Severance pay calculator for Israel

These common cases show the severance pay and the part of it that is taxed.

Each figure is one month's last salary for every year of work. The part above ₪13,750 for each year of work is taxed as income in 2026.

Severance pay is one month of your last salary for every year you worked.

1. For every year of work the employer owes a month of your last salary (Severance Pay Law, section 12).
2. A part of a year after a full year counts in proportion, so six more months earn half a month's salary (section 12).
3. A worker paid by the hour or the day gets a month's pay for every year too, for work since 1 August 1983 (Severance Pay Regulations, 1983).
4. The salary is your last one. A temporary change in pay is ignored, and pay for a given job, as a share of takings or by the amount produced is averaged over the 12 months before you left (Severance Pay Regulations, 1964, regulations 4, 6 and 9).

This is the pay the law sets. A contract or a collective agreement can give more, and the law keeps those rights (section 31).

You are entitled to severance pay in these cases, and not in others.

• You were dismissed after working a year in a row for the same employer or at the same workplace (section 1(a)).
• Your fixed-term contract ended and the employer had not offered to renew it at least three months before the end (section 9).
• You resigned because your working conditions got materially worse, or for other reasons that make it unreasonable to expect you to carry on (section 11(a)).
• You resigned because of your own health or a family member's, when the medical findings and your working conditions gave good reason (section 6).
• A mother who resigned within nine months of giving birth, or of adopting or taking in a child, to look after the child. A father counts in the cases the same section lists (section 7).
• You resigned because you moved home in one of the cases the regulations list, such as moving to marry, or to a farming community or a locality in a development area (section 8; Severance Pay Regulations, 1964, regulation 12).
• You resigned shortly before regular army service, or after reaching retirement age (section 11(c) and (e)).

Severance pay is not owed in these cases.

• You resigned for any other reason, because the law counts only the resignations it lists as dismissal.
• You worked less than a year. A dismissal shortly before the first year ends is presumed to be meant to avoid paying, and does not take the right away (section 3).
• A collective agreement, or a labour court where there is none, says the circumstances justified dismissal without severance pay, or with only part of it (sections 16 and 17).

Severance pay up to ₪13,750 for each year of work is free of income tax in 2026.

The Income Tax Ordinance (section 9(7a)) frees a retirement grant from tax up to one month's last salary for each year of work, and never above ₪13,750 for each year, as it notes for every year from 2024 to 2027. The Israel Tax Authority lists severance pay as that grant, and a part of a year counts in proportion.

For example, 10 years at ₪20,000 a month come to ₪200,000: ₪137,500 is free of income tax and ₪62,500 is taxed as income.

You can ask the tax office to spread the taxed part over several years. The Tax Authority's directive on spreading allows up to six tax years back from the year you got the money, and forward only if you worked at least six years, with one year for every four years worked and six at most.

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