Obviously it depends on the jurisdiction. In countries with strong employees protections, redundancy payments have a high priority during administration.
I realize one possible misconception is severance vs "gardening leave" [0].
They look really similar, but legally entirely different.
In "gardening leave" you're still an employee and on payroll until the last day. Whereas severance you're not an employee and typically paid lump-sum (but doesn't matter for this discussion). So in this specific situation, yes, that would be wages and would be paid out first before creditors because you are _legally_ entitled to those wages.
The problem of course you cannot hope to put a whole company on "gardening leave" in hopes that it can "act as severance" for everyone. Your creditors will sue you and easily win. They'd probably put an emergency injunction on the company and remaining funds before the first month was even completed once they learned of "creditors hate this one little trick!"
It's not the way it is calculated. All payments attached to employment contract are wages, be it regular salary, bonuses, vacation pay or severance. Say the contract defines severance of 1 month for each full year worked capped at 3 months: at the moment contract reaches 1 year anniversary, the employee should be owed 1 month worth of severance upon contract termination
I've worked in the sf tech industry my entire career and my employment contracts have never included guaranteed severance. I've seen severance being paid out to fellow employees but afaik it is done as courtesy and wasn't legally required.
> my employment contracts have never included guaranteed severance
My assumption was that we would not be talking about "unpaid severance" if there was no severance defined in the first place.
> Are you European? Maybe it's different there.
Generally severance is not legally mandated, but can be mandated under some specific circumstances, e.g. no-notice termination. Usually it is similar to US: either defined in collective (union) agreement or part of termination contract.
Well your assumption is wrong. There was no defined severance, people are saying that Convoy should have paid severance anyway because its the “right thing to do” when laying off employees. And others are saying they couldn’t because of creditors coming first.
But yes this grandparent post is mostly correct. If severance was not built in to any loan contact (it never is). Then creditors are paid first.
It would be interesting to know how much debt they have vs remaining cash and when did it dip below.
Paying severance is extremely low probably even below equity since there's no legal requirement to pay severance.