Israeli Workers Risk Losing Severance and Benefits Due to Incorrect Resignation Letters

Israeli law allows employees to receive full severance pay even when resigning, but the specific reason cited in their resignation letter is crucial for determining eligibility for unemployment benefits and the timing of those payments. The National Insurance Institute (Bituah Leumi) and employers may interpret the same departure differently, potentially leading to financial losses for the employee.

For instance, a mother resigning seven months after childbirth to care for her baby is legally considered dismissed and entitled to full severance. However, if she registers with the employment service in the same week, Bituah Leumi might classify her as a voluntary resignation, imposing a 90-day waiting period before unemployment benefits begin. This discrepancy arises because the criteria for "valid reasons" for resignation differ between severance pay law and unemployment benefit regulations.

A 34-year-old worker earning 12,000 shekels gross monthly, who resigned after four years due to his partner's illness, illustrates the potential financial impact. While his full severance entitlement is 48,000 shekels, with 34,600 shekels in his severance fund, his employer must pay an additional 13,426 shekels. If his resignation is deemed a valid reason, he could receive approximately 21,300 shekels in unemployment benefits for the first three months without the 90-day wait, totaling around 34,700 shekels. The difference stems from the 6% employer contribution to severance funds, covering about 72% of the total compensation.

Valid reasons for severance pay eligibility, requiring at least one year of employment and a direct link to the departure, include significant worsening of working conditions (like salary cuts or demotion), personal or close family health issues, resignation to care for a child within nine months of birth, relocation over 40 kilometers due to marriage or spouse's work, or mandatory military service. Bituah Leumi's list for waiving the 90-day unemployment benefit waiting period is shorter, including worsened conditions, health problems, sexual harassment, or relocation making the commute over 60 kilometers (or over 40 kilometers for mothers of children under seven).

To secure full compensation, employees must clearly state the valid reason in their resignation letter, framing it as a dismissal under the Severance Pay Law. The author advises citing reasons like worsened conditions, illness, or relocation. If conditions worsen, employees should formally notify the employer and allow a reasonable time for correction before resigning. The severance pay, up to a tax-exempt limit of 13,750 shekels per year of employment, must be paid by the employer on the last day of work, or within 15 days. Employees can pursue unpaid severance through the Ministry of Labor's enforcement unit or the regional labor court within seven years of termination.