When the Provider Fails
Your person's employer stops trading, and your contract is with the company that is no longer there.
Ending the service agreement
Ending the person's employment
Moving them to your own entity
The person simply resigning
YoursThe provider'sCrosses the twoNeither contract
Four matters, and no share: what any one agreement covers differs by agreement. One crosses both, and the handoff is where these arrangements fail. Three endings, and only one of them is yours to start and finish.
Where each loss lands if the company employing your people stops trading
The deposit you placed with them
YoursLands as: An unsecured claim in an insolvency, ranking behind almost everybody
What you can do: Keep the deposit as small as the agreement allows, and know which entity holds it
Payroll funded but not yet paid out
YoursLands as: Money that left your account and did not reach the person, with two claims and one sum
What you can do: Fund as close to the payment date as the agreement permits, rather than early
The person's unpaid wages and statutory entitlements
The provider'sLands as: A claim against their employer, sometimes backed by a state fund and sometimes not
What you can do: Find out before signing whether that country has a wage guarantee scheme
The person having no employer at all
Crosses the twoLands as: An employment that has to be recreated somewhere, by somebody, while they are unpaid
What you can do: A new employer willing to take them on, an offer the person accepts, and somebody funding the gap
The indemnity you negotiated
Neither contractLands as: No bearer: a promise from a company that has stopped trading pays nobody
What you can do: Check the entity's accounts at signature, because the promise is only as good as the balance sheet
Your own continuity of work
YoursLands as: Delivery stops while somebody who still has to eat sorts out their own employment
What you can do: Keep the arrangement small enough that a failure is survivable rather than terminal
Six losses, and the protection you negotiated hardest for is the one that evaporates. One buyer's own assessment; insolvency outcomes, priority and state wage guarantees differ by jurisdiction.
If the provider stops trading, your person's employer has stopped trading. Your contract is with a company that is no longer there, and the money you have placed with it is an unsecured claim.
The contractual distinction in “When the Provider Fails” also matters when buying workforce software. For teams researching workforce analytics software, workforce analytics software for distributed operations should be evaluated against a named operational decision, clear ownership, export requirements and a tested exit process rather than treated as a substitute for the employment agreement.
It is a low-probability event with an unusually severe shape, which is why it is worth ten minutes before signing rather than none.
When documenting “When the Provider Fails”, the CISA cybersecurity best practices can help test assumptions about ownership, worker protection and cross-border responsibility before a process becomes routine.
What actually happens first
The person stops being paid. Not you, not your service, the person. Their salary is the immediate casualty and they have no other income.
Everything else in this note is secondary to that, and your decisions should be ordered accordingly.
Your deposit
Held by the provider, usually a month or more of total cost, and in an insolvency an unsecured claim ranking behind employees, secured creditors and tax authorities.
Keep it as small as the agreement permits and know which legal entity holds it. Those are the only two controls available.
Funded payroll in transit
Money that left your account to fund a payroll run and has not reached the person. Legally contested, practically lost, and morally yours to deal with.
Fund as late as the agreement allows rather than early. A week's difference in timing is the difference between an exposure and none.
Where this leaves the person
They are an employee of an insolvent employer. Some countries have a wage guarantee fund that covers arrears; many do not, or cover only part.
Find out whether one exists in each country you hire in. It takes one question and it tells you how bad the worst case is for them.
The indemnity, in an insolvency
Worth nothing against a company that cannot pay. Every carefully negotiated protection in the agreement rests on the counterparty being solvent.
This is the reason the entity check at signature matters more than the drafting, and it is the check almost nobody does.
Checking beforehand
Accounts for the contracting entity. Funding history. Whether the group is profitable or venture-funded and burning. Whether the entity you contract with is the one with assets.
The sector has had failures. A provider that answers these questions openly is behaving normally; one that treats them as impertinent is telling you something.
Repeat the check at renewal rather than only at signature. Ownership and funding change, and the entity you assessed three years ago may now sit under somebody else.
Early signs
Payroll slipping. Invoices arriving late or in odd formats. Requests to fund earlier than usual. Staff turnover at your account. Silence on routine questions.
Any one is ordinary. Three together, particularly the funding request, deserve attention rather than patience.
The person often sees it first, through their own payslip or an unanswered query. Asking them periodically whether anything has felt odd is a cheap early warning.
What you would actually do
Find another employer for the person quickly: another provider, your own entity if one exists, or a direct arrangement if local law allows one.
Speed matters more than terms, because the person is unpaid while it is sorted out. Having a second provider already assessed turns weeks into days.
Accept worse commercial terms to move quickly and renegotiate later. The cost of a month's delay falls on somebody who cannot absorb it.
Paying them anyway
Legally awkward and sometimes the right thing. A person employed by an insolvent company, working on your projects, with no income, is in a position your decisions created.
Take advice on the mechanism, because a direct payment can have classification consequences. Take it quickly.
What to have ready
A note of which entity holds your deposit, a second provider you have already evaluated, and the knowledge of whether a wage guarantee fund exists in each country.
Three facts, written down once:
- Which legal entity holds your deposit.
- A second provider you have already evaluated in each country.
- Whether a wage guarantee fund exists where each person works.
They turn a crisis into a procedure.
Scale as the real control
One or two people are a problem you can solve by hand. Thirty people across eight countries, employed by a single provider that has failed, is an event your company will remember.
Concentration risk applies here as it does to any supplier, and it is rarely considered because the service feels administrative.
Splitting across two providers costs some efficiency and buys a great deal of resilience. Past a certain size it is the obvious answer and is almost never the one taken.
What no preparation removes
The dependence. You have placed other people's employment with a company whose financial health you cannot observe and cannot influence, and no clause changes that.
What the preparation does is shorten the time the person spends unpaid, which is the only part of the outcome you can actually improve. Everything else — the deposit, the funded payroll, the indemnity — is money, and the money is the smaller loss.