Resigning for Specific Reasons Can Qualify for Severance Pay

Israeli labor law recognizes certain resignations as equivalent to termination, entitling employees to full severance pay, a distinction that can amount to tens of thousands of shekels. This classification is crucial because it also affects eligibility for unemployment benefits, which are typically delayed for 90 days for regular resignations but may be paid immediately under specific circumstances.

The discrepancy arises from differing lists of qualifying reasons used by the National Insurance Institute (for unemployment benefits) and the severance pay law. For an employee with four years of service and a NIS 12,000 monthly salary, understanding these differences can mean a difference of approximately NIS 35,000 in financial entitlement.

Most employers contribute 6% of salary to pension funds for severance, covering about 72% of full severance. When an employee resigns for reasons deemed a termination by law, the employer must cover the remaining 2.33% of the final salary for each month of employment. If the employer contributes 8.33% and has applied Section 14 of the law, the severance component is considered prepaid, and the focus shifts to unemployment benefits.

Qualifying reasons for resignation-as-termination include significant changes in working conditions (like pay cuts or relocation), employee or family member health issues, childbirth or adoption within nine months of resignation, moving residences due to marriage or a spouse's job change (requiring a minimum distance), sexual harassment, and unpaid wages. A minimum of one year of employment with the same employer is generally required, with continuous service often recognized even through staffing agencies.

For example, an employee earning NIS 12,000 with four years of service, resigning due to a partner's illness, is entitled to full severance of NIS 48,000. The pension fund holds about NIS 34,600, requiring the employer to pay the difference. Crucially, if this resignation is recognized as a termination, the employee might receive unemployment benefits immediately, rather than facing a 90-day waiting period, potentially totaling an additional NIS 21,300.