Section 14 of the Severance Pay Law: what you get when employment ends and when the employer must top up

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

What does Section 14 of the Severance Pay Law provide?

Section 14 sets a default rule. A payment to a benefits fund (קופת תגמולים), to a pension fund or to a similar fund does not replace severance pay. There are two exceptions: the collective agreement that applies to the employer and the employee set this, or the Minister of Labor approved the payment. Even then, it replaces severance pay only to the extent set or approved (section 14 of the Severance Pay Law, 5723-1963).

Under this section, a “general approval” was issued. Under it, employer payments to a pension fund or to managers’ insurance (ביטוח מנהלים) replace severance pay under the conditions set in it. Its full name is the general approval regarding employer payments to a pension fund and an insurance fund in lieu of severance pay (Yalkut HaPirsumim (official notices gazette) 5758, p. 4394). When the arrangement applies, the money in the fund is the severance pay, all of it or part of it. It comes instead of a payment from the employer.

Another route is the Extension Order for Comprehensive Pension Insurance in the Economy (צו ההרחבה לביטוח פנסיוני מקיף במשק), which extended a general collective agreement. Under it, the employer’s severance payments under the order replace severance pay under section 14. But they do so only for the wages, components, periods and rates for which they were deposited (section 7 of the order, Yalkut HaPirsumim 6302, 27 September 2011).

Which deposits cover 100% of severance pay, and which only 72%?

Under paragraph (1) of the general approval:

The rates in the table are the total “employer’s payments” to the fund, from the wage from which deposits were made. They cover benefits and severance pay together, not the severance component alone (the opening paragraph and paragraph (1) of the general approval).

When the arrangement relies on the general approval, two more conditions are required (paragraph (2) of the general approval). First, a written agreement between the employer and the employee, in which the employee agrees to the arrangement. It must be made no later than three months from the start of the payments. Second, an advance waiver by the employer of the return of the money, except for the exceptions in the approval.

I was dismissed and had Section 14: what must the employer top up?

The arrangement replaces severance pay only at the rate set in it. It applies only to the wage from which the payments were made, and only to the period in which they were made (the opening paragraph and paragraph (3) of the general approval). Everything else is ordinary severance pay, which the employer pays: one month’s wage for each year of employment according to the last wage. This is under section 12(a) of the Law and regulations 2 and 4 of the Severance Pay Regulations (Calculation of Severance Pay and Resignation Deemed Dismissal), 5724-1964 (תקנות פיצויי פיטורים (חישוב הפיצויים, והתפטרות שרואים אותה כפיטורים), התשכ״ד-1964).

In practice, the top-up can come from three sources:

• A 72% arrangement: the balance, 28% of the severance pay for the period of the arrangement (paragraph 1(a) of the general approval).
• Wages above the wage from which deposits were made: the deposits may have been made from a wage lower than the determining wage. Then the arrangement does not reduce the right to severance pay for the wage above it (paragraph (3)).
• A period before the arrangement: for a period in which there were no payments under the arrangement, nothing replaces the severance pay (the opening paragraph).

A hypothetical example (sections 12 and 14 of the Law and paragraphs 1(a) and (3) of the general approval, as worded on 27 October 2026). A monthly-salaried employee is dismissed after 10 years. Their wage was NIS 10,000 throughout the period. In the first three years, nothing was deposited for them in a fund. From the start of the fourth year, 12% of the full wage was deposited for them in a pension fund. This was under a written arrangement that replaces 72% of the severance pay.

In other words, in the example the employer owes NIS 49,600, in addition to the money in the fund. When the wage went up over the years, the calculation is more complex, and it is checked against the fund report and the payslips. The calculation by seniority and wage: the severance pay calculator.

I resigned: what happens to the money in the fund when there is Section 14?

Severance pay is due to a person who was dismissed (section 1(a)). It is also due to a person who resigned in circumstances that the Law treats as dismissal (sections 6 to 8 and 11). Examples are health, giving birth, moving home under the conditions set, or a material deterioration in working conditions. On an ordinary resignation there is no right to severance pay from the employer, and therefore no top-up either.

The money deposited under the arrangement does not go back to the employer. In the general approval, the employer waived its return in advance (paragraph 2(b) of the general approval). There are two exceptions. A judgment denied the right to severance pay under sections 16 or 17. Or the employee withdrew money other than on a qualifying event, meaning death, disability or retirement at age 60 or over. Amounts paid in lieu of severance pay under section 14 cannot be returned, transferred, charged or subject to attachment (section 26(a)(1)). But sometimes the employee stops working in circumstances that do not give a right to severance pay. Then this protection applies only on two conditions. The amount is also intended for annuity insurance. And no collective agreement or other agreement set that it can be returned or transferred.

Did you resign because of one of the circumstances in the Law? See Resignation deemed dismissal.

Section 14 signed in the middle of employment: how is it calculated?

