Insolvency compensation / wage guarantee (§ 165 SGB III)

§ 165 SGB III guarantees employees their outstanding net pay for the last three months before the insolvency event — typically the opening of proceedings, dismissal for insufficient assets, or full cessation of operations without a filing. The Federal Employment Agency pays it out on application, regardless of whether the insolvency estate is liquid at that point.

The benefit is funded through the insolvency-compensation levy (U3), which every employer pays alongside social security contributions via the health insurers, irrespective of its own insolvency risk. The insolvency estate itself is not charged for it — unlike ongoing wages after proceedings open, which are estate liabilities payable out of the estate.

This matters to buyers in two ways. First, it explains why administrators can often continue operating a business for the first months without acute wage-cost liquidity pressure — a factor in whether a going-concern or transferring restructuring is feasible. Second, the insolvency event marks the dividing line in a § 613a BGB business transfer: wage claims up to that point are covered by the pre-insolvency estate or the wage guarantee; claims arising afterward fall to the acquiring buyer.