EMCC European Monitoring Centre on Change

Insolvency compensation

Germany
Phase: Management
Typ:
  • Income support for workers
Senast ändrad: 03 August, 2021
Lokalt namn:

Insolvenzgeld

Engelskt namn:

Insolvency compensation

Coverage/Eligibility

The instrument covers outstanding payments resulting from the termination of business activities following the opening/rejection of insolvency proceedings. An employer is also considered insolvent if the company is definitely closed down or if there is a high probability that payment obligations cannot be settled at due date or if assets are not sufficient to cover debts.

All workers employed with private employers are entitled to avail of this compensation, including trainees or apprentices and home office workers.

Main characteristics

In case of outstanding payments resulting from the termination of business activities, workers are entitled to three months of financial compensation prior to the opening of insolvency proceedings or the rejection of insolvency proceedings (if the employment ended before that, for the three months before the termination of the employment contract). In 2020, the allowance is provided for monthly wages that do not exceed €6,900 in Western Germany and €6,450 in Eastern Germany.

Workers are informed by the works council (covered by the Works Constitution Act in case of insolvency) and the employer representative as well as the insolvency manager. The compensation comprises net wages including holiday remuneration, payment in case of illness, remuneration for overtime, travel costs and so on, within certain maximum limits; income from a new employment contract or from self-employment during the 'insolvency income period' will be deducted.

The compensation is covered by a central public fund set up for covering potential claims of workers in case of insolvency. The fund is financed by monthly contributions from private employers (0.06% of payroll in 2020) paid alongside with social security contributions to statutory health insurers. Public employers and public agencies/bodies do not have to contribute to the fund. The compensation is paid by the Federal Employment Agency.

Application for insolvency income must be filed with the public employment service within two months after the agency has attested the termination of business or the insolvency case, otherwise employees lose their entitlement.

Funding

  • Companies

Involved actors

National government
Legal framework.
Public employment services
The compensation is paid by the Federal Employment Agency.
Employer or employee organisations
The workers are informed by the works council.

Effectiveness

The Federal Employment Agency provides statistics on the claimants of 'Insolvenzgeld'. In 2019 this number rose for the first time since 2013 to 63,421 accepted claims. In 2011, the claims of 130,649 workers were satisfied, some 8,075 were rejected.

The number of workers' claimants accepted decreased over the past years (114,608 in 2012; 119,437 in 2013; 93,152 in 2014; 83,680 in 2015;  69,493 in 2016; 67,357 in 2017; 62,430 in 2018).

Some 7,000 (2012), 6,300 (2013), 6,800 (2014), 6,671 (2015), 5,864 (2016), 5,899 (2017), 5,636 (2018) and 5,243 (2019) of workers' claims were rejected.

The Federal Employment Agency spent over €842 million on insolvency compensation and related social security contributions in 2019 (BA, 2019). 

Strengths

Workers receive part of their compensation for the last three months before the insolvency of the employer. The Federal Employment Agency also pays social security contributions for this time.

Weaknesses

Lengthy procedure, strongly dependent on the formal progress of the insolvency procedure.

Exempel

No information available.
Källor
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