Employee rights in the event of bankruptcy in Israel

An employee in Israel whose employer has gone bankrupt, or whose company is in liquidation, is entitled to receive from the Bitouah Leoumi the payment of his salary and severance pay owed by his employer.

In other words, it's the Bitouah Léoumi that covers the employee (and above all his rights) in these cases.

Who is entitled to this allowance?

• An employee whose employer has gone bankrupt.
• An employee whose company has been ordered into liquidation (if the employer is a company).
• An employee entitled to redundancy payments under clause 5 of the Redundancy Payments Act - חוק פיצויי פיטורין.
• A supplementary fund, if the employer owes a debt to the supplementary fund in which the employee is insured.

The following are not entitled to compensation

• An independent.
• A majority shareholder in the company, who does not have an employee-employer relationship with the company.
• A shareholder in a small business, and immigrant workers or workers from the Territories illegally residing in Israel.

Rights conditions

The court must have issued an order declaring the employer bankrupt in Israel. Or an order for liquidation of the company or dissolution of the partnership. In some cases, an order dissolving a joint union is also sufficient.

The information concerning the employee's claim has been approved by the liquidator of the bankrupt company.

Benefit amounts

For the employee

The salary and severance pay owed by the employer on the day of interruption of work. Up to the maximum set by the National Insurance Act.
For anyone whose employer has received a liquidation order/bankruptcy order, the maximum payment is 112,762 shekels in the month of January 2018.

Surviving spouses or members

A salary in accordance with Article 7 of the Wage Protection Act, and severance pay in accordance with Article 5 of the Severance Pay Act, up to the maximum amount determined by the National Insurance Act.

Read also: Resignation notice in Israel

Supplementary fund

Payments that are not transferred to the supplementary fund from the employee's money or the employer's money or both, up to the maximum amount determined by the Bitouah Leoumi law - as of January 2018- 17,348 shekels.

A member of a cooperative society

If he was a member of a cooperative moshav or kibbutz for at least 7 years - up to the maximum period determined by law - as of January 2018 - 69,392 shekels.

How do I apply?

Application forms for various benefits are available from downloadable from the Bitouah Leoumi website and can be sent online to your nearest branch.

Our accounting firm can take care of these formalities for you.