Severance pay by salary and seniority
The table is produced by the calculator's own engine, applying the rule of one month's salary per year of service. Amounts are the gross entitlement before tax and before settling against the fund.
| Final salary | 3 years | 5 years | 10 years | 20 years |
|---|
| ₪6,000 | ₪18,000 | ₪30,000 | ₪60,000 | ₪120,000 |
| ₪8,000 | ₪24,000 | ₪40,000 | ₪80,000 | ₪160,000 |
| ₪10,000 | ₪30,000 | ₪50,000 | ₪100,000 | ₪200,000 |
| ₪12,000 | ₪36,000 | ₪60,000 | ₪120,000 | ₪240,000 |
| ₪15,000 | ₪45,000 | ₪75,000 | ₪150,000 | ₪300,000 |
| ₪20,000 | ₪60,000 | ₪100,000 | ₪200,000 | ₪400,000 |
| ₪25,000 | ₪75,000 | ₪125,000 | ₪250,000 | ₪500,000 |
| ₪30,000 | ₪90,000 | ₪150,000 | ₪300,000 | ₪600,000 |
A partial year earns proportional severance
Section 12 states explicitly that "a part of a year following a year of employment entitles the employee to proportional severance pay". On a salary of ₪15,000 that means ₪3,750 for an additional 3 months, ₪7,500 for 6 months and ₪11,250 for 9 months. The basic entitlement itself arises only after one continuous year, under section 1 of the law.
The 6% gap: what the employer still owes on dismissal
This is the part most calculators miss, and it is what determines how much money actually changes hands. The mandatory pension expansion order requires the employer to provision 6% to the severance component, not 8.33%. A simple calculation shows why that is not enough: 6% times 12 months equals 0.72 of a monthly salary per year of service, while the law entitles the employee to a full month.
From this follows a rule that is easy to remember: a 6% provision covers exactly 72% of the entitlement, and the top-up the employer owes is always exactly 28% of it - at every salary, at every seniority, without exception.
| Final salary | Seniority | Statutory entitlement | Accrued at 6% | Top-up required | Accrued at 8.33% |
|---|
| ₪10,000 | 5 years | ₪50,000 | ₪36,000 | ₪14,000 | ₪49,980 |
| ₪12,000 | 5 years | ₪60,000 | ₪43,200 | ₪16,800 | ₪59,976 |
| ₪15,000 | 5 years | ₪75,000 | ₪54,000 | ₪21,000 | ₪74,970 |
| ₪15,000 | 10 years | ₪150,000 | ₪108,000 | ₪42,000 | ₪149,940 |
| ₪20,000 | 10 years | ₪200,000 | ₪144,000 | ₪56,000 | ₪199,920 |
| ₪25,000 | 15 years | ₪375,000 | ₪270,000 | ₪105,000 | ₪374,850 |
Note the last column: even a provision of 8.33% leaves a tiny gap, because 8.33% times 12 equals 99.96% rather than 100%. On a salary of ₪25,000 with 15 years of service that is only ₪150, but it is the reason some agreements specify a rate of 8.3333%.
The three states of section 14
Section 14 of the Severance Pay Law provides that "a payment to a provident fund, a pension fund or a similar fund shall not come in place of severance pay unless so provided in the collective agreement applying to the employer and the employee and to the extent so provided, or if such payment was approved by order of the Minister of Labour". In practice there are three states, and the calculator handles all three.
| State | On dismissal | On resignation |
|---|
| Section 14 does not apply | Full statutory entitlement. The fund balance is credited against the debt and the employer tops up | Generally no entitlement, and the money in the fund reverts to the employer |
| Section 14 applies to 6% | The fund money belongs to the employee, and the employer tops up 28% of the entitlement | The accrued balance stays with the employee, with no top-up |
| Section 14 applies in full (8.33%) | The fund balance is the severance. No top-up even if the balance is below the entitlement | The balance stays with the employee in full |
The practical implication for the employee: under full section 14, the amount you receive is not necessarily the final salary times seniority. If your salary rose sharply in recent years, the balance will be lower than the theoretical calculation, and the employer is not obliged to top it up. If fund returns were strong and the salary was stable, the balance may actually exceed the theoretical entitlement. That is why the calculator lets you enter the real balance from your fund statement instead of relying on an estimate.
Tax on severance pay: the 2026 exemption ceiling
Severance pay is not automatically tax exempt. The exemption is granted up to the lower of two options: the final salary times 1.5 times the years of service, or the annual exemption ceiling times the years of service. In 2026 the ceiling stands at ₪13,750 per year of service, unchanged since 2024 (in 2023 it was ₪13,310).
