I was fired: what am I owed? The final settlement and a checklist

Service page: Unlawful dismissal: when, what you are entitled to and how to sue.

You received a dismissal notice. Maybe you expected it, maybe not. The first thing to know: a pre-dismissal hearing, advance notice and severance pay are rights under the law, not a favor you wait for someone to offer you. Here you will find what you are entitled to and how to check the final settlement, component by component.

How do you check the final settlement?

The final settlement of accounts is the last payment the employer makes when employment ends. The check is simple in principle: take the last payslip and the statement from the pension fund, and go through it component by component.

Other components, such as a bonus or special terms from the contract, depend on the agreement, the extension order or the contract that applies to you, so they are checked against the documents themselves. This check, component by component against the payslips and the fund statements, is what payslip review by a lawyer and CPA does.

Did you resign because of a material deterioration in working conditions? Under section 11(a) of the Severance Pay Law, such a resignation is treated as dismissal for the purpose of severance pay. See Resignation deemed dismissal: when you get severance pay even though you resigned.

Was there a hearing before the dismissal?

Before a dismissal, the employer must tell the employee in advance and in writing what the claims against them are, and allow them to respond. This duty comes from the duty of good faith in the employment relationship (section 39 of the Contracts (General Part) Law, 5733-1973 (חוק החוזים (חלק כללי), התשל״ג-1973)). A dismissal without such an opportunity, or after a “hearing” held when the decision had already been made, may entitle the employee to compensation, even when there was a reason to dismiss.

On the right to a hearing and what must happen in it, see A pre-dismissal hearing.

Severance pay: what you are entitled to by law

The Severance Pay Law, 5723-1963, provides that an employee who worked for at least one year and is dismissed is entitled to severance pay at the rate of one month’s salary for each year of employment (or a proportional part of it). The basis for the calculation is the last salary (including fixed components).

For example: an employee who earned NIS 20,000 and worked for 6 years is entitled to NIS 120,000 in severance pay. The Law sets no ceiling on the amount of severance pay.

In most workplaces, the employer sets aside money for severance in a pension fund or in managers’ insurance. When a Section 14 arrangement applies, the contributions replace severance pay: a contribution of 6% replaces 72% of the severance pay, and the remaining 28% stays a debt of the employer, while a contribution of 8.33% replaces it in full. When there is no such arrangement, the money that has accumulated is credited toward severance pay, and the employer tops up the difference to the full amount.

When can severance pay be denied?

Under section 16 of the Law, an employee is not entitled to severance pay, or is entitled to partial severance pay only, if they were dismissed in circumstances that justify this under the collective agreement that applies to them, or, if there is no such agreement, under the collective agreement that applies to the largest number of employees in that sector. In a sector with no collective agreement, the Regional Labor Court decides (section 17). These are exceptional cases of a serious breach of discipline, such as theft or an extreme breach of trust, and an employer may not deny severance pay on its own initiative without such a source.

Advance notice: the time you are entitled to

The Advance Notice of Dismissal and Resignation Law, 5761-2001, sets minimum periods according to seniority:

• A monthly-salaried employee: one day for each month of work in the first half-year; from the seventh month until the end of the year, 6 days plus two and a half days for each month of work; after the first year, one month (section 3)
• An hourly or daily-paid employee: in the first year, one day for each month of work; in the second year, 14 days plus one day for every two months; in the third year, 21 days plus one day for every two months; after three years, one month (section 4)

During the advance notice period, the employee is entitled to a full salary and to continue working as usual, unless the employer chooses to pay in lieu of notice and release the employee immediately. Paying in lieu of advance notice also requires full payment for the whole period.

Garden leave during the advance notice period

Garden leave is an arrangement in which an employee goes into the advance notice period but does not actually work. They receive a full salary but stay at home. The practice is very common in high-tech companies, and it has a clear purpose: to cut the employee off from access to trade secrets, customers and projects before they move to a competitor.

Legally, during the advance notice period the employer may waive the employee’s actual work, provided it pays them their regular wages for that period (section 6 of the Advance Notice of Dismissal and Resignation Law). An arrangement that continues beyond the notice period relies on the terms of the contract. If the company applies garden leave but does not pay a full salary, this is a breach of contract.

Dismissed? What to do on the first day

After a dismissal, there are a few immediate steps:

• Do not sign under pressure: if you are asked to sign a waiver or an “agreement ending the employment”, do not sign before getting advice. Such a signature may block a future claim.
• Pension fund: the severance money accumulated in the fund is released to the employee after the employer gives the fund the required notice and forms. Make sure this is done
• Unemployment benefit: entitlement to unemployment benefit from the National Insurance Institute (Bituach Leumi), provided you have accumulated 12 months of work in the last 18 months (usually). To be eligible, you register at the Israeli Employment Service bureau as unemployed (section 163), and you file the claim with the National Insurance Institute within 12 months of the day the cause of action arose (section 296 of the National Insurance Law [Consolidated Version], 5755-1995)
• Overtime pay and other wage components: anything not paid (overtime, unused vacation days, recuperation pay) can be claimed. A wage claim generally becomes time-barred within 7 years (section 5 of the Prescription Law, 5718-1958 (חוק ההתיישנות, התשי״ח-1958)), but a claim under the Annual Leave Law within 3 years (section 31 of that Law), and special rules may apply to rights that come from an extension order

Dismissed and think it was unlawful? The page A claim for unlawful dismissal explains when a dismissal is treated as unlawful, what the Labor Court may award, and how long you have to file a claim.

Frequently asked questions about the final settlement

How soon must the employer pay the final settlement of accounts?

The last wages are paid on the date they would have been paid if you had continued working (section 12 of the Wage Protection Law). Severance pay not paid within 15 days of the date it was due, which as a rule is the last day of work, is treated as delayed, and compensation for late payment of wages is added to it (section 20 of the Wage Protection Law).

Are you also entitled to recuperation pay at the end of employment?

Anyone who has completed the first year of employment is entitled to recuperation pay, and also to the proportional part for part of a year (section 5(b) of the Extension Order on Employer Participation in Recuperation and Vacation Expenses). So in the final settlement you also check the proportional part of the last year.

What do you do if something is missing from the final settlement?

Compare the last payslip and the fund statement with the list above, and send the employer a written demand that sets out what is missing. If the payment does not arrive, sue in the Regional Labor Court (section 24 of the Labor Court Law). Pay attention to the deadlines: a claim under the Annual Leave Law becomes time-barred within 3 years (section 31 of that Law), and compensation for late payment of wages becomes time-barred sooner (section 17A of the Wage Protection Law).