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Bankruptcy and Corporate Liquidation (Employee Rights)

The law of insuring employee rights in case of bankruptcy and corporate liquidation was enacted in 1975, to protect employees whose rights were severely impaired as a result of difficulties faced by their place of work, consequent to which liquidation or bankruptcy decrees had been filed.

Under the law, an employee whose employer went bankrupt or whose company underwent liquidation is entitled to receive a benefit from the National Insurance Institute that includes payments, owed by the employer, up to the maximum amount set by the law:

  1. Wages
  2. Severance pay
  3. Provident fund payment
 
 The benefit includes the following three components:
  1. The wages to which the employee is entitled that has not been paid by the employee;
  2. The severance pay to which the employee is entitled that is not covered by the provident fund;
  3. Provident fund payments for the employee that were supposed to be transferred by the employee but were not.

Indexation differentials from the day the debt was made to the day of the actual payment are be added to the wage and the severance pay paid by the National Insurance Institute. The payment for wages is made first, and only afterword is, severance pay paid, up to the maximum amount set by the law.

                
The benefit, which includes wages, severance pay and provident fund payment, is be paid to employees only, and under all the following conditions:
 
  • Bankruptcy or Liquidation Decrees – The district court has filed a decree against the employer and declared him bankrupt, or has filed a decree for liquidation of company, of partnership or of cooperative society or association.
  • Appointment of Trustee or Liquidator – The district court has appointed a trustee or liquidator.
  • Approval of Trustee or Liquidator – The employee's claim information has been approved by the trustee of the bankrupt or by the liquidator of the company.

 

                
Deductions from the Benefit
The fees required by law are deducted from the approved benefit: income tax, and national and health insurance contributions.
Contact Us
For additional information, contact the Department of Employee Rights Insurance of the National Insurance Institute, Head Office, 13 Weizman Blvd. Jerusalem 91909
  • Phone: 02-6463020 Sunday, Wednesday 12:00-15:00
  • Fax: 02-6535851
Useful Advice regarding Employee Rights in case of Bankruptcy and Corporate Liquidation
To avoid delays in the treatment of your claim for benefit under the Law of Employee Rights in case of Bankruptcy and Corporate Liquidation, you are requested to carefully fill out all the information on the claim form attach the required documents, and file the claim to the trustee or liquidator as soon as possible.
A Claim for Provident Fund Payment
In most cases, upon the submission of the liquidation decree against the company, the company that manages the provident funds of the employees files a general claim to the liquidator on behalf of all the employees, and the employee does not have to file a claim. The employee can contact the company that managed the provident funds and check whether such a claim has been filed.

The claim to the liquidator shall be for the amount of the debt to the provident fund in the terms of the fund alone (the National Insurance will calculate the indexation differentials later).                       

Once the liquidator approves the claim for the provident fund debt, it is transferred to the National Insurance Institute for examination, calculation of indexation differentials and payment.

Once the payment is made by the National Insurance, a notice is sent to the employee and to the provident fund.

A Claim for Wage and Severance Pay
The claim for wage and severance pay shall be filed to the liquidator or to the trustee (not to the National Insurance Institute) by the payment claim for salary debt and termination compensation form - original form only, along with documents to prove the debt.

Documents to be attached to the claim form:

  • Last three pay slips from the place of work
  • Document indicating the amount of severance pay credited to the employee in the provident fund on the day of the employment termination
  • Proof of continuous work
  • Bank certification or cancelled check – origin, for verification of the account holders information
  • Letter of dismissal


Once the liquidator or trustee has approved the claim, it is transferred to the National Insurance Institute,
to the Department of Employee Rights Insurance.

The decision of the trustee or liquidator is not final. Under section 189b of the law, the National Insurance Institute is authorized to approve, reject or dispute the decision.

Once the claim has been approved, the payment is sent directly to the insured's bank account. The payment is not transferrable nor up to foreclosure.  

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