The Pay Security Act ensures payment of employee's claims arising from an
employment relationship in the event of the employer’s insolvency. All claims the
employer would have been obligated to pay to the employee can be paid as pay
Pay security is based on the Pay Security Act (866/1998) and the Pay Security Decree
(868/1998). For seamen, pay security is based on the Seamen’s Pay Security Act
(1108/2000) and the Council of State’s Decree on seamen’s pay security (1295/2000)
Conditions for receiving pay security
Pay security is paid only to employees in an employment relationship. An employment
relationship is in question when an employee renders services to the employer under the
employer’s direction and supervision in exchange for payment or other forms of
compensation. Pay security excludes the managing director of a corporation, accountable
partner of a limiter partnership, partners in a general partnership and sole proprietors.
Additionally, other persons who have exercised authority in the enterprise may be
ineligible for pay security.
The employer’s insolvency is a prerequisite for pay security. The employer shall be
if he has been declared bankrupt
if it is established at distraint that he is unable to pay his debts
if he has neglected to remit the statutory withholding taxes or employer
contributions on time
if the employer’s insolvency can be established by the pay security authorities
clearly and beyond dispute.
The pay security applicant need not present an account of the employer’s insolvency,
rather, it is established by pay security authorities.
Period of application
An application for payment of the claim in the form of pay security shall be
submitted within three (3) months of its falling due.
Claims resulting from an employment relationship usually fall due monthly, and the final
settlement at the end of the employment relationship. In the case of an indemnity or
compensation based on the law or a contract, but without a specific due date, the
application for payment in the form of pay security shall be submitted within three months
of the date when court ruling acquired legal force or of making a contract according to
established labour market practice.
Should the application for pay security not be submitted by the deadline, claims can not be
remitted as pay security.
No application period for seamen's pay security application submissions has been set. The
application for claims shall, however, be submitted during the time the lien under maritime
law of the Maritime Act (674/1994) is in force. As a result, the seaman's application for pay
security should be submitted within one year of the emersion of the outstanding balance.
Clear and indisputable claims
Only clear and indisputable claims for pay security will be paid. If the employer has
disputed the claim for pay security and it has not been possible to establish its validity in
the pay security procedure, the claims cannot be paid as pay security until its grounds and
amount have been determined in the district court.
Claims remitted as pay security
The following claims can be paid as pay security:
salary (monthly, hourly, contract or incentive pays)
holiday pay and reimbursement
end-of-holiday pay and holiday compensation
working hours restriction compensation
salary for period of notice
waiting period salary
equipment and travel compensation
indemnity having to do with the employment relationship
working-time account claims
Restrictions for pay security
The maximum amount of pay security for one employee for work done for one employer is
15 200 EUR. There is no maximum pay security for seamen, however, with the exception
of claims pertaining to indemnification.
Pay security for working-time account claims is, at maximum, the equivalent of the
employee’s six month salary for work done for the same employer. This pertains to
seamen as well.
The maximum amount of pay security on pay for waiting time is equal to the amount which
is paid as pay security to cover other claims arising from the employment relationship. This
restriction applies to seamen as well.
For the purpose of preventing abuses, the restrictions have been set to the employee’s
right to pay security.
Application for pay security and the processing of applications
Applications for pay security may be submitted by
an employee organisation to which the employee has transferred his claim for
the administrator of the bankrupt’s estate when the employer has been declared
Pay security applications are available at employment offices. They can also be received
by writing to the following address: www.suomi.fi/asiointi. It is recommended that copies of
a possible employment contract, employment references and a payslip be submitted with
the application for determining pay security claims. Employment offices and employment
and economic development centres accept pay security application submissions and
provide advice in pay security related issues. Additionally, an application for pay security
based on work abroad can be filed with a Finnish diplomatic mission abroad.
Pay security applications are processed by, and decisions pertaining to them are made by
the employment and development centre in whose area the employer is domiciled.
Seamen’s pay security matters are handled at the Uusimaa employment and development
The employment and economic development centre will send the submitted application for
pay security to the employer or the administrator of the bankrupt's estate and provide them
with the opportunity to be heard with regard to the application. The employer’s insolvency
will be verified via the distraint authorities, tax authorities and the Suomen Asiakastieto Oy
business and credit information company.
Payment of pay security
Pay security is paid within a week of the decision to the employee’s bank account. Pay
security can also be paid by postal order to the address specified by the employee.
Pay security is subject to a tax withholding of 30 per cent up to 5 000 euros, and 50 per
cent for claims remitted exceeding this amount. Additionally, the employee’s pension and
unemployment insurance payments will be deducted from the pay security before
payment. The pay security administrator informs the tax authorities of all remitted pay
securities, except for pay security paid through a bankrupt estate.
Employer repayment liability
The employer or the bankrupt's estate shall repay to the State all claims paid as pay
security, including annual interest on the said claims. The pay security decision is
enforceable with regards to the employer immediately as of the date of the decision. The
claims will be recovered through means of collection or in the bankruptcy proceedings
The employee’s appeal to the Unemployment Security Appeal Board
An employee may appeal a pay security decision to the Unemployment Security Appeal
Board and further to the Supreme Administrate Court in the following cases, for example:
the application has been rejected because it was filed too late
the application has been rejected because of a lack of verification of the employer’s
the application has been rejected because the claims do not arise from an
the application has been rejected due to suspected abuse of pay security.
Court proceedings against the employer
If an application that a claim be paid in the form of pay security has been rejected because
the employer has disputed the claim, the employee shall, in order to retain his entitlement
to pay security, institute court proceedings against the employer in a district court. If an
application has been rejected because the pay security authorities have been un able to
establish its grounds and amount in the pay security procedure, but the employer has not
disputed the claim, the employee must institute a declaratory action against the State in a
district court. In case of the employer’s bankruptcy, no action can be instituted and
disputes concerning the claim shall be settled in the bankruptcy proceedings.
A new pay security application must be filed within three months of the date on which the
court decision acquires legal force.
Seamen must submit a new application for pay security within six months of the date on
which the court decision, or the distrait officer’s decision in the case of a compulsory
auction of a ship, acquires legal force.
The employer's recovery claim
An employer liable for payment may submit a recovery claim against the State concerning
a pay security decision. In the case of an employer’s bankruptcy, payment liability disputes
can be settled in the bankruptcy proceedings.
The Unemployment Insurance Funds reimburse each year retroactively to the State the
difference between the amounts paid to the employees as pay security and the principal
collected from employers. The funds needed for these payments are collected from
employers as unemployment insurance premiums.
Remember to file for pay security within three months!