German social law

Financial aid

In cases of a bankruptcy of an employer the European law puts an obligation on every member country to set up a protection mechanism so that an employee’s salary claims in the riskiest time of at least the last period before applying for bankruptcy procedures or ceasing the business activities because of the total lack of means.

In Germany, salary claims of the last three months of a labor contract are coveredby a state fund. A labor contract can only be terminated by a termination period in a written and signed (by both sides!) contract (limited contract) or by a written and signed termination letter. The state work agency – the authority responsible for benefits in case of bankruptcy of an employer – acknowledges also a mutual oral agreement as a termination date, according to which an employee is no longer obliged to perform work services.

In Germany, employees must apply for benefits in case of bankruptcy of an employer within 2 months from the announcing of the decision initiating bankruptcy procedures. Missing the time limit means losing the claims. There is a possibility of a restoration of the status quo before expiration of a 2-months– period. The application for a restoration must be made within a period of three months, together with an application for bankruptcy benefits. The period begins with a date of becoming for the first time aware of the bankruptcy or at least having a possibility to become aware of this fact.

The employees’ bankruptcy protection in Germany does not apply to claims resulting from a termination of a labor contract, like a compensation for a missed statutory paid annual holiday (in Germany 4 weeks) or a compensation for the loss of a post.