| Final salary | Seniority | Total severance | Exemption ceiling | Tax exempt | Taxable | Est. tax at 31% |
|---|
| ₪10,000 | 10 years | ₪100,000 | ₪137,500 | ₪100,000 | ₪0 | ₪0 |
| ₪15,000 | 10 years | ₪150,000 | ₪137,500 | ₪137,500 | ₪12,500 | ₪3,875 |
| ₪20,000 | 10 years | ₪200,000 | ₪137,500 | ₪137,500 | ₪62,500 | ₪19,375 |
| ₪25,000 | 10 years | ₪250,000 | ₪137,500 | ₪137,500 | ₪112,500 | ₪34,875 |
| ₪30,000 | 10 years | ₪300,000 | ₪137,500 | ₪137,500 | ₪162,500 | ₪50,375 |
| ₪20,000 | 20 years | ₪400,000 | ₪275,000 | ₪275,000 | ₪125,000 | ₪38,750 |
| ₪30,000 | 20 years | ₪600,000 | ₪275,000 | ₪275,000 | ₪325,000 | ₪100,750 |
Two conclusions follow directly from the numbers. First: any qualifying salary above ₪13,750 produces a taxable portion, regardless of seniority - because the ceiling is denominated per year, exactly like the entitlement, so seniority scales both sides equally. Second: the 1.5 multiplier only bites below ₪9,167, since only there is 1.5 times the salary smaller than the ceiling. On a salary of ₪8,000 the annual exemption is ₪12,000 rather than ₪13,750; above ₪9,167 the ceiling always governs.
Severance continuity and tax spreading
Anyone facing a large taxable amount does not have to pay the tax immediately. There are two lawful ways to defer or reduce it: severance continuity, leaving the severance money in the fund and carrying it to the next employer or into a pension, and tax spreading, dividing the taxable income across several tax years to use lower brackets. Both require handling with the assessing officer via form 161, and are worth examining before the money is withdrawn - a decision made in error at the withdrawal stage is very hard to reverse afterwards.
What counts towards the qualifying salary
The salary you enter into the calculator is not the gross figure on the payslip. Regulation 1 of the Severance Pay Regulations 5724-1964 sets out a closed list of components.
| Counts towards the qualifying salary | Does not count |
|---|
| Base salary | Overtime |
| Seniority increment | Travel reimbursement |
| Cost-of-living increment | Car and phone allowances |
| Family increment | Bonuses and grants |
| Departmental or professional increment (as part of base salary) | Commissions and incentives |
If the salary is paid without a component breakdown, the ordinary wage without increments applies. The gap between payslip gross and qualifying salary can be very large for employees with a company car or commissions, so entering the full gross will produce an inflated result.
Cases where the standard calculation does not hold
A change in employment scope
Regulation 7 provides: "where an employee moved from full-time to part-time work or from part-time to full-time work, the final salary shall be calculated for each of the employment periods according to the salary immediately before dismissal, in proportion to the degree of partiality". In other words the seniority is split into periods and each is computed at its own scope. An employee who worked 6 years full-time and a further 4 years at half-time is not entitled to 10 half-time salaries, but to 6 full salaries plus 4 half salaries.
A salary reduction before dismissal
Regulation 8 protects the employee: "where a reduction occurred in an employee's salary as a result of which the final salary fell, the salary of the employee immediately before the reduction shall be treated as the final salary for the period preceding the reduction". The period before the cut is computed at the higher salary.
Output-based or turnover-based pay
Regulation 9 provides that where the salary is paid wholly or partly for the performance of specific work or as a share of turnover, "the average salary of the twelve months preceding the dismissal shall be treated as the final salary". This is the only place the twelve-month rule applies, and it is aimed at commission and piece-rate workers - not at hourly workers generally, as is often claimed.
A full worked example
An employee with a qualifying salary of ₪18,000, seniority of 7.5 years, section 14 applying to 6%, and a 31% marginal tax bracket:
| Step | Calculation | Result |
|---|
| Statutory entitlement | ₪18,000 × 7.5 | ₪135,000 |
| Accrued in the fund at 6% | 6% × ₪18,000 × 90 months | ₪97,200 |
| Severance top-up | ₪135,000 less ₪97,200 | ₪37,800 |
| Exemption ceiling | ₪13,750 × 7.5 | ₪103,125 |
| Tax exempt | Up to the ceiling | ₪103,125 |
| Taxable | ₪135,000 less ₪103,125 | ₪31,875 |
| Estimated tax | 31% of the taxable portion | ₪9,881 |
| Net in hand | ₪135,000 less the tax | ₪125,119 |
When resignation still earns severance
The law recognises situations in which a resignation is treated as a dismissal for severance purposes. Among them: a material worsening of employment conditions or circumstances in which the employee cannot reasonably be expected to continue, relocation on the terms the law defines, the health of the employee or a family member, resignation by a parent after childbirth on the statutory terms, and conscription to regular military or police service. Where section 14 applies, the money accrued in the fund stays with the employee in any event, including on an ordinary resignation - one of the main benefits of the arrangement from the employee's side.
More calculators in this cluster
Severance is one component of employment cost. These tools complete the picture:
Not sure how to budget a hire or a termination inside your growth plan? Talk to us.
Sources
The figures on this page were verified against primary sources on 7 August 2026: the Severance Pay Law 5723-1963 (sections 1, 12 and 14), the Severance Pay Regulations (Calculation of Compensation and Resignation Deemed Dismissal) 5724-1964 (regulations 1, 7, 8 and 9), the Severance Pay Rates for a Wage Worker Regulations 5743-1983, and information on the 2026 tax exemption ceiling from Kol Zchut. The exemption ceiling is updated annually by the Israel Tax Authority; if you are reading this page in a later tax year, confirm the current ceiling.
