Free Consultation
Labor Law

My Israeli employer went bankrupt owing me wages and severance. Can I recover the money?

When an Israeli employer is declared insolvent, the National Insurance Institute (Bituach Leumi) operates a wage guarantee fund that pays employees their unpaid wages, severance, and other work-related debts. This right is set out in Chapter 8 of the National Insurance Law (Consolidated Version) 5755-1995. The fund covers a capped amount per employee, currently around NIS 118,000 in 2026, and eligibility depends on the court formally opening insolvency proceedings against the employer. Foreign workers on valid permits are covered on the same terms as Israeli employees. Payment comes from the state, not the failed company, so it does not depend on the company having any assets left.

The wage guarantee fund is triggered only after a court issues an insolvency order against the employer under the Insolvency and Economic Rehabilitation Law 5778-2018 (for individuals or companies), placing the business into liquidation or a rehabilitation process. Once that order exists, the appointed trustee (ne'eman) compiles the list of what each employee is owed and submits it to the National Insurance Institute. The fund covers unpaid salary, accrued but unused annual leave, severance pay, and pension contributions the employer failed to deposit. Amounts above the statutory ceiling are not paid by the fund; for those you remain an ordinary creditor in the insolvency estate, ranking behind secured creditors but with a preferred status for a portion of wage debt.

In practice, do not wait for the employer to pay once you learn it has folded. File a claim to be recognized as a creditor with the trustee promptly, because the National Insurance Institute pays out based on the trustee's certified figures, not on your own calculation. If the employer has vanished but no formal insolvency order has been made, you may need to petition the court yourself to open proceedings before the fund can act. Where the shortfall exceeds the ceiling or the trustee disputes your figures, you can still sue in the Regional Labor Court for the balance, and unpaid wages carry the delayed-wage penalties described in our guide to recovering unpaid wages from an Israeli employer. Keep payslips, your contract, and bank records, as these prove the amounts owed.

⚖ In Practice
  • Governing law: Chapter 8, National Insurance Law (Consolidated Version) 5755-1995; insolvency opened under the Insolvency and Economic Rehabilitation Law 5778-2018
  • Competent authority: National Insurance Institute / Bituach Leumi (pays the fund); the insolvency trustee (Ne’eman) certifies the debt; Regional Labor Court / Beit Din Ezori LaAvoda for any balance
  • Amount covered: capped at roughly NIS 118,000 per employee (2026), covering unpaid wages, severance, unused leave, and missing pension deposits
  • Timeline: claim is filed through the trustee after the court's insolvency order; act promptly, as delay risks missing the trustee's claims bar date
  • Extra fact: the fund pays from state money regardless of whether the company has assets, so recovery does not depend on the employer being solvent
  • Foreign workers: workers on valid permits are covered on the same terms as Israeli employees and can claim even after leaving Israel

From the full guide: Severance Pay in Israel: Rights and Remedies for Foreign Workers and Expats

Related Questions

Related Guides

Need legal help with this topic?
Get a Free Consultation with Adv. Eli ShimonyPrepared under the direction of Adv. Eli Shimony, Eli Shimony Law Office · Editorial policy

← Browse all Q&A