How Ukraine protects employees of bankrupt enterprises?

Author : Iryna Shostak

Source : 112 Ukraine

If the company goes bankrupt and does not pay wages for a long time, a worker has a real chance to get his earned money back. Such an initiative was put forward by the Ministry of Economy
20:54, 8 September 2021

Open source

Today, about 154,000 Ukrainians are waiting for the promised - just so many workers, according to the State Statistics Service, are owed by Ukrainian enterprises as of August 1, 2021. The total amount of debt since the beginning of the year "ran up" no less impressive - almost 150,000 USD. Thus, on average, one employee received less than 1,000 USD.

One of the reasons for this "entertaining" mathematics is the insecurity of employees of bankrupt or liquidated enterprises in Ukraine. As of January 1 of this year, about 36% of the total debt was owed to employees of such enterprises.

Related: Bankruptcy pandemic: How coronavirus destroys world's largest companies

What is offered

“I worked at a furniture company for three years, everything was great. But then quarantine broke out, and our salaries were delayed. When debts accumulated for three months, colleagues began to strike and the company was closed. filed in the economic court, did not satisfy. I was never paid more than a thousand euros,” says our interlocutor from Dnipro.

Today, if the debtor is declared bankrupt, an inventory and valuation of his property is carried out with further sale. It is these funds that should go into the pockets of former employees (but only those whose claims were included in the register of creditors, as required by the Bankruptcy Code). At least, that's what the law provides. But in practice, everything works differently: in case of insufficient liquidation property of a bankrupt, most of these debts are recognized as paid off without actually paying them to employees.

The initiative of the Ministry of Economy is designed to change the state of affairs for the better for ordinary Ukrainians. At least, this is what the officials assure.

The draft law proposes to improve the compensation mechanism, which today is often delayed. In simple terms, the state will provide guaranteed payments by creating a special fund for this. This is the main problem, but more on that later. First, let's look at what the employee is entitled to.

Related: Almost 200 airports may face bankruptcy due to Covid-19 pandemic

Payments from the state: what is due and to whom

The first thing to note: compensation is introduced only for new! debts declared in the economic process and after submitting an application to the State Labor Office. There is no need to talk about the happy end of the stories of the salaries that bankrupt enterprises owe Ukrainians today.

So, if your company goes bankrupt, you will be able to claim at least the average salary for three months, which you received before the company filed a bankruptcy case or the employment contract with you was terminated.

At the same time, the maximum amount of compensation also cannot exceed 12 minimum wages as of January 1 of the corresponding year (2,500 USD) and the size of three average salaries for the last year of the employee's work.

Speaking in the dry language of numbers, an employee can count on a maximum of 680 USD (we take into account the "minimum wage" of 225 USD).

"It's good that they are trying to 'snatch' at least some money from a bankrupt employer. But if he has not paid his salary for years, and a person is offered three monthly salaries with a restriction on minimum wages... And where to find other leftovers? Where to get them?" Tetiana Pashkina, an expert on labor law, notes.

The amount of compensation within these norms will be paid by the State Labor Office. To obtain it, the employee will have to contact the service within three months after the application is included in the register of creditors' claims against the debtor.

The procedure itself, in which payments will take place within six months after the adoption of the bill, will be established by the Cabinet. Therefore, it is not yet clear how long the Ukrainians will have to wait for their compensation.

Even more vague is the time frame for obtaining other amounts of monetary claims that exceed a certain maximum amount of compensation. According to the initiative, they will be satisfied in the order of priority provided for by the Bankruptcy Procedure Code.

By the way, if the initiative is supported, the law will come into force on January 1, 2022.

Related: Coronavirus crisis: Over 10% of small and medium-sized enterprises in Ukraine on verge of bankruptcy

How are salary debts to be paid?

According to the Ministry of Justice, the total debt of bankrupt enterprises in 2019 amounted to UAH 21.4 million, in 2020 - almost 50. Where to get the money? As noted above, to guarantee payments, the state will create a special fund, the source of which will be a part of the payment of ERUs. Thus, the Pension Fund will again fall under the distribution.

"ERUs are the main source of formation of the Pension Fund. They are already being torn to pieces, there is not enough money. If they start taking funds from ERUs for the formation of a new special fund, this will lead to an increase in the Pension Fund deficit. And the state budget will have to provide additional funds for its coverage," says economist Oleh Pendzin.

An additional source of the fund will be receipts from fines for violations of legislation under Art. 265 of the Labor Code: for the payment of wages without ERUs, "in envelopes", hiring without a contract, etc. In 2019 and 2020, the state received more than UAH 90 million under these articles.

"Patching" the holes of the Pension Fund will not be limited. The authors acknowledge that the implementation of the initiative will require additional expenditures from the country's budget - to expand the staff of the State Labor Service by 250 people for the new goals of the Cabinet. However, the effectiveness of the new bill directly depends on the budget expenditures for the department that will administer the compensation. Is there really a need to have 250 staff?

“I believe that the state owes these funds, which will be spent on the creation of a separate body or department within the body in order to create jobs,” says lawyer Rostyslav Kravets.

The likelihood of additional spending on administration may lead to the fact that in the Verkhovna Rada the initiative will fail.

"I have pessimistic expectations that this bill will be implemented. It will not find support in the Ministry of Finance, because the Explanatory Note to it explicitly says that the implementation of the initiative will pull additional costs from the state budget. Today there is already a big hole there," economic expert Oleh Pendzin explains.

Related: Owner of bankrupt air company breaks sanctions, pays for maintenance of African planes in Ukraine

Will the new initiative help ordinary workers?

According to lawyer Rostyslav Kravets, the initiative can create corruption risks when relatives or friends who are timely arranged for the company will receive deductions from the fund.

At the same time, there is an acute issue of the awareness of workers who really need compensation in its procedure. According to Kravets, the main thing is that a person knows that he generally has such rights and that in the event of the bankruptcy of an enterprise, they can count on help from the state. The task of providing timely information falls on the shoulders of the government.

Experts agree that the initiative brings certain guarantees and benefits to ordinary Ukrainians. But, if the initiative is implemented with violations, taxpayers will pay for it, including those employees, for whose financial well-being the authors of this bill are fighting.



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