Labor Law Lawyers
Employee rights during dissolution of a company
Employer Bankruptcy
One of the important payments carried out by the National Insurance Institute is the payment of employee rights whose employer goes into bankruptcy or dissolves a company. The payment is given for wages, pension and severance pay, as well as most other social rights, for a period of up to 12 months.
By Igal Mor, Adv. & Notary
Accuracy in Legal Advice. Excellence in legal support.
Insolvent Employer - Bankrupt
In the difficult economic reality, it frequently occurs: employers run into financial difficulties, close their business and enter bankruptcy proceedings. in addition, companies that employ workers sometimes go into the process of liquidation. In many cases, the employer is left with financial obligations towards his employees, who end up not receiving what is their right to receive. That is to say, not only is the employee left without a job, but he may find himself in an economic crisis due to not receiving wages, severance pay, pension, or other social rights. The good news is that the National Insurance Institute pays the employee’s rights instead of the employer for up to a period of 12 months. It is worth noting that if the employee dies before the funds to which he is entitled have been paid, his survivors will be entitled to receive them.
To whom is the claim filed?
As a general rule, when we want to exercise rights from the National Insurance Institute, we submit a claim to the branch to which we belong. However, employee claims due to the bankruptcy of an employer or liquidation of a corporation, are not submitted to the National Insurance, but to the liquidator or trustee appointed by the court. For each claim submitted to them, the relevant documents must be attached, such documents may be: confirmation of continuity in work, pay slips and a letter of dismissal. After the claim has been approved by the liquidator or the trustee, only then will it be transferred to the National Insurance Institute, which can approve or reject it in full or in part. If the claim is approved, the funds will be transferred directly to the employee’s bank account.
A claim to a Pension Fund
As mentioned, a claim for workers’ rights to be paid for by the National Insurance Institute will be submitted to the trustee or liquidator, who must approve it. Only after that, will the claim be transferred to the National Insurance Institute for further processing. The exception to this rule are claims for payment for the pension fund in the insurance company, which should be submitted to the insurance company itself and not to the liquidator or the trustee like most claims. We note that most of the time, the company that manages the pension fund will itself submit a general claim on behalf of all the employees to the liquidator or the trustee and therefore exempts the employee from the need to do so independently. Of course, you should contact the company and find out if it did file a claim as mentioned, and if it did not, you should submit the claim to it and it will pass it on.
What rights does National Insurance pay for?
As mentioned above, in case of bankruptcy or liquidation of a company, National Insurance will step into the shoes of the employer and pays his employees their rights. This is for a period of up to the last 12 months only, according to the ceiling set in the regulations. What rights are paid to the employee? Firstly, all of the work wages. components such as overtime, commissions and premiums are also taken into account. National Insurance will also pay recovery fees, the additional clothing fee, the 13th salary, and vacation pay. In addition, pension provisions will be made for the employee and severance pay will be paid to him, as detailed below.
Provisions for Pension and Severance Pay
In the event that the employer has not transferred the funds for the pension component (employer portion and/or employee portion) to the insurance company, the National Insurance Institute will supplement these sums to the fund plus linkage differences from the day the debt was created until the actual payment date, according to the ceiling determined. this ceiling changes from time to time. As for severance pay, in the event of employer bankruptcy or liquidation of a company that employed employees, said employees are legally entitled to full severance pay. As long as the employer made deposits to the insurance company and to the compensation fund, National Insurance will make up the shortfall for full severance compensation. If the employer did not make the aforementioned deposits, National Insurance will pay 100% of the compensation for the employees.
Support From a Lawyer is Essential
The procedure for exercising rights before the Liquidation Fund and/or National Insurance requires specific legal knowledge and skill, therefore it is of paramount importance to receive professional legal guidance from an attorney specializing in labor law, insolvency procedures and the National Insurance.
The labor law department of the Mor & Co. Law Firm specializes in legal representation in labor law in Israel.
We understand the importance of protecting the legal status of employers and employees. Labor law presents a number of challenges. We are here to assist you if you require legal advice and representation.
You will receive professional and personalized legal representation. At every stage of the legal process.
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