Severance pay in Israel (pitzuim): eligibility, calculation and Section 14
For English-speaking employees and for employers from abroad: who is entitled to severance pay in Israel, how the amount is calculated, and when payments to a pension fund take its place under section 14 of the Severance Pay Law.
In short
An employee who has worked for one year continuously for the same employer or at the same workplace, and is dismissed, is entitled to severance pay (section 1(a) of the Severance Pay Law). A monthly-salaried employee receives one month's salary for each year of employment, and part of a year proportionally (section 12(a)). Pension or provident-fund payments replace severance pay only to the extent set in a collective agreement or approved by the Minister of Labour (section 14).
Office in Kiryat Ono, in the Tel Aviv metropolitan area; Hebrew and English.
Who is entitled to severance pay in Israel?
The right is set out in section 1(a) of the Severance Pay Law, 5723-1963 (חוק פיצויי פיטורים, התשכ״ג-1963): a person who has worked for one year continuously for one employer or at one place of work, and was dismissed, is entitled to severance pay from the employer who dismissed them. For a seasonal employee the condition is two seasons in two consecutive years; a "season" is three consecutive months in a year in which the employee worked at least 60 days. In Hebrew the payment is פיצויי פיטורים (pitzuei piturim), often shortened to pitzuim.
Continuity is not broken by the interruptions listed in section 2, among them military and reserve service, the weekly rest day and holidays, annual leave, paid or unpaid leave given under a statute or with the employer's consent, a strike or a lockout, an accident or illness, and a temporary interruption without severance of the employment relationship, or one with severance that does not exceed six months. Some of these periods are nonetheless left out when the amount is calculated (regulation 10, in the table below).
A dismissal shortly before the end of the first year of employment is regarded, unless the contrary is proven, as made in order to avoid the obligation to pay severance pay, and it does not defeat the right to it (section 3).
When does a resignation count as a dismissal?
The right arises on dismissal, but the Law treats certain resignations, and the end of a fixed-term contract, as a dismissal for severance purposes. Among them:
- a resignation because of a material deterioration in working conditions, or because of other circumstances in the employment relationship in which the employee cannot be expected to continue working (section 11(a));
- a resignation because of the state of health of the employee or of a family member, where, in light of the medical findings, the working conditions and the other circumstances, there was sufficient reason to resign (section 6);
- a resignation within nine months of giving birth, in order to care for the child, with parallel rules for adoption, surrogacy and foster care (section 7(a)); on the conditions in section 7(b), the same applies to a father;
- the end of a fixed-term contract, unless the employer offered to renew it; the offer must be given at least three months before the contract ends, and an employee who refuses it is regarded as having resigned (section 9).
The Law lists further cases, among them a move of residence in the circumstances set out in section 8 and in regulations under it, and other cases in section 11. Whether a particular resignation falls within one of them depends on the facts.
How is severance pay calculated?
Section 12(a) sets the rate: one month's salary for each year of employment for a salaried employee, meaning an employee whose remuneration is paid mainly on the basis of a month or a longer period. Part of a year after a year of employment entitles the employee to proportional severance pay.
For a wage employee, meaning one who is not a salaried employee (for example, one paid by the hour or by the day), section 12(a) sets two weeks' wages for each year of employment. Regulations 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 (regulation 1 of the Severance Pay (Rates of Severance Pay for a Wage Employee) Regulations, 5743-1983).
Example. An employee on a monthly salary who worked for 9 years and whose last salary was ILS 11,000 is entitled to 9 × ILS 11,000 = ILS 99,000. After 6 years and 3 months (6.25 years) on a last salary of ILS 12,000, the amount is 6.25 × ILS 12,000 = ILS 75,000. Income tax on severance pay is outside the scope of this page.
A calculator that applies these rules, with the section 14 offset, is available in Hebrew: severance pay calculator (Hebrew).
Which salary is severance pay calculated on?
