Severance Pay Is a Legal Right, Not a Goodwill Gesture
In Israel, severance pay is mandated by the Severance Pay Law (1963). After one year of continuous employment, you are legally entitled to פיצויים (Pitsuyim) - one month's salary for every year of employment (and proportionally for partial years). This is not discretionary. An employer who dismisses you after three years owes you three months' salary in severance.
When Are You Entitled?
Severance entitlement depends on the circumstances of your departure:
- Dismissed by employer: Full entitlement from one year onwards.
- Resigned: Generally no entitlement - but there are exceptions if you resigned due to employer misconduct, a significant pay cut, relocation to an unreasonable distance, or a hostile work environment. These cases often end up in labor court.
- Mutual agreement: Terms are negotiated; employees often receive full severance as part of the settlement.
- Employer bankruptcy: Bituach Leumi has a special fund (pitsuyim guarantee) that pays severance when employers cannot.
Note the one-year threshold: employment contracts sometimes use a probation period of 6-12 months during which the employer can dismiss without severance. Make sure you know your probation terms.
What is Section 14 of the Severance Pay Law?
Most employment contracts signed since 2008 use "Section 14" of the Severance Pay Law, which changes how severance is accumulated:
- Your employer contributes 8.33% of your monthly gross into your pension fund, earmarked as the severance component.
- Whatever is in that portion of your pension is yours when you leave - whether you resign or are dismissed.
- The employer has no further severance obligation once Section 14 applies. The pension-held amount is the settlement.
This arrangement benefits employees in several ways: the severance accumulates investment returns over your working life, it's protected from employer insolvency, and you can access it at retirement even if you switch jobs frequently. The downside is that if severance accumulated at 8.33% per year turns out to be less than one month's final salary per year of service, the employee has no top-up claim - so in long tenures with significant salary growth, Section 14 can be slightly less favorable.
How does the notice period (Hatraa) work in Israel?
Both you and your employer must give notice before ending employment. The minimum notice periods under Israeli law are:
- During the first year of employment: one day per month worked (so after 6 months: 6 days; after 12 months: 12 days)
- After one year: one month
- After two years: one month (the minimum stays at one month for most employees)
Many employment contracts - especially in the tech sector - specify longer notice periods (two to three months). This is standard and legally enforceable. During the notice period you continue to receive your full salary and benefits.
Your employer can choose to waive the notice period and pay you a payment in lieu of notice (equivalent to your monthly salary). You are not obligated to physically work the notice period if your employer prefers to release you immediately.
How do you check your pension severance component?
If your contract uses Section 14, check your pension fund's online portal to see the severance component separately from your regular pension savings. It should be labeled "pitsuyim" or "takbulot maasik - pitsuyim." If you've been working for several years, this number can be significant - a 10-year track record at a decent salary can mean 100,000+ NIS sitting in your pension earmarked for you.
In Israel, severance pay (Pitsuyim) is a legal right under the Severance Pay Law (1963), not a discretionary benefit. After 12 months of continuous employment you are entitled to one month of gross salary for every year worked, with no salary cap and proportional accrual for partial years, so an employer who dismisses you after three years owes three months' salary. Most contracts signed since 2008 use Section 14, under which the employer deposits 8.33% of your monthly gross into your pension earmarked as severance; that balance is yours whether you resign or are dismissed, and the employer has no further top-up obligation. Notice (Hatraa) is one day per month during year 1 and one month from year 2 onward, with tech contracts often specifying two to three months; an employer may pay in lieu of notice instead of having you work it. Resignation generally forfeits severance unless you quit for constructive-dismissal reasons such as employer misconduct, a significant pay cut, an unreasonable relocation, or a hostile work environment, and Bituach Leumi runs a guarantee fund that pays severance when an employer goes bankrupt.
Under Israel's Severance Pay Law (1963), once you complete 12 months of continuous employment you are entitled to one month of gross salary for every year worked, with proportional accrual for partial years. There is no salary cap, so the entitlement scales with your full salary. As a concrete example, an employer who dismisses you after three years owes you three months' salary in severance. This is a legal right rather than a goodwill gesture.
Generally no. Dismissal by the employer carries full entitlement from one year onward, but resignation usually forfeits severance. There are exceptions: you may still be entitled if you resigned due to employer misconduct, a significant pay cut, relocation to an unreasonable distance, or a hostile work environment. These constructive-dismissal cases often end up in labor court, where the reason has to be verifiable. Departures by mutual agreement are negotiated, and employees often receive full severance as part of the settlement.
Most employment contracts signed since 2008 use Section 14, which changes how severance is accumulated. Instead of a separate fund, your employer contributes 8.33% of your monthly gross into your pension fund, earmarked as the severance component. Whatever is in that portion is yours when you leave, whether you resign or are dismissed, and once Section 14 applies the employer has no further severance obligation: the pension-held amount is the settlement. This is unusual internationally because it integrates severance into the pension system rather than maintaining a separate fund.
Section 14 benefits employees in several ways: the severance accumulates investment returns over your working life, it is protected from employer insolvency, and you can access it at retirement even if you switch jobs frequently. The downside is that if the amount accumulated at 8.33% per year turns out to be less than one month of your final salary per year of service, you have no top-up claim. So in long tenures with significant salary growth, Section 14 can be slightly less favorable than the traditional calculation based on final salary.
Both you and your employer must give notice before ending employment. The statutory minimums are one day per month worked during the first year (so 6 days after 6 months, 12 days after 12 months), and one month from the second year onward, which remains the minimum for most employees. Many contracts, especially in the tech sector, specify longer periods of two to three months, which is standard and legally enforceable. During the notice period you continue to receive your full salary and benefits. Your employer can also waive it and pay you in lieu of notice, equivalent to your monthly salary, in which case you are not obligated to physically work the period.
The US has no statutory severance requirement: it is entirely at-will and based on employer policy or individual negotiation, so Israel's guaranteed one month per year is a significant advantage regardless of any at-will language in your contract, a concept that does not translate to Israeli labor law. UK statutory redundancy pay is based on age and weekly pay, with the weekly figure capped at a statutory maximum (£751 per week from 6 April 2026), using a multiplier of 0.5 to 1.5 weeks per year. Israel's one month of gross salary per year with no cap is typically more generous, especially for higher earners who benefit from the uncapped calculation.
If your contract uses Section 14, log into your pension fund's online portal and look for the severance component listed separately from your regular pension savings, usually labeled "pitsuyim" or "takbulot maasik - pitsuyim." After several years this can be substantial: a 10-year track record at a decent salary can mean 100,000+ NIS earmarked for you. If your employer goes bankrupt, Bituach Leumi operates a pitsuyim guarantee fund that pays severance when an employer cannot. The one-year threshold also matters: contracts sometimes include a probation period of 6 to 12 months during which the employer can dismiss without the statutory severance, so the probation terms in the contract are the detail that determines this.
