Attorney | Labor Law
Severance Pay 2026 — Complete Guide
Who is eligible for severance pay under Israeli law, how it is calculated, what is included in the salary base, and what to do when the employer does not pay. Adv. Liron Yitzhak Elmaliach, free initial consultation.
Eligibility & Calculation of Severance Pay 2026
The Severance Pay Law provides that every employee dismissed after at least one year of employment is entitled to severance pay. The formula: last monthly salary × number of years of service. A partial year is calculated pro-rata. Severance pay must be paid within 15 days of the end of employment.
The last salary for calculation — generally the regular salary without variable components. However, there are disputes over what enters the base: fixed supplements, recurring bonuses, company car allowances — each case is examined on its own merits. When in doubt — seek advice.
Severance pay funds accumulated in a pension fund (under Section 14) — reach the employee at the end of employment and are not subject to tax up to a certain ceiling. It is important to check whether all the money in the fund covers the severance pay owed.
What Is Included in the Salary Base — Important Details
The salary base for severance pay calculation generally includes: base salary, seniority supplement, fixed on-call allowance, fixed shift supplement, and sometimes bonuses that have become a fixed part of the salary. Non-fixed supplements — variable overtime, performance-based bonuses — are generally not included.
Disputes over the salary base are common — employers tend to narrow the base, while employees can claim recognition of additional components. The Labor Tribunal recognizes the principle that a salary component paid on a regular and consistent basis — should enter the base.
If there is doubt whether all components were included — review the pay slip before leaving, and if you have already left — the calculation can be reviewed retroactively. Seek legal advice.
Employer Didn't Pay — What to Do
Severance pay not paid on time accumulates "withholding penalties" — an addition of up to 50% for the delay. That is, if the employer owes you ₪50,000 and did not pay — they may be liable for a substantially higher amount.
You can sue in the Labor Tribunal — proceedings are relatively faster than regular court. It is also possible to file a complaint with the Labor Inspector — a measure that sometimes moves employers to pay without legal proceedings.
If the employer went bankrupt — there is a "priority" for payment of salary and severance pay over other debts, and there are channels for approaching the Insolvency Commissioner. Seek legal advice as early as possible in this situation.
Frequently Asked Questions — Severance Pay
Everything you wanted to know about severance pay in Israel 2026
Check Whether You Are Owed Severance Pay
Free initial consultation — Adv. Liron Yitzhak Elmaliach