Pay security reform improves the position of victims of serious work-based exploitation

The purpose of the pay security system is to ensure that employees receive their pay and other claims arising from an employment relationship in the event of the employer’s insolvency. From 2023, victims of serious work-based exploitation will have a longer period of time to apply for pay security. In addition, the reforms on pay security will streamline the pay security process and combat the shadow economy. 

The President of the Republic is expected to approve the amendments on 10 November 2022.

If the employer is insolvent, the employee may apply for pay security to cover the claims arising from the employment relationship. These include pay, holiday compensation and daily allowances. Usually, employees can apply for pay security for three months after the pay or other claim has become due.

The Government Programme of Prime Minister Sanna Marin includes a pledge to investigate ways to address intentional or grossly negligent underpayment. To achieve this objective, the application period for pay security will be extended for victims of serious work-related exploitation. 

Victims of work-based exploitation will have a longer application period for pay security

“Serious exploitation of labour almost always involves significant underpayment. In future, victims will have a longer time to apply for pay security and receive the salaries and other remuneration they are entitled to,” Minister of Employment Tuula Haatainen says.

If the employer of a victim of serious work-related exploitation has received a criminal conviction to pay claims arising from an employment relationship or compensation for criminal damage, the victim may apply for pay security for these claims. In future, the three-month application period will not begin until the judgment becomes final. The aim is to prevent employees’ claims from becoming time-barred during criminal investigations and consideration of charges. 

Going forward, pay security can be paid to a victim outside the normal application period also without a criminal conviction. This would apply to situations where there are reasonable grounds to believe that an employee has been subjected to serious work-related exploitation, which has prevented the application for pay security within the normal application period. In these cases, the application period for pay security will be 18 months from the termination of the employment relationship. 

An employee can use the exceptional period to apply for pay security only once.

More efficient and quicker pay security process

“The pay security authorities will gain more extensive rights to obtain and disclose information. This will help us combat the shadow economy and speed up the pay security process,” Haatainen continues.

For example, the pay security authority can impose a conditional fine on an employer to persuade them to disclose information. The authority in charge of pay security can in certain situations and on its own initiative disclose information related to pay security to the criminal investigation authority, prosecutor, Financial Intelligence Unit, tax administration and occupational safety and health authority. 

Solutions to default judgments and conciliation situations

In dispute situations, a pay security application is usually submitted after a legal process, in which the court investigates the claims and pleas of the parties to an employment relationship. Possible default judgments and conciliated settlements confirmed by the court are problematic from the point of view of pay security, as they generally do not clarify the basis or size of the claims. The payment of pay security requires that the grounds for and amount of the claims can be established. 

To solve this problem, pay security legislation will be amended to add the conditions for paying pay security on the basis of a default judgment and a conciliated settlement confirmed by the court.

The amendments will enter into force on 1 January 2023. They were prepared on a tripartite basis.

Inquiries:
Piritta Jokelainen, Special Adviser to the Minister of Employment, tel. +358 295 04 7353
Mari Hankaankorpi, Senior Specialist, Ministry of Economic Affairs and Employment, tel. +358 295 04 7331
Nico Steiner, Senior Ministerial Adviser, Ministry of Economic Affairs and Employment, tel. +358 295 04 9001