Germany.: What to do for employees if the company is bankrupt

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Since the fourth quarter of 2020, the number of bankrupt enterprises has unfortunately increased sharply due to the current economic situation and the ongoing lockdown. Accordingly, the amount required to compensate for the last three salaries of employees of bankrupt enterprises increased (Insolvenzgeld).

The Federal Statistical Office recently reported that bankrupt enterprises owed creditors and their employees € 16.7 billion in the first half alone, well above the comparable figure for the same period last year. For the payment of this money in 2021, 1.6 billion euros are provided.

If there is still money in the cashier of the company, employees can hope to pay off wages, overtime, vacation pay. If there is no money, then they become creditors (Insolvenzgläubiger). And they just have to register at the labor exchange.

Like other creditors (suppliers or customers of the company), employees of the enterprise can count on only a small compensation for their claims. At the same time, in case of insolvency of the company, the law on protection against unjustified dismissal (Kündigungsschutzgesetz) applies. Of course, employees have the right to resign themselves due to wage arrears. Anyone who wants to take advantage of this must first set a deadline for the employer in writing to pay off the debt and wait for the payment of at least one unpaid wage.

If the employer has released employees from work, they are entitled to receive unemployment benefits. For those who quit because of wage arrears, the labor agency does not block the payment of benefits for three months, as is usually the case when quitting on their own. But in such cases, the labor agency does not pay unemployment benefits, but Insolvenzgeld. Moreover, such a payment covers the last three salaries until the opening of the bankruptcy process.


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