Section 13 leaves the components of the salary, and the method of calculating it, to regulations. The Severance Pay (Calculation of Severance Pay and Resignation Deemed Dismissal) Regulations, 5724-1964 provide as follows:
| Topic | What the regulations provide | Regulation |
|---|---|---|
| Salary components | Basic wage, seniority increment, cost-of-living increment and family increment. | 1(a) |
| Departmental or professional increment | Treated as part of the basic wage. | 1(b) |
| Salary not paid by those components | The regular wage, without increments. | 1(c) |
| More than one position with the same employer | The salary paid for one position only, as customary in that work. | 1A |
| Which salary | For the period after 1 January 1964, the employee's salary on the eve of the dismissal ("last salary"). Where a collective agreement applies to the employer and the employee, or failing that to the largest number of employees in the branch, the calculation follows its provisions, subject to that rule. | 2, 4 |
| Temporary change in salary | The last salary is calculated as if the change had not occurred. | 6 |
| Move between full-time and part-time work | The last salary for each period of work is calculated by the salary on the eve of the dismissal, in proportion to the part-time fraction of that period. | 7 |
| Salary reduction | For the period before the reduction, the last salary is the salary on the eve of the reduction. | 8 |
| Pay for a specific task, a share of the takings or the quantity of output | For that pay, the last salary is the average of the 12 months before the dismissal. | 9 |
| Unpaid leave | Leave under a statute: the salary that would have been paid on the eve of the dismissal had the employee been working. Any other case: the salary on the eve of the leave, plus the cost-of-living increment that would have been added by the eve of the dismissal. | 5A |
| Periods not counted in the amount | Among others, unpaid leave beyond 14 days per year of employment, other than a period for which the employee is entitled to maternity benefit. | 10 |
A calculation that multiplies a salary figure does not show which components that figure includes; the components are checked against the payslips.
What is Section 14, and when do pension payments replace severance pay?
“A payment to a provident fund, to a pension fund or to a similar fund shall not take the place of severance pay unless it was so provided in the collective agreement that applies to the employer and the employee, and to the extent so provided, or unless such a payment was approved by the Minister of Labour, and to the extent so approved.”Section 14 of the Severance Pay Law, 5723-1963 — unofficial translation; the Hebrew text governs
The Minister's general approval (Yalkut HaPirsumim 5758, p. 4394, signed on 9 June 1998 and amended in 5760 and 5761) sets out when the employer's payments take the place of severance pay. They do so only in respect of the salary from which they were paid and for the period for which they were paid (the "exempted salary"):
| Employer's payments, out of the exempted salary | In place of | Paragraph |
|---|---|---|
| Pension fund: at least 14⅓% | 100% of severance pay | 1(a) |
| Pension fund: 12%, plus 2⅔% to complete severance pay, paid to a severance provident fund or an insurance fund | 100% of severance pay | 1(a) |
| Pension fund: 12% without the completion | 72% of severance pay only | 1(a) |
| Insurance fund: 13⅓%, plus a payment for loss-of-working-capacity insurance | 100% of severance pay | 1(b)(1) |
| Insurance fund: 11%, plus a payment for loss-of-working-capacity insurance | 72% of severance pay only | 1(b)(2) |
| Insurance fund: 11%, a payment for loss-of-working-capacity insurance, and 2⅔% to complete severance pay | 100% of severance pay | 1(b)(2) |
In the approval, a "pension fund" is a fund for comprehensive pension, and an "insurance fund" is managers' insurance that includes an annuity option, or that combines annuity and non-annuity plans. The approval covers payments made from the date of its publication.
In every case the approval requires a written agreement between the employer and the employee, made no later than three months after the employer's payments began. The agreement must record the employee's consent to the arrangement, specifying the payments and the fund and including the text of the approval. It must also record the employer's advance waiver of any right to a refund out of its payments, unless the employee's right to severance pay was denied by a judgment under section 16 or 17, and to the extent denied, or the employee withdrew money from the fund other than on a qualifying event, meaning death, disability or retirement at 60 or over (paragraph (2)). The approval does not detract from the employee's right to severance pay in respect of salary above the exempted salary (paragraph (3)).
Example. Take the employee above (6.25 years, last salary ILS 12,000), who from the start of the employment had a section 14 arrangement replacing 72% of severance pay, with the payments made on the full salary. Under section 12 the severance pay is ILS 75,000. The part the arrangement replaces is 72% × ILS 75,000 = ILS 54,000, and the difference is ILS 21,000. Had the payments been made on a lower salary, the arrangement would cover only the salary from which they were paid (paragraph (3) of the approval).
Can severance pay be denied to a dismissed employee?
Only in the circumstances the Law sets. An employee is not entitled to severance pay, or is entitled to part of it only, if dismissed in circumstances that, under the collective agreement applying to the employer and the employee — or, where there is none, the collective agreement applying to the largest number of employees in that branch — justify dismissal without severance pay or with partial severance pay (section 16). In a branch of work with no collective agreement, the Regional Labour Court may determine that the dismissal was in such circumstances, guided by the rules of the collective agreement applying to the largest number of employees (section 17).
What should employers and employees check?
- Is there a written section 14 agreement, made no later than three months after the payments began and including the text of the approval (paragraph (2) of the general approval)?
- At what rate were the payments made, and to which kind of fund (paragraph (1))?
