Severance Pay by Voluntary Resignation: Conditions for Eligibility in Israel

Core Concept

Severance pay (pitzuim) is compensation that an employee may receive upon resignation in specific, legally defined circumstances. This is not an automatic right but an exception to the general rule, designed to protect the employee in difficult life situations.

Who is Eligible?

The right to receive pitzuim upon resignation arises only when there is a valid reason. You must have worked at the same place of employment for at least one year.

Primary reasons that grant eligibility for compensation:

• Deterioration of working conditions (e.g., a significant reduction in salary, transfer to another position without consent).
• Relocation to another city for a valid reason (e.g., relocation due to a spouse's military service).
• Resignation due to health reasons (your own or a family member's), supported by medical documentation.
• Resignation within 9 months of childbirth to care for the child.
• Reaching retirement age.

Who is NOT eligible:

• Employees who resign without a legally recognized valid reason.
• Employees who have worked at their last place of employment for less than one full year.

Your Rights

The amount of severance pay is typically calculated using the formula: one month's salary for each year of employment. The calculation is based on the last full gross salary. If you have worked for a partial year, the calculation will be proportional.

For example, for 2.5 years of work, you may be entitled to compensation equal to 2.5 times your last monthly salary. The exact calculation depends on numerous factors, including the components of your salary.

Step-by-Step Guide

1. Determine the reason. Ensure that your reason for resignation corresponds to one of the legally approved cases. If necessary, consult with a labor law specialist.
2. Write a letter of resignation. This is the most critical step. In the letter (Mikhtav Hitpatrut), you must clearly and unequivocally state the reason for your resignation that entitles you to pitzuim. Submit the letter to your employer and keep a copy with proof of delivery.
3. Conduct the final accounting (Gmar Heshbon). Upon termination of employment, the employer is obligated to conduct a final accounting with you, which includes the payment of pitzuim if you are entitled to it. Expected timeframe: up to 30 days after the last working day.
4. Check your pension savings. A portion of the pitzuim (or the entire amount) may be held in your pension fund (Keren Pensia or Bituach Menahelim). Contact the fund to clarify the amount and the conditions for its withdrawal.
5. Seek assistance in case of refusal. If the employer refuses to pay, you have the right to file a claim with the labor court.

List of Documents

• Identification card (Teudat Zehut).
• Copy of the resignation letter stating the reason.
• Employment contract (Hoze Avoda).
• Recent payslips (Tlushei Maskoret) to confirm salary amount.
• Medical certificates (if the reason for resignation is health-related).
• Documents confirming relocation (if applicable).

Pitfalls

• The wording in the resignation letter is critical. An incorrectly stated or ambiguous reason can disqualify you from receiving compensation. State only the truth, but formulate it in a legally sound manner.
• Do not sign a waiver of claims (Tofes Vitur). Some employers may ask you to sign a document waiving any future claims upon termination. Do not sign it if you have not yet received all payments due to you, including pitzuim.
• Statute of limitations. A claim for non-payment of pitzuim can be filed within a specific period. Do not delay in seeking assistance.
• Taxation. Severance pay is subject to taxation, but there are significant benefits and exemptions (ptor). Verify whether you are required to pay tax on the amount received.

Contacts and Links

For accurate and up-to-date information, it is recommended to contact the Ministry of Labor (Misrad ha-Avoda) directly or consult with lawyers specializing in labor law.

Official links and phone numbers are not provided in this guide to avoid misinformation due to potential changes. Please verify current contact information on official government portals of Israel.

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