Severance Pay Law: the sections this site discusses

Related service: Unlawful dismissal

What the law provides

Section 1 of the Law gives an employee who worked for at least one year and was dismissed a right to severance pay from the employer. Section 12 sets the rate of severance pay: one monthly wage for each year of employment with the same employer, and a proportional part for a partial year of employment. For an hourly or daily-paid employee (an employee whose wage is mainly not paid on a monthly basis), the section sets two weeks’ wages for each year of employment. But the Severance Pay Regulations (Rates of Severance Pay for an Hourly or Daily-Paid Employee), 5743-1983 (תקנות פיצויי פיטורים (שיעורי פיצויי פיטורים לעובד בשכר), התשמ״ג-1983), made under section 12(b), raised the rate to one month’s wages for each year of employment, for periods of employment from 1 August 1983 on. The entitlement applies on dismissal. On resignation there is usually no entitlement, unless the resignation is recognized in law as equivalent to dismissal (for example, because of a medical condition or a tangible worsening of conditions).

Section 14 of the Law sets out when deposits to a provident fund replace severance pay: only if this is set in the applicable collective agreement or in an approval of the Minister of Labor, and only to the extent set. Under the Extension Order for Comprehensive Pension Insurance in the Economy, a deposit of 6% to the severance component replaces only 72% of the severance pay, for the wage and the period for which it was deposited, and the employer must top up the rest, unless it deposited 8.33% and it was set that the deposit replaces the full severance pay. Severance money that was deposited does not go back to the employer, except in the exceptions set in the order. Good to know: Israel has no separate law called the “Mandatory Pension Law”. The duty to make pension contributions comes from collective agreements and extension orders, not from the Severance Pay Law itself; section 14 is what sets the relationship between the pension deposit and the right set in the Law.

A numerical example

An employee worked for 6 years at a monthly wage of NIS 12,000, and the employer made monthly contributions for her to comprehensive pension insurance (6% employee benefits contributions, 6.5% employer benefits contributions and 6% for severance pay from the employer, 18.5% in total) under the arrangement that applies at the workplace, without a break. On dismissal, the money accumulated in the severance component (6% over 6 years: NIS 51,840 without returns) replaces only 72% of the severance pay. The full severance pay is NIS 72,000 (NIS 12,000 × 6 years), so the employer must top up 28%, NIS 20,160, unless it deposited 8.33% and it was set that the deposit replaces the full severance pay.

What to prepare for a severance pay check

1. The dismissal letter, or the resignation letter and the reasons for it, to examine whether the resignation counts as a dismissal (sections 6 and 11).
2. The written confirmation of the start and end of the employment relationship, which the employer must give at the end of employment (section 8 of the Advance Notice of Dismissal and Resignation Law, 5761-2001), to check the continuous year of employment (section 1) and seniority.
3. The latest payslips, to establish the wage on which severance pay is calculated (section 13 and the regulations under it).
4. The pension fund or provident fund statements: the deposit rate to the severance component and the period for which it was deposited (section 14).
5. The employment contract, and the applicable collective agreement or extension order, if they set an arrangement under section 14.
6. The actual payment date: severance pay that was not paid within 15 days of its due date (as a rule, the day the employment relationship ended) counts as delayed and gives a right to compensation for late payment (section 20 of the Wage Protection Law, 5718-1958).

For an exact calculation, including the components of the determining wage and the pension contributions, see the guide Severance pay calculator: seniority, wages and Section 14, and the pages Employment law and Employment law: the complete guide. See also: Resignation deemed dismissal: when you get severance pay even though you resigned.

The sections the site discusses

This page brings together 2 sections of the Severance Pay Law that are discussed in 4 guides on this site. The title of each section is the marginal note of the consolidated version of the Law (unofficial translation), not a heading we wrote. The last column links to the guides on this site that discuss that section.

The original text of the law

• Severance Pay Law, 5723-1963: text of the Law
• Extension Order for Comprehensive Pension Insurance in the Economy (Consolidated Version), sections 7–9 — Ministry of Labor (PDF, in Hebrew)
• Severance Pay Law: consolidated version on Nevo (Israeli legal database)

FAQ

How much severance pay is a dismissed employee entitled to?
Under section 12 of the Law, one monthly wage for each year of employment with the same employer, and a proportional part for a partial year of employment. For an hourly or daily-paid employee too, the rate is one month’s wages for each year of employment, under regulations made under section 12(b).

Is the “mandatory pension law” a separate law from the Severance Pay Law?
No. Israel has no law called the “Mandatory Pension Law”. The duty to make pension contributions comes from collective agreements and extension orders. Section 14 of the Severance Pay Law sets how an ongoing pension deposit can replace severance pay.

Is an employee who resigns entitled to severance pay?
As a rule, no, unless the resignation is recognized in law as equivalent to dismissal, for example because of a tangible worsening of conditions or a medical condition that justifies it.

What does section 14 of the Severance Pay Law provide?
It provides that a payment to a provident fund replaces severance pay only if this is set in the applicable collective agreement or in an approval of the Minister of Labor, and only to the extent set. Under the Extension Order for Comprehensive Pension Insurance in the Economy, a deposit of 6% for severance pay replaces 72% of it, and the employer must top up the rest, unless it deposited 8.33% and it was set that the deposit replaces the full severance pay.

Is an employee who resigns after reaching retirement age entitled to severance pay?
Yes. Under section 11(e), the resignation of an employee after reaching retirement age, as defined in the Retirement Age Law, 5764-2004 (חוק גיל פרישה, התשס״ד-2004), counts as a dismissal for the purposes of the Law. Amounts paid to the employee from a provident fund as a result of the employer’s payments, which were intended to serve as severance pay or to replace it, may be credited against the severance pay or replace it.

This page collects the references to legislation on the site. The section headings are the marginal notes as worded in the consolidated text of the law, and are not our interpretation. The binding text is the one published in Sefer HaHukim (the official gazette of statutes). The content here is general information and is not legal advice. Translated: 12 November 2026 · Hebrew version updated: 13 October 2026.