Wage Guarantee Fund Portugal: who pays if the company fails

Has your employer gone into insolvency owing you wages? A public fund pays in its place. It is called the Wage Guarantee Fund, it is managed through Social Security, and it is set out in Article 336 of the Portuguese Labour Code. You have one year from the end of your contract to claim.

Insolvency does not end your contract

Article 347(1) of the Labour Code says what matters: a judicial declaration of the employer's insolvency does not terminate the employment contract. The insolvency administrator must keep meeting obligations towards workers in full while the establishment is not definitively closed.

From there, the administrator has two routes:

• Before definitive closure, the administrator can terminate the contract of a worker whose contribution is not indispensable to the running of the business (Article 347(2)). In that case you are entitled to the compensation under Article 366 (Article 347(5)). Not paying it is a serious administrative offence (Article 347(7)).
• On closure, terminations must follow the collective redundancy procedure with the necessary adaptations (Article 347(3)), except in micro companies (Article 347(4)). The step by step is in the collective redundancy guide.

If instead the business closes totally and definitively without insolvency, Article 346 applies: the contract lapses, the procedure in Articles 360 and following must be followed, and you are entitled to compensation calculated under Article 366, for which the company's assets are liable (Article 346(5)).

Practical rule: do not disappear and do not sign anything blank. Keep recording your attendance and keep everything in writing.

What the Wage Guarantee Fund actually is

Article 336 is a single sentence, but it is the one that counts: payment of a worker's claims arising from the employment contract, or from its breach or termination, which cannot be paid by the employer because of insolvency or a difficult economic situation, is guaranteed by the Wage Guarantee Fund.

The regime is in Decree-Law 59/2015 of 21 April, which transposes Directive 2008/94/EC. The Fund is an autonomous fund, financed by employers and by the State, and it is run by IGFSS, the financial management institute of Social Security.

The Fund only opens when one of these three decisions exists (Article 1(1) of the annex):

1. A judgment declaring the employer insolvent.
2. A court order appointing a provisional judicial administrator, in a Special Revitalisation Procedure (PER).
3. An order accepting the application by IAPMEI, in the out of court company recovery procedure.

There is also a rule worth knowing if you work for a multinational: if you carry out, or used to carry out, your work in Portugal for an employer operating in two or more Member States, the Portuguese Fund pays even if the insolvency is declared by a court in another EU or EEA country (Article 1(3)).

Which claims count and how much the Fund pays

The claims covered are all those arising from the employment contract, its breach or its termination (Article 2(1)): wages, holiday and Christmas allowances, untaken holiday, overtime and the termination compensation.

Three details change the final amount:

• Deductions. Your own social security contributions and income tax withholding are taken off the gross claim (Article 2(2)). The Fund pays those amounts to the competent authorities (Article 2(3)). In other words, you receive the net figure.
• Reference period. The Fund pays claims that fell due in the six months before the insolvency action, the PER application or the out of court recovery application (Article 2(4)). If there are no claims in that window, or they fall below the cap, the Fund pays claims that fell due after the reference period, up to that cap (Article 2(5)).
• Termination compensation. Compensation calculated under Article 366 is paid by the Fund, except the part payable by the FCT, the FGCT or the equivalent mechanism, once triggered (Article 2(6)). See the work compensation fund guide.

The caps in Article 3(1) are two and apply at the same time:

• Global cap: the equivalent of six months of pay.
• Monthly cap: three times the guaranteed minimum monthly pay.

With the 2026 minimum wage of 920 euros, that means a monthly cap of 2,760 euros and an absolute cap of 16,560 euros. See the minimum wage guide for 2026 and check the figure published for the year at www.seg-social.pt, because it rises with the minimum wage.

There is also a priority rule that matters when you have several different claims: when the amount hits the cap, payment is allocated first to base pay and seniority payments (Article 3(2)).

The one year deadline that costs people everything

This is where most people lose money without knowing it.

Article 2(8) of the annex says the Fund only guarantees payment where the claim is filed within one year from the day after the employment contract ended. After that year, it is gone.

