Thursday 23 October 2008

Bankruptcy and Employee Benefits

There was unimaginable fall-out in financial markets recently . Japan too was not different.
Bear sterns, J.P. Morgan ,Merry Lynch , Citi-group and biggest of all Lehman !.

Example of Lehman was very classic ,while employees were down with week-end hang-over they woke up with the bankruptcy news. Initially there was a ambiguity about whats gonna happen ,to the extent that whether even current months salary would be paid ?

After little exploring it shows what happens to employees in such circumstances -
  • Firm files bankruptcy in court.
  • Court monitors , dispose of assets and use incoming cash to pay off creditors.
  • Taxes comes first
  • Then employee claims are paid.
  • Lastly outside creditors are taken care off.
So as long as firm is solvent and have enough assets , employee will be paid surely for the billable hours.

Normally pension is safe ( In case of Japan at-least ) but for health insurance you need to refer to your agreements.

I extracted this information from here ,here and here

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