Retirement age: rights, duties and adjustments

Service page: Employment lawyer: dismissals, wages and severance pay.

You received an “attractive” retirement offer from your employer. It has numbers that look high. It also has a “waiver of all claims” clause. Before you sign, check exactly what you are entitled to under the law, and only then consider whether the offer is worth the waiver.

What the law says: retirement age in Israel

The Retirement Age Law, 5764-2004 sets the retirement age at 67 for men and 65 for women, and for a woman born up to December 1969 the retirement age is lower, according to her month of birth (section 6 and the Schedule). The mandatory retirement age, the age at which an employee can be required to retire, is 67 for both men and women (section 4). Before that age, dismissal because of age is prohibited discrimination (section 2 of the Employment (Equal Opportunities) Law, 5748-1988 (חוק שוויון ההזדמנויות בעבודה, התשמ״ח-1988)). From the mandatory retirement age the employer may require the employee to retire, but even then with full rights, as in a dismissal.

Retirement age for a woman by year of birth (Part B of the Schedule to the Retirement Age Law): born May 1947 to December 1959: 62; 1960: 62 and 4 months; 1961: 62 and 8 months; 1962: 63; 1963: 63 and 3 months; 1964: 63 and 6 months; 1965: 63 and 9 months; 1966: 64; 1967: 64 and 3 months; 1968: 64 and 6 months; 1969: 64 and 9 months; born 1970 onward: 65 (section 3). The mandatory retirement age is 67 for women too (section 4), so an employer cannot require a woman to retire because of her age only because she has reached her retirement age.

What many people do not know: even after retirement age, an employer cannot simply “not renew a contract” and avoid rights. Retirement at the mandatory retirement age at the employer’s initiative is a dismissal, and an employee who resigned after reaching retirement age is deemed to have been dismissed for the purposes of severance pay (section 11(e) of the Severance Pay Law).

What a retiring employee is entitled to

An employee who reaches retirement age is entitled to a set of rights. It is important to understand each of them in depth before signing an agreement:

• Severance pay under the Severance Pay Law, 5723-1963: one month’s wages for each year of employment (see the severance pay calculator). If there is a pension fund with employer contributions, check whether you can take the severance money in addition to the pension fund, or whether it was offset.
• Advance notice when the employer ends the employment, for example at the mandatory retirement age: one month for a long-serving employee (sections 3 and 4 of the Advance Notice of Dismissal and Resignation Law, 5761-2001). You can receive it in practice (you work one more month), or receive payment in its place if the employer waives your work during that period (section 6). An employee who resigns in order to retire is the one who gives advance notice to the employer (section 5).
• Payment for unused leave (vacation redemption) for vacation days not taken: based on a day’s wage at its value on the day of retirement, not on the day the leave accrued.
• Old-age pension from the National Insurance Institute (Bituach Leumi): from age 67 for men. For women: depends on the year of birth, rising gradually to 65. The amount of the pension depends on the years of insurance.
• Pension fund: according to the savings accumulated over the years of work. It is important to check the pension track and the pension options before retiring.

Dismissal because of age: discrimination prohibited by law

The Employment (Equal Opportunities) Law, 5748-1988 expressly prohibits dismissal, failure to promote, or reducing wages because of age (see discrimination at work). You received a dismissal letter that explains a “reorganization”, but you know that everyone who was dismissed is over 55? This may indicate discrimination. In such a claim the Labor Court may award compensation even if no pecuniary damage was caused (section 10(a)(1) of the Law).

Warning signs: a dismissal that comes close to a certain age; an “early retirement offer” that comes with pressure to sign quickly; a change in working conditions that makes things harder specifically for long-serving employees. All of these justify a check.

Early retirement: a possible route, with conditions

Many people want to retire before the mandatory age. The option exists, but it involves financial decisions that affect the rest of your life:

• the old-age pension from the National Insurance Institute will be paid only from the age set by law, not before
• an early withdrawal from the pension fund may reduce the monthly pension permanently, for the rest of your life
• an early retirement offer from an employer: always ask what exactly is included and what amounts to a waiver of rights
• the right to severance pay in early retirement depends on the circumstances: an ordinary resignation does not, as a rule, entitle you to severance pay, but severance money set aside in a fund under a Section 14 arrangement of the Severance Pay Law belongs to the employee; in an early retirement agreement it is worth stating this expressly

Preparing for retirement: the steps that make a difference

A year or two before the expected retirement, these are the steps with the greatest effect:

• ask for a status report from all your provident funds, pension funds and managers’ insurance policies, so you do not discover on the day you retire that years are missing
• check with the National Insurance Institute what pension to expect based on your years of insurance
• hire a licensed pension advisor to check whether retiring makes financial sense and which pension track is optimal
• get legal advice on the retirement terms before signing any document, even if “the offer looks good”

Breach of retirement rights: where to turn

If the employer did not pay severance, delayed pension money, dismissed you because of age, or pressured you to sign an agreement on unfair terms, do not give up. The Labor Court has the power to hear all of these, and in cases of discrimination you can also claim compensation without proof of damage. You can also file a complaint with the Regulation and Enforcement Administration (Ministry of Labor).

One rule: do not sign a waiver of rights on the day you receive the offer. Always ask for time to check it.

Frequently asked questions

My employer is ending my employment at the mandatory retirement age. Am I entitled to advance notice?

Yes. When the employer ends the employment, for example at the mandatory retirement age, a long-serving employee is entitled to advance notice of one month (sections 3 and 4 of the Advance Notice of Dismissal and Resignation Law). You can actually work during this period, or receive payment in its place if the employer waives your work during it (section 6). An employee who resigns in order to retire is the one who gives advance notice to the employer (section 5).

Everyone dismissed in the organization was over 55. Is that discrimination?

It may indicate discrimination. The Employment (Equal Opportunities) Law, 5748-1988 prohibits dismissal, failure to promote or reducing wages because of age, and in such a claim the Labor Court may award compensation even if no pecuniary damage was caused (section 10(a)(1) of the Law).

If I retire early, am I entitled to severance pay?

It depends on the circumstances. An ordinary resignation does not, as a rule, entitle you to severance pay, but severance money set aside in a fund under a Section 14 arrangement of the Severance Pay Law belongs to the employee, and in an early retirement agreement it is worth stating this expressly. The old-age pension from the National Insurance Institute will be paid only from the age set by law.

Who do you turn to when the employer did not pay your retirement entitlements?

To the Labor Court, which has the power to hear non-payment of severance, delay of pension money, dismissal because of age, and pressure to sign an agreement on unfair terms. In cases of discrimination you can also claim compensation without proof of damage. You can also file a complaint with the Regulation and Enforcement Administration (Ministry of Labor).