Navigating employment termination in Israel requires careful adherence to local labor laws, which are designed to protect employee rights while providing a framework for employers. Understanding the specific requirements for notice periods, severance pay, valid grounds for dismissal, and mandatory procedures is crucial for ensuring compliance and avoiding potential legal challenges. Both employers and employees must be aware of their rights and obligations throughout the termination process.
Israeli labor law provides a structured approach to ending employment relationships, emphasizing fairness and due process. Key aspects include mandatory notice periods based on tenure, the right to severance pay after a qualifying period, and strict procedural steps, such as conducting a pre-termination hearing. Employers must also be mindful of protected employee categories who have additional safeguards against dismissal.
Notice Period Requirements
Israeli law mandates specific minimum notice periods that an employer must provide to an employee before termination, and vice versa. The required notice period depends on how the employee is paid (monthly or daily/hourly) and their length of service with the employer.
For employees paid on a monthly basis:
| Length of Service | Minimum Notice Period |
|---|---|
| First 6 months | 1 day per month of work |
| 7th to 12th month | 6 days + 2.5 days per month starting from the 7th month |
| After 1 year | One month |
For employees paid on a daily or hourly basis:
| Length of Service | Minimum Notice Period |
|---|---|
| First year | 1 day per month of work |
| Second year | 14 days + 1 day for every two months in the second year |
| Third year | 21 days + 1 day for every two months in the third year |
| After 3 years | One month |
It is important to note that the employment contract or a collective agreement may stipulate longer notice periods, which would then apply. The employer can waive the employee's requirement to work during the notice period but must still pay the employee for this period (payment in lieu of notice).
Severance Pay
Severance pay (known as Pitzuei Pikurim) is a significant component of employment termination in Israel. Generally, an employee is entitled to severance pay if they have completed at least one full year of employment with the same employer or at the same workplace and are dismissed. There are also specific circumstances where an employee resigning may be entitled to severance pay (e.g., resignation due to health reasons, relocation, or deterioration of working conditions).
The standard calculation for severance pay is one month's salary for each year of employment or a pro-rata amount for a portion of a year. The "salary" for severance calculation typically includes the base salary and any fixed, regular allowances that are considered part of the employee's ordinary wages.
A crucial aspect is the arrangement under Article 14 of the Severance Pay Law. Under this arrangement, employer contributions made to a pension fund or provident fund on behalf of the employee can be designated as replacing the employer's severance pay obligation, either fully or partially. If an Article 14 arrangement is in place and the employer has made the required contributions (typically 8.33% of the employee's salary), the funds accumulated in the employee's pension/provident fund from these contributions belong to the employee upon termination, regardless of the reason for termination, and the employer is generally released from the obligation to pay additional severance for the period covered by these contributions.
Grounds for Termination
Employment in Israel can be terminated for various reasons, broadly categorized as termination with cause and termination without cause.
- Termination Without Cause: An employer can terminate an employee's contract without specific misconduct or performance issues, provided they follow the correct procedures, give the required notice, and pay severance pay (if applicable). This is the most common type of termination.
- Termination With Cause: An employer can terminate an employee for specific reasons related to the employee's conduct or performance, such as:
- Serious misconduct (e.g., theft, fraud, insubordination).
- Repeated or significant poor performance that has been documented and addressed.
- Breach of contract or company policies.
Even when terminating for cause, the employer must still follow the correct procedures, including conducting a pre-termination hearing. In cases of severe misconduct, the employer may be exempt from paying severance pay, but this is often subject to legal interpretation and challenge.
Certain employees benefit from enhanced protection against dismissal and cannot be terminated without a special permit from the Ministry of Economy and Industry (or other relevant authority), even if there are grounds for termination. This includes pregnant employees, employees on maternity leave, employees undergoing fertility treatments, employees on reserve duty, and employees receiving certain work injury benefits.
Procedural Requirements for Lawful Termination
Israeli law places significant emphasis on the process of termination to ensure fairness. The most critical procedural requirement is the pre-termination hearing (שימוע - Shimua).
The steps for a lawful termination process typically include:
- Written Invitation to a Hearing: The employer must send the employee a written invitation to a pre-termination hearing. This invitation must clearly state the reasons for considering termination and provide the employee with sufficient time (usually a few days) to prepare.
- The Hearing: The hearing must be conducted in good faith. The employee has the right to present their case, respond to the allegations or reasons for potential termination, and bring a representative (e.g., a lawyer, colleague, or union representative). The employer must genuinely consider the employee's arguments before making a decision. Minutes of the hearing should be taken.
- Written Decision: Following the hearing, the employer must issue a written decision regarding the employment status. This decision should explain whether the employment is being terminated and the reasons for the decision, taking into account the points raised in the hearing.
- Written Termination Letter: If the decision is to terminate, a formal written termination letter must be provided. This letter should state the effective date of termination, the notice period given (or payment in lieu of notice), and details regarding final payment, severance pay, and release of funds from pension/provident funds.
- Final Payment and Documentation: The employer must provide the employee with their final salary payment, including payment for accrued vacation days, sick days (if applicable), and any other outstanding entitlements. The employer must also provide the necessary forms for the employee to claim unemployment benefits and release pension/provident funds.
Failure to conduct a proper hearing is a common pitfall and can render the dismissal wrongful, even if there were valid grounds for termination.
Employee Protections Against Wrongful Dismissal
Israeli law provides employees with significant protections against wrongful dismissal. A dismissal may be considered wrongful if:
- It is carried out without a proper pre-termination hearing.
- It is based on discriminatory grounds (e.g., religion, race, gender, sexual orientation, age, marital status, parenthood, political views, union activity).
- It occurs during a protected period (e.g., pregnancy, maternity leave, reserve duty) without the required permit.
- It is in retaliation for reporting violations or engaging in protected activities.
- It violates the principle of good faith.
If an employee is found to have been wrongfully dismissed, they may be entitled to remedies, which can include significant financial compensation (often up to 12 months' salary or more, depending on the circumstances) or, in rare cases, reinstatement to their position. Legal proceedings for wrongful dismissal are common, highlighting the importance of strict adherence to legal requirements throughout the termination process.
