Definition
If insolvency proceedings are opened in respect of an employer’s assets, employment contracts do not automatically terminate. The insolvency administrator takes over the business and may give notice of termination – the notice period is limited by law to a maximum of three months, regardless of any longer contractual notice periods. Employees are entitled to insolvency pay from the Federal Employment Agency for the last three months prior to the opening of insolvency proceedings, which replaces the lost net salary up to the contribution assessment ceiling. The claim must be submitted within two months. Outstanding salary claims from the period prior to the insolvency application are usually paid only on a pro rata basis.
Specialist solicitor in employment law
With over 15 years’ experience in employment law
Classification under employment law
In the event of insolvency, the insolvency payment safeguards the last three months’ wages prior to the opening of insolvency proceedings (Sections 165 et seq. SGB III). Notice periods are reduced to a maximum of three months (Section 113 InsO).
Distinction from related terms
Insolvency payment: Insolvency payment is a state benefit that secures outstanding wages for a limited period. It does not replace the entire employment relationship, but only outstanding remuneration claims.
Termination in insolvency proceedings: Even in insolvency, the employment relationship may be terminated, though often with shorter notice periods. Insolvency itself does not automatically terminate the employment relationship.
Practical tip
Submit your claim for insolvency pay to the Jobcentre within two months of the insolvency event. If you miss this deadline, you will lose your entitlement. In addition to the insolvency table, submit any outstanding claims (unpaid holiday pay, overtime).