Article 2(9) adds an important brake: the period is suspended when the insolvency action is filed, when the PER application is filed and when the out of court recovery application is filed. It starts running again 30 days after the insolvency judgment becomes final, or 30 days after the decision in the other cases.

In current interpretation, while the contract has not ended the clock has not started. Even so, do not wait. File as soon as you have the statement of claims, because the suspension depends on procedural dates you do not control.

A second clock runs in parallel, and it comes from the Labour Code. Article 337(1) provides that a worker's claim lapses one year after the day following the end of the contract. And Article 337(3), added by Law 13/2023, protects you: that claim cannot be extinguished by a waiver, except through a court settlement. In plain terms, a discharge declaration someone puts in front of you to sign does not wipe out what you are owed.

Put both dates in your calendar on the day the contract ends.

How to claim, step by step

1. Gather proof of the claims. You need a statement or certified copy issued by the insolvency administrator or the provisional judicial administrator (Article 5(2)(a)). If you are not a formal party to the proceedings, a statement from the employer setting out the nature and amount of the debt works (Article 5(2)(b)). If neither is possible, a statement from ACT works (Article 5(2)(c)).
2. Check the certification. The application must be certified by whoever issues the statement, either with an electronic signature or a handwritten signature on the back of the document (Article 5(3)).
3. File the application. At any Social Security office or at www.seg-social.pt, using the form approved by ministerial order (Article 5(4)). Attach your social security number, tax number and proof of IBAN.
4. Wait for the decision. The application is decided within 30 days from the date the file is properly completed (Article 8(1)). The decision is reasoned and states the amount to be paid, the payment method and the deductions made (Article 8(2)).
5. Sort out unemployment benefit in parallel. These are separate processes. See the unemployment benefit guide and the what to do after dismissal guide.

Two things not to do. Do not inflate the figures: Article 7 allows the Fund to refuse payment where there is abuse, collusion or simulation, and to reduce the amount if it does not match the average of the pay declarations for the 12 months before the application. And do not assume the Fund writes off the company's debt: the Fund is subrogated to your rights and creditor privileges and will pursue the employer, with interest for late payment (Articles 4 and 11).

Your employer is not paying but is not insolvent yet

If there is no insolvency judgment and no PER, the Fund is closed. That does not leave you unprotected.

Your claims carry creditor privileges (Article 333): a general privilege over movable assets and a special privilege over the employer's property where you carry out your work. In the ranking, the claim with the special immovable privilege ranks ahead of social security contribution claims (Article 333(2)(b)). In practice, you go near the front of the queue.

Other parties may be liable for the debt. Article 334 makes the employer and any company linked to it by cross shareholdings, control or group relations jointly liable for a claim that has been due for more than three months. Article 335 extends liability to the shareholder, manager, administrator or director, where the conditions of Articles 78, 79 and 83 of the Companies Code are met. If your employer is an empty shell inside a larger group, this changes the picture.

The practical route is the usual one, set out in the late wages guide:

• Send a written demand setting out the amounts and a deadline to pay.
• Add interest for late payment to the amounts you claim.
• File a complaint with ACT, anonymously if you prefer. See the guide on filing an ACT complaint.
• After 60 days of arrears, termination for just cause becomes a real option. See the guide on proving just cause.

One final warning: if the business was sold rather than closed, your contract transfers to the buyer and does not lapse. Different rules apply and they are in the transfer of business guide. Whichever route you take, check what you are owed in the final pay guide.

Are you the employer? Two practical notes. First, the Fund does not write off the company debt. It pays workers and then recovers the gross amounts from the company, with interest for late payment and an enforceable debt certificate (Articles 4, 11 and 12 of the annex); the debt can be paid in instalments by agreement with the Fund (Article 13). Second, during insolvency the administrator remains bound to pay workers in full while the establishment stays open, and terminations before closure require the proper procedure and compensation, on pain of a serious administrative offence (Article 347(1), (3), (5) and (7)). The rest of the formal duties are in the employer obligations checklist.

This guide is general information and does not replace legal advice for your specific case. Questions? ola@despacho.pt