The Wage Guarantee Fund: who pays your unpaid wages

What is the Wage Guarantee Fund?

The Wage Guarantee Fund (Fundo de Garantia Salarial, FGS) is a public fund, run within Portuguese Social Security, that pays workers the credits arising from the employment contract, its breach or its termination when the employer cannot pay them because it is insolvent or under recovery¹. It is set out in Decree-Law 59/2015 and implements the European directive protecting employees in employer insolvency⁴.

The most important point: payment is not automatic. The worker must request it, in time.

When does the Fund pay?

The FGS steps in when the company's situation is formalised in one of three processes¹:

• the insolvency has been declared by the court;
• a judge has issued the order appointing the provisional judicial administrator in a special revitalisation process (PER);
• the negotiation protocol has been deposited under the out-of-court recovery regime (RERE).

Merely having wages in arrears, without one of these processes, is not enough to trigger the Fund. In that case the path is to claim the credits in court or to file for the employer's insolvency.

Which debts does the FGS cover?

The employment-contract credits are covered²:

• unpaid salaries;
• holiday, Christmas and meal allowances owed;
• severance or compensation due for the termination of the contract or for breach of its conditions.

As a rule, the credits fallen due in the six months before the insolvency, PER or RERE process started are counted¹. If there are none in that window, or they fall short of the limit, the Fund may pay credits fallen due after that date, up to the limit.

How much does the Fund pay? The two limits

Article 3 of Decree-Law 59/2015 sets two limits¹:

Global maximum: six months of retribution · Monthly cap: three times the minimum wage, 3 × €920 = €2,760 in 2026³

The courts settled how the two combine: the worker is always entitled to six months of their own retribution, but the monthly value counted is capped at €2,760. The absolute maximum is therefore €16,560 (6 × €2,760).

Here is how it looks by salary:

Run your own numbers, with the amounts owed, in the Wage Guarantee Fund calculator.

A worked example from start to finish

Imagine a €1,200 gross salary and a company declared insolvent owing 4 months of salaries (€4,800), €1,200 of holiday and Christmas allowances and €2,400 of severance: €8,400 in total.

• Retribution counted: €1,200 (below the €2,760 monthly cap).
• FGS ceiling: 6 × €1,200 = €7,200.
• The Fund pays €7,200 (86% of the debt); the remaining €1,200 is claimed in the insolvency process.

Is what exceeds the ceiling lost?

No. What the FGS does not pay remains the worker's credit against the company, to be claimed in the insolvency process, where labour credits enjoy priority over most other creditors. Upon paying, the Fund is subrogated to the worker's rights: it is then the Fund that collects from the company the amounts it advanced¹.

What is the deadline and how do you apply?

Payment must be requested within one year counting from the day after the employment contract ended¹. The period is suspended by the filing of the insolvency action, the PER or the RERE, until 30 days after the decision becomes final.

The request uses form Mod. GS 1-DGSS, filed with Social Security, together with the court (or IAPMEI) certificate stating the amounts claimed, or a statement from the employer or the labour authority (ACT)². The amount is paid in a single instalment.

Does the payment deduct IRS and Social Security?

Yes. At payment, the Fund deducts the Social Security contributions and the IRS withholding due on each credit, just as if the employer were paying². Severance within the legal limits is exempt, so the effective deduction depends on the composition of the debt. To see how deductions work on a normal salary, try the net salary calculator.

Wages in arrears: what other rights do you have?

With pay overdue for more than 60 days, the worker may terminate the contract with just cause and receive the corresponding compensation, estimated in the severance pay calculator. Once the contract ends involuntarily, and the conditions are met, there is also the unemployment benefit. If the company has instead entered a lay-off, different rules apply: see the lay-off pay calculator.

Run the numbers on what the Fund guarantees in your case in the Wage Guarantee Fund calculator.