarantee Fund.
Not All Wages Are Payable
It is important to understand that not every unpaid wage is necessarily recoverable from the Wage Guarantee Fund. To qualify for payments, the employer must be unable to pay for specific legally recognized reasons, such as bankruptcy, a court decision recognizing insolvency, or a court-approved postponement of bankruptcy. If a court orders bankruptcy postponement, the last three months of wages can still be claimed from the fund.
Other conditions must also be satisfied. The employee must have worked at the same workplace for at least one year before the date the employer fell into payment difficulty, and the unpaid wage claim must have arisen before the employer’s payment difficulty date. Periods such as military service, long-term medical treatment, or pretrial detention do not count against the one-year employment requirement; workers in those circumstances can still claim unpaid wages. Whether the employer actually paid unemployment insurance contributions is not a deciding factor for the Wage Guarantee Fund; the key condition is that the employee worked at the same workplace within the year preceding the employer’s payment difficulty.
Situation of Those Receiving Unemployment Benefits
Receiving unemployment benefits does not prevent someone from also using the Wage Guarantee Fund. Beneficiaries of unemployment pay can still apply to the fund without issue. Employees may claim unpaid wages from the fund that date back up to five years prior to the employer’s payment difficulty date. Determining eligibility relies heavily on timing: the one-year continuous work requirement is calculated backward from the date the employer fell into payment difficulty.
To determine the date an employer fell into payment difficulty, authorities use documentary evidence such as the court date of a bankruptcy declaration, the court decision date for bankruptcy postponement, the date of a judicially approved composition period (konkordato), or the date of an aciz certificate or a seizure report that will be converted into an aciz certificate. The date on which one of these documents or decisions was issued is used to establish whether the employee meets the one-year employment criterion and can therefore apply for support from the fund.