Wage Claims

Facets relevant to wage claims

If an employer fails to pay an employee’s wages on time, the employee should first bring this to the employer’s attention and ask for an explanation. If it’s not a simple mistake, the employee should contact their union if they are a member or reach out to a lawyer. Wage claims are subject to the general statute of limitations, which is ten years.

If the employer has declared bankruptcy 

If the reason the employer has not paid wages is due to financial difficulties, a payment demand can be sent to the employer, giving them one week to settle the wage claim. If this doesn’t happen, the employee can file for bankruptcy in district court within three weeks. If the employer fails to pay, it is presumed that the employer is insolvent and can be declared bankrupt. However, the employer can refute this presumption. 

Once declared bankrupt, a bankruptcy trustee takes over the estate, and the company loses control over its assets and debts. Naturally, a bankrupt company cannot pay all its debts, so there is a statutory order of priority under the Preferential Rights Act (in swedish: förmånsrättslag (1970:979)).

Wage guarantee

If an employee has primarily performed their work in Sweden, the state can cover certain parts of the employee’s wage claims under the Wage Guarantee Act (in swedish: lönegarantilag (1992:497)). 

The bankruptcy trustee decides on the wage guarantee, so any questions about this should be directed to them. Only wage claims that constitute bankruptcy claims with general preferential rights according to the Preferential Rights Act are covered. 

Payments from the state wage guarantee can amount to a maximum of four price base amounts. The calculation is based on gross salary without consideration of social charges. If the bankruptcy trustee decides that the employee is entitled to wage guarantee, the payment will be made by the County Administrative Board within one to two weeks. Only wage claims that have fallen due are paid out. Any severance pay is paid on its respective due date.

Preferential rights

An employee’s wage claim that is not covered by the wage guarantee has general preferential rights, provided that the employee has not owned a significant part of the company or had substantial influence in the company during the last six months. 

Wage claims related to the period three months before and one month after the bankruptcy are covered and counted as bankruptcy claims. Preferential rights for wage claims can amount to a maximum of ten price base amounts. Deductions must be made for the amount already received through the wage guarantee. 

Any excess amount or claims for additional months become an unsecured claim in the bankruptcy and are only paid if there are remaining funds after all higher-priority claims have been settled.

If the employment continues after bankruptcy

After the bankruptcy, the company cannot incur new debts, but the bankruptcy trustee can on behalf of the bankruptcy estate. If the trustee decides to continue the business for more than a month after the bankruptcy, the bankruptcy estate is responsible for the employee’s wage claims. 

In such cases, the employee’s wage claim becomes a so-called mass claim, which has the highest priority in the employer’s bankruptcy. Mass claims are paid first. If the estate’s assets are insufficient to cover the mass claims, the state will step in and cover the shortfall.

Priority order for wage claims 

Distribution in bankruptcy for wage claims is summarized as follows:

1. Mass claims: Always fully covered
2. Wage guarantee: Full coverage up to four price base amounts
3. General preferential rights: Paid if there are funds left in the bankruptcy estate after 1 and 2
4. Unsecured claims: Paid if there are funds left in the estate after 1, 2, and 3

We are here to help 

Contact us if you need legal assistance with wage claims. Advantage Law firm experienced in representing both employers and employees in such matters.