The arrangement applies “for the wage from which the payments were made... and for the period in which they were made”. This is in the opening paragraph of the general approval. So the period of employment is divided into two:

1. From the start of employment until the start of the arrangement: full severance pay under section 12, according to the last wage.
2. From the start of the arrangement until the end of employment: the money in the fund replaces severance pay at the rate set in the arrangement. It does so for the wage from which deposits were made.

The general approval requires a written agreement “no later than three months from the start of the employer’s payments” (paragraph (2)). Was the agreement signed after that date? Or does it not include what the approval requires? Then check its wording and the dates before drawing any conclusion from it.

The deposits were made from a wage lower than the wage on the payslip

The arrangement applies only to the “exempted wage”, the wage from which the payments were made. It does not reduce the right to severance pay under the Law for wages above it (paragraph (3) of the general approval). For example, deposits may have been made only from the basic wage. The determining wage for severance pay may also include other components that the regulations include in it. Then there may be a difference. This is checked by comparing the fund report, month by month, with the payslips. Such a comparison is part of a payslip review.

I did not sign Section 14. What does that mean?

Section 14 allows a payment to a fund to replace severance pay in two ways. One is a collective agreement that applies to the employer and the employee. The other is an approval of the Minister of Labor. The general approval, which is such an approval, requires a written agreement with the employee (paragraph (2)). But the lack of a signature is not the end of the check. Look at the Extension Order for Comprehensive Pension Insurance in the Economy (section 7 of the Extension Order (Consolidated Version), Yalkut HaPirsumim 6302, 27 September 2011). Under it, the employer’s severance payments under the order replace severance pay under section 14. They do so only for the wages, components, periods and rates for which they were deposited. For wages, components, periods or rates for which nothing was deposited, the right to severance pay is preserved. This money does not go back to the employer, with two exceptions (section 8 of the order). The employee withdrew it other than on a qualifying event (death, disability or retirement at age 60 or over). Or a judgment denied the right to severance pay under sections 16 or 17.

The National Labor Court held that some payments cannot replace severance pay under section 14 (Labor Appeal (ע״ע) (National) 44824-03-16, 4 June 2017). This applies to a payment that was not paid “to a benefits fund, a pension fund or a similar fund”. Take the amount “on account of severance pay” that appears on the payslip and is paid directly to the employee. It is not an arrangement under section 14.

Frequently asked questions

What is Section 14 of the Severance Pay Law?

Under the section, a payment to a fund replaces severance pay only to the extent set, and only in two cases (section 14). A collective agreement that applies to the employer and the employee set this. Or the Minister of Labor approved it. Under it, a general approval was issued. It sets out the deposit rates at which the arrangement replaces 100% of the severance pay, and those at which it replaces only 72%. The Extension Order for Comprehensive Pension Insurance in the Economy also applies the section. It covers the employer’s severance deposits under the order (section 7 of the order).

The employer deposited 12% in the pension fund (benefits and severance together). Does that cover all the severance pay?

Under the general approval, 12% to a pension fund replaces only 72% of the severance pay (paragraph 1(a)). This is when no additional 2⅓% to complete severance pay is deposited. On dismissal, the balance is severance pay that the employer must pay (sections 1(a) and 12(a)).

I resigned. Am I entitled to a top-up to 100%?

Not on an ordinary resignation, because there is no right to severance pay (section 1(a)). The Law treats a resignation in some circumstances as dismissal (sections 6 to 8 and 11). An example is a material deterioration in working conditions. Such a resignation gives a right to severance pay as if you were dismissed, and then also to the top-up.

I resigned. Can the employer take back the severance money from the fund?

Under the general approval, the employer waived the return of the money in advance (paragraph 2(b)). There are two exceptions. A judgment denied the right to severance pay under sections 16 or 17. Or you withdrew money other than on death, disability or retirement at age 60 or over. The same applies to deposits under the extension order (section 8 of the order).

Section 14 was signed after several years of work. What about each year of employment before that?

The arrangement applies only to the period and the wage for which the payments were made (the opening paragraph of the general approval). For the period before the arrangement, severance pay is calculated under section 12. It is one month’s wage for each year of employment according to the last wage.

The deposits were only from the basic wage. Am I owed a difference?

Possibly. The arrangement does not reduce the right to severance pay for wages above the wage from which deposits were made. This is under paragraph (3) of the general approval. The Severance Pay Calculation Regulations set what is included in the determining wage. Check the difference against the payslips and the fund report.

How do I know if I have Section 14?

Check your employment contract, your employment letter or the form for joining the fund. Do they include consent to an arrangement under section 14, and when was it signed? The general approval requires a written agreement with the employee (paragraph (2) of the general approval). If there is no such agreement, check whether the Extension Order for Mandatory Pension (צו הרחבה לפנסיה חובה) or a collective agreement applies to you. They too can provide that the deposits replace severance pay, at the rate and under the conditions they set.