You Are Dismissed from Work in Israel: Which Payments Should Be Checked in the Final Settlement

First, Separate the Payments According to Their Bases of Entitlement

There is no single, comprehensive “dismissal payment” that includes everything at once. The settlement may contain, as separate items, salary through the last working day, severance pay, payment in lieu of advance notice, cash compensation for unused annual vacation, and unpaid convalescence pay. Entitlement to each item and the method of calculating it must be examined separately, based on seniority, the contract, the collective agreement, payslips, and pension contributions. It is especially important to determine which portion of the severance pay has already accumulated in the pension fund and which portion the employer must supplement, if due.

Notice: Work During the Period or Receive Money Instead

Under the Advance Notice for Dismissal and Resignation Law, the employer must notify the employee of dismissal in writing and in advance; the period begins when the notice is delivered. The employer may release the person from work immediately, but must then pay the regular salary for the notice period due. The calculation base includes, among other things, the base salary and fixed supplements for seniority, cost of living, family, department, or profession; conditional payments and special expenses may not be included. If, after four years of employment, a person was given only seven days instead of one month, they are entitled to payment for an additional 23 calendar days: the monthly salary is divided by 30 and multiplied by 23.

Why the Notice Month Is Not Always an Additional Month of Seniority

If the employee continues working during the notice period, the employment relationship continues and rights continue to accrue. If compensation is paid instead of work, the relationship ends immediately: as a rule, no pension contributions or contributions to a training fund are paid for this period, and vacation, sick days, and seniority do not accrue; the contractual right to a company car also ends. Therefore, a payment equal to one month’s salary is not always economically equivalent to an additional month of ordinary work. There may be an exception if the contract, collective agreement, or established practice of the employer provides otherwise.

Vacation May Not Be Hidden Within Payment in Lieu of Notice

When employment is terminated immediately, the employee may simultaneously be entitled to payment in lieu of notice and compensation for accrued, unused annual vacation days. The employer may not declare that one payment automatically absorbs the other. This approach was also reflected in the National Labor Court’s decision in case Dava 3-107/98: an employer that did not provide vacation and a notice period may not deduct vacation compensation from the payment for failure to provide notice. Convalescence pay should also be checked as a separate item; whether it is due depends on whether the amounts owed were actually paid and on the arrangement applicable in the workplace.

Severance Pay and the Limits of Entitlement

Severance pay must not be confused with salary for the notice period or vacation compensation; it is based on an independent ground for payment. Seniority, the salary recognized for calculation purposes, the terms of the employment contract and collective agreements, as well as the amounts accumulated in pension funds, must be reconciled. Severance pay and payment in lieu of notice may not be denied merely at the employer’s discretion; this requires serious disciplinary misconduct and an established statutory basis. In case AA 21979-11-20, the National Labor Court left the employee without payment in lieu of notice after it was established that he had unlawfully obtained money from a resident of a home for the elderly.

When the Court Adds Compensation

In addition to unpaid amounts, the Labor Court may consider claims for compensation for unlawful dismissal, breach of contract, or delayed severance pay. The court considers not only the parties’ statements but also the documents: the written notice, the date it was delivered, payslips, vacation records, pension reports, the contract, and correspondence. Compliance with the obligation to conduct a hearing for the employee before deciding on dismissal, and the existence of a statutory prohibition or restriction on dismissal, such as in situations protected by law, are examined separately. The amount of additional compensation depends on the circumstances; the materials presented do not establish a uniform amount or an automatic “fine” for every violation.

FAQ

Sources

• Advance Notice of Dismissal — Kol Zchut
• Employees’ Rights Upon Dismissal — Prisha
• National Labor Court Decision in Case AA 21979-11-20
• Decision on Vacation and Advance Notice, Dava 3-107/98
• Decision on Counting the Notice Period for Unemployment Benefit Purposes

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