German law · English information
Opening insolvency proceedings does not automatically terminate employment. Employment law and insolvency law must be considered together.
Dismissals and operational changes
Section 113 InsO contains special termination rules but does not replace other statutory requirements. Dismissal protection, works council involvement, collective redundancy notification and social plans may be relevant. Measures cannot be justified solely by an insolvency application.
Insolvency benefit
Subject to statutory conditions, Insolvenzgeld can cover unpaid remuneration for generally three months before the insolvency event. The Federal Employment Agency is responsible. Application deadlines and possible pre-financing require separate review.
Business transfers
Section 613a BGB and insolvency-specific rules may apply. Purchasers and sellers need a careful allocation of employment relationships, liabilities and information obligations.
Related information
Procedures overview · Creditor rights · Corporate insolvency
Official German Insolvency Code · Official StaRUG
Practical implementation
Allocate employment and pay claims by period
Insolvency does not automatically end employment. Unpaid remuneration, continued work and termination depend on the procedural stage and relevant service period. Insolvency benefit covers a limited period subject to statutory conditions, not every employment-related claim. Accurate payroll records and certificates are therefore essential. Status, variable pay and unusual contractual arrangements can raise additional issues. Workforce budgeting should distinguish amounts potentially covered by benefit from the cash required for continued employment.
Prepare workforce measures and business transfers
Dismissal protection, participation rights and possible collective-redundancy rules still apply. Section 113 InsO provides a special notice rule but does not replace all other validity requirements. A business sale requires examination of whether employment contracts transfer to the buyer. Information duties, objection rights and pension obligations may affect the transaction. Funding, employment measures and sale terms should be coordinated early to avoid inconsistent commitments to employees and the purchaser.
Four practical examples
The following scenarios are illustrative examples, not reports of client matters. The outcome depends on the facts and applicable rules.
Example 1: Wages are outstanding
A business has not paid all wages for several months. The insolvency event, covered period and eligible claims need examination. Payroll documents and application deadlines must be secured; older or unusual remuneration is not automatically covered.
Example 2: Dismissals are proposed
An administrator plans redundancies. The special notice period does not remove the need to consider justification, works council involvement and special protection. The opening order alone does not validate dismissal.
Example 3: A division is sold
A buyer wants to retain only selected workers. Whether a business transfer occurs must be assessed first. Mandatory employment consequences cannot be excluded simply by agreement between seller and buyer.
Example 4: Benefit pre-financing is proposed
Pre-financing is considered to retain staff during preliminary proceedings. Conditions, approvals and administration require coordination. Forecasts should not assume the funds are available before the necessary arrangements are secured.
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