Factsheet for measure
DE-1997-13/2627
– measures in Germany
Insolvency compensation
Insolvenzgeld
Background information
The instrument was created with a view to cover outstanding payments resulting from the termination of business activities following the opening of insolvency proceedings. All workers employed with private employers are entitled to avail of this compensation, including trainees or apprentices and home office workers.The Federal Employment Agency administers the scheme and pays insolvency compensation to affected workers.
Content of measure
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 2024, the allowance is provided for monthly wages that do not exceed €7,550 in Western Germany and €7,450 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. 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.
Use of measure
The Federal Employment Agency provides statistics on the claimants of insolvency compensation. In 2019 this number rose for the first time since 2013 to 63,421 accepted claims.
The number of workers' claims accepted decreased over the past years (130,649 in 2011; 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).
Since 2019, the figures have been as follows: 60,286 workers' claims accepted in 2020; 33,720 in 2021; 36,989 in 2022 and 47,291 in 2023.
Some 8,075 (2011), 7,000 (2012), 6,300 (2013), 6,800 (2014), 6,671 (2015), 5,864 (2016), 5,899 (2017), 5,636 (2018) 5,243 (2019), 4,796 (2020), 3.957 (2021), 3,816 (2022), 5,230 (2023) 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). This number increased to €1.2 billion in 2023 (BA, 2023).
As the Federal Employment Agency's statistics also shows, the number of workers applying for insolvency compensation continued to decrease with 77,903 applications being filed in 2020 and 46,859 in 2021. The number increased again in 2022 to 57,085 and in 2023 to 81,231.
Target groups
Actors and funding
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Actors
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Funding
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National government
Public employment service
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Companies
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Social partners
Social partners' role in
designing the measure
and form of involvement:
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Trade unions
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Employers' organisations
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Role
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Unknown
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Unknown
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Form
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Not applicable
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Not applicable
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Social partners' role in the
implementation, monitoring and assessment phase:
-
Unknown
-
Main level of involvement: Unknown
Involvement
Unknown
Views and reactions
Unknown
Sources
