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Safeguarding wages in cases of insolvency

In the case of an employer's inability to pay, insolvency compensation is designed to ensure that employees essentially receive the pay which is due to them for a certain period and can thus ensure the livelihood of themselves and their families.

Wage compensation in cases of insolvency is an insurance benefit regulated by the Act on Wage Compensation (Insolvenz-Entgeltsicherungsgesetz, IESG).

Amount of insolvency wage compensation

The amount of insolvency wage compensation depends primarily on the payment due to the workers affected.

The Insolvency Contingency Fund (IEF) is largely funded from contributions made by employers in the form of a surcharge on unemployment insurance contributions.

For 2015, the amount of the IESG surcharge was legally set at 0.45% of the contribution base for social insurance. For the year 2016, the amount of the IESG surcharge was reduced to 0.35% by a decree of the Minister of Labour, Social Affairs and Consumer Protection.

Use of the Insolvency Contingency Fund

Alongside wage compensation, funding from the IEF is also used to cover certain social insurance contributions which the employer has not passed on to the relevant regional health insurance fund due to insolvency.

In addition, the vocational training of young people (apprentice training) is also supported via funding from the IEF.

Applying for insolvency wage compensation

Employees affected by insolvency and insolvent employers can contact IEF-Service GmbH. It currently has offices in Vienna, Graz, Klagenfurt, Salzburg, Innsbruck, Linz, Ried im Innkreis, St. Pölten and Eisenstadt.