Tuesday, 4 November 2014
Salary and benefit payments during business closure
Q: If a business is closing down and I am about to go on maternity leave do they still have to pay me as well as I have two weeks’ vacation pending do they have to pay me for that as well?
A: You have to receive your salary/wages as long as they can afford it. This all depends on how the business is closing down and then the priority of debt payments. There are a few terms involved in this process; i.e. insolvency (compulsory or voluntary), receivership, liquidation, bankruptcy and administration. So it depends on the category which the company falls under when closing down.
Salaries have secondary priority to the government debts (taxes, NIS, etc.). According to the Companies Act 1995, as amended-s.435(1)(b):
all wages or salary (whether or not earned wholly or in part by way of commission or for time or piece work) of any employee, not being a director, in respect of services rendered to the company during four months next before the relevant date;
Bankruptcy & Insolvency
If the company is bankrupt, wages have 4th place priority according to The Bankruptcy and Insolvency Act, 2006 - s.127(d):
excluding severance, claims for wages, salaries, commissions or compensation of any employee for services rendered during the six months immediately preceding the bankruptcy, together with disbursements properly incurred by a traveling salesman in and about the bankrupt’s business, during the same period, so as not to exceed such amount as may be prescribed by Order in each case;
The law is not explicit as to whether unused vacation and maternity leave are included in debt payments, but it's a unique matter that I would love to put to the test.