Many company bankruptcies: insolvency compensation funds under pressure

For 2026, the fund expects an outflow of around 100 million euros, but the reserves should still be enough for this. But in 2027 an increase in employer contributions will be necessary if you don’t want to cut benefits, said Pfabigan.

This year, the major insolvencies at KTM and Kika/Leiner in particular triggered around 80 million euros in payments from the IES. The Signa bankruptcy, the largest insolvency in the history of the Second Republic, was less crucial for the fund because relatively few employees were affected.

The insolvency remuneration fund steps in if a company becomes insolvent and can no longer pay wages and salaries. This also includes vacation entitlements and severance payments. The fund is financed by contributions from all companies, which currently make up 0.1 percent of the annual wage bill. In addition, the fund submits its payments as a claim to the insolvent company and receives part of it back from there in accordance with the quota.

Cautious optimism for 2026

For the coming year, Pfabigan is confident that the burden on the IES will decrease. Although the number of bankruptcies is still rising, there is a “settling down” in applications, with a decline of 20 to 30 percent compared to the previous year. This is due to the fact that more, smaller companies are becoming insolvent. Assuming that there are no more negative surprises by Christmas and that the economy experiences at least a modest recovery, “we assume that things will be a little quieter next year,” said Pfabigan.

However, the need for a contribution increase is becoming apparent for 2027. Since 2022, companies have had to pay 0.1 percent of wages and salaries, previously it was 0.2 percent, which led to the buildup of substantial reserves. Since then, the fund has had to dip into reserves to meet its obligations. However, the law clearly states that employers’ contributions must cover the expected expenses. “Everyone in the house, in the ministry, in the supervisory board is aware that the current contribution rates will not work permanently,” said Pfabigan. The Ministry of Social Affairs is responsible.