- Were the payments made on the full salary, or only on part of it (paragraph (3))?
- Which components make up the salary for severance purposes, and was there a reduction, a temporary change or a move to part-time work (regulations 1 to 9)?
- Were there periods of unpaid leave or other interruptions that are not counted in the amount (regulation 10)?
- Is a settlement or a discharge letter about to be signed? It has no effect for severance pay unless it is in writing and states expressly that it concerns severance pay (section 29).
Severance pay is one of several entitlements when employment ends; advance notice of dismissal is another (see the notice periods in English). For the wider picture, see employment law in Israel.
Frequently asked questions
Is an employee who resigns entitled to severance pay in Israel?
Not as a rule: section 1(a) of the Severance Pay Law gives the right to an employee who was dismissed. But the Law treats certain resignations as a dismissal, among them a resignation because of a material deterioration in working conditions, or because of other circumstances in which the employee cannot be expected to continue working (section 11(a)), a resignation for reasons of health (section 6), and a resignation within nine months of giving birth in order to care for the child (section 7).
How is severance pay calculated for an hourly or daily employee?
For periods of employment from 1 August 1983, a wage employee, meaning one who is not paid mainly on a monthly basis, is entitled to one month's wages for each year of employment (regulation 1 of the Severance Pay (Rates of Severance Pay for a Wage Employee) Regulations, 5743-1983). For earlier periods, section 12(a) of the Law sets two weeks' wages for each year.
If there is a section 14 arrangement, can more still be owed?
It can. Under the general approval, the employer's payments replace severance pay only at the rate set (100% or 72%, depending on the payments), only for the salary from which they were paid and the period for which they were paid, and only where the written agreement the approval requires was made (paragraphs (1) to (3)).
When does a settlement or discharge letter cover severance pay?
Section 29 of the Severance Pay Law gives no effect to a settlement concerning severance pay, or to a discharge receipt, unless it was made in writing and states expressly that it concerns severance pay. Read such a document before signing it.
When must severance pay be paid, and what happens if it is late?
As a rule, on the day the employment relationship ends, unless a collective agreement or arrangement, or an extension order, that applies to the employee sets a later date (section 20(a) of the Wage Protection Law, 5718-1958). Severance pay not paid within 15 days of that date is treated as delayed. If it is paid between the 16th and the 30th day, linkage differentials are added; after the 30th day, linkage differentials plus 20% a month on the total, proportionally for part of a month (section 20(b)). No such compensation is due on the part of the severance that the employee receives from a pension or provident fund out of the employer's payments, if the employer notified the fund in writing within those 15 days that it consents to the payment (section 20(e)). The Regional Labour Court may reduce or cancel that compensation, including where there is a dispute of substance about the very right to severance pay (section 20(d)).
What should I have ready before a first call about severance pay?
The employment contract and any section 14 agreement, recent payslips, the pension-fund statements, and a short description of the employment: when it started and ended, and how it ended. Please don't send documents through the form; we will first arrange a call.
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I will get back to you during office hours. Until then there is no need to send documents — keep the documents related to the matter with you. If there is a close deadline, write to me on WhatsApp or call +972-50-431-3155.
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Legal framework and sources
- Severance Pay Law, 5723-1963 (חוק פיצויי פיטורים, התשכ״ג-1963) — full text, Hebrew Wikisource
- Severance Pay (Calculation of Severance Pay and Resignation Deemed Dismissal) Regulations, 5724-1964 (תקנות פיצויי פיטורים (חישוב הפיצויים, והתפטרות שרואים אותה כפיטורים), תשכ״ד-1964) — full text, Hebrew Wikisource
- Severance Pay (Rates of Severance Pay for a Wage Employee) Regulations, 5743-1983 (תקנות פיצויי פיטורים (שיעורי פיצויי פיטורים לעובד בשכר), התשמ״ג-1983) — full text, Hebrew Wikisource
- General approval of employer payments to a pension fund and to an insurance fund in place of severance pay, Yalkut HaPirsumim 5758, p. 4394 (אישור כללי בדבר תשלומי מעבידים לקרן פנסיה ולקופת ביטוח במקום פיצויי פיטורים) — full text, Hebrew Wikisource
Checked against the current statutory text on 1 October 2026. Every source above is in Hebrew; the Hebrew text is the governing text of the law, and the quotations on this page are unofficial translations. This information is general and is not legal advice.
This page is general information about Israeli severance pay law, written for English-speaking readers. It is not legal advice, does not create an attorney-client relationship, and is no substitute for advice on your own facts. The governing text of every statute cited is the Hebrew original, and the quotations here are unofficial translations. Past results do not guarantee similar results in the future.
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