Danish workers now get improved terms when firms go to the wall

Employees in Denmark whose companies go bankrupt are now more likely to get all the money they are owed, following an increase in the maximum that can be paid out.

Since 1972, all Danish employers have been required to contribute to an employees’ guarantee fund — known by its Danish initials as LG — which pays out if an employer becomes bankrupt. Employees are entitled to the full amount they are owed including wages, holiday pay, pay in lieu of notice and pension contributions.

However, this payment is subject to an upper limit and until last month it had remained unchanged at 110,000 Danish kroner (£12,800) since 2004. On 2 July the maximum payout was increased to 160,000 Danish kroner (£18,600).

The decision to increase the maximum, taken by the board of LG, which is composed of representatives of both unions and employers, should mean that almost all employees will get the full amount they are due. In 2008, under the previous limit, only 6.2% of employees entitled to payments had the amount cut because it was above the limit.

Some 30,000 people are expected to lose their jobs because of bankruptcies this year in Denmark.