Labour law6 min read9/12/2026

The Employer Does Not Provide Form 161: How to Receive Severance Pay Without Overpaying Tax

Form 161 is not merely a formality, but rather the employer’s report concerning the termination of employment and the amounts and rights granted to the employee upon departure. Without proper reporting, the pension fund may not release the accrued severance pay, and a hasty withdrawal of the funds may complicate the tax treatment.

Numbers and facts

•1963 — the year the Severance Pay Law was enacted
•6 years — the period for which Forms 106 are available in the personal online area
•6.22% — the severance pay contribution for the specified employees with funded pensions
•8.33% — the full contribution under the specified managers’ insurance
•9 months after childbirth — the period mentioned regarding departure to care for a child

When the Obligation to Complete Form 161 Applies

The employer must report the employee’s departure to the Israel Tax Authority and specify in Form 161 all amounts and rights granted to the employee upon termination of employment. This obligation does not apply only to dismissals initiated by the employer: reporting is also required for other forms of termination of the employment relationship. Form 161 does not in itself create an entitlement to severance pay—this entitlement is determined under the Severance Pay Law, 5723-1963, and according to the circumstances in which the employment ended. For example, dismissal generally entitles the employee to payments, while in the case of resignation, the reason for leaving and the terms of the pension insurance are important.

Why the Funds Remain in the Fund Without the Form

The funds in the severance pay component are held in the pension fund or insurance policy, but this does not mean that they can be received immediately in cash. To release the funds, the fund generally needs the details completed by the employer and, in appropriate cases, authorization to release the funds. The Ministry of Education portal expressly states that employees entitled to severance pay receive the funds from the pension funds together with Form 161 and authorization for their release. Therefore, the request to the employer should address not only a copy of the form, but also all documents required by the specific fund.

What to Do in the Event of a Delay by the Employer

First, a written demand should be sent to the employer, stating the employment termination date, identity card number, the name of the fund, and a request to complete the reporting on Form 161. The letter, proof of delivery, the final month’s payslip, and correspondence with the accounting department should be retained: it is almost impossible to prove oral telephone conversations. The Israel Tax Authority’s official service allows employers to fulfill their obligation to report an employee’s departure, so a claim that there is “no paper form” does not in itself explain the inaction. If the inquiry goes unanswered, the reporting status should be checked with the Israel Tax Authority, and the fund should separately be asked exactly which document is missing; the issue of compelling the employer to act and awarding compensation for proven damage may require proceedings before the Labor Court.

How to Avoid Financial Loss Due to Tax

The main mistake is demanding the immediate transfer of the full amount to the bank account before examining the tax arrangement. Form 161 records the payments and rights upon departure, after which the tax treatment depends on the amount, employment history, and the method chosen for handling the accrued funds. The official materials presented do not confirm a uniform tax-exempt ceiling suitable for every employee, so a universal shekel amount cannot be applied. Before withdrawing the funds, it is advisable to compare Form 161 with the fund’s records and the annual Forms 106 and, in case of uncertainty, obtain a calculation of the tax implications of each option.

Form 106 Does Not Replace Form 161

Form 106 is an annual certificate detailing salary, tax withheld, and social benefit contributions made through a particular employer. Forms 106 for the previous six years are available in the Israel Tax Authority’s personal online area, which helps employees verify income and, if necessary, file a request for a refund of overpaid tax. However, Form 106 is not a report on termination of employment and does not replace Form 161 for the purpose of releasing severance funds. It is useful as a verification document: the salary, deductions, and contribution amounts should correspond to the employer’s and the fund’s calculations.

The Form’s Contents, Not Merely Its Existence, Must Be Checked

A received Form 161 may contain an incorrect employment termination date, omit the fund, or state only a partial amount. It should be compared with the final payslip, the pension fund statement, and the dismissal or departure letter. For employees in the education system, the official portal presents different contribution mechanisms: the employer’s severance pay contribution is 6.22% of pensionable salary under a funded pension arrangement and 8.33% under managers’ insurance. These rates relate to the system in question and should not be applied automatically to another employee’s contract.

FAQ

How long may the employer refrain from providing Form 161?

The materials presented do not specify a universal number of days after which every delay automatically becomes a violation. They refer to examining what constitutes a reasonable period, so the employment termination date, the readiness of the final accounting, the employer’s actions, and the actual damage caused by the delay are important.

Can severance pay be received without Form 161?

The fund may require Form 161 and a document authorizing the release of the funds, so the absence of reporting often prevents payment. First, the fund should be asked, in writing, which document is missing and whether it has received electronic details from the employer.

Whom should I contact if the accounting department ignores the request?

A formal written demand should be sent to the employer, after which the reporting status should be checked through the Israel Tax Authority and the requirements should be verified directly with the pension fund. If the employer continues to take no action, the method of demanding the documents and the possibility of compensation for damage in the context of a labor dispute should be examined.

Should all severance funds be withdrawn from the pension fund immediately?

No. Receiving Form 161 does not require the immediate withdrawal of the full amount. The tax implications of the withdrawal should first be examined and compared with the option of leaving the funds in the pension product.

Will Form 106 help recover tax that was withheld?

Form 106 contains annual data on income and deductions and is used when filing a request for a tax refund. Employees who are not required to file an annual tax return may request a refund for a period of up to six years, but Form 106 in itself does not replace Form 161.

What to do next

Request Form 161 and the documents required to release the funds from the employer in writing, while also verifying the requirements with your fund. Before transferring the funds to the bank account, check the amounts against payslips and Forms 106 and clarify the tax implications of the withdrawal. If the delay continues, retain proof of your inquiries and document any expenses or losses incurred.