II. We take this opportunity to delve into more detail of some of the laws/provisions referenced above.
Notice of Employment Terms and Conditions
Even if current law did not already require it, we would suggest that it is important for parties to a contractual relationship to have at least the basic terms of that relationship concretized in writing to minimize disputes.
The Notification Law (Employment Conditions) – 2002 obliges every employer to provide employees with a written notification within 30 days from the beginning of the employees’ employment. The notice, which constitutes an employment agreement, must include details regarding the employment conditions, such as the date the employment commences (and if the employee is hired for a fixed period, the date the employment is to end), a general description of the job, the salary and other payments, including the times when these payments would be transferred to the employee), regular working hours, social payments, etc. The Law also states, that if employment conditions change during the employment period, the employer must provide the employee with written notification within 30 days. An employment contract which includes the conditions stated in the official form of Notice, can satisfy the obligation of the Notice (which is why it is often included as an appendix in Israel employment contracts).
Severance Pay/Pitzui Piturim
Generally, according to the Severance Pay Law – 1963, an employee, who has worked for his employer for a year, is entitled to severance pay, at the rate of one month’s last, regular salary for each year of employment at his/her employer, provided that the employment is terminated by the employer without cause (the parameters of “cause” are not within the scope of this article but in this context requires an egregious act by the employee). Under certain circumstances, an employee may be entitled to severance pay upon his resignation due to constructive termination (i.e. under particular conditions, if the employee can prove that he was forced to resign). There are other limited situations in which an employee may be entitled to severance pay, even if he resigned at his/her own discretion based on a list of conditions set forth in the law such as:
constructive termination: resignation compelled by employer such as material worsening of employment conditions (Haraat Tenaim);
- change of control of employer;
- death of employee – payable to heirs as well as death of employer;
- illness preventing continued employment (proof required and circumstances considered);
- a woman who resigns within nine months after giving birth to a child (and in some cases regarding adoption), in order to care for the child;
- resignation because a female employee was in a shelter for battered women if she was in the shelter for a period of sixty days or more;
- when a person changes his residence due to a new marriage, or if he moved to a settlement or an area of agricultural development;
- non-renewal of a fixed term employment contract unless the employer offered to renew the contract;
- entering regular army service or continuing serving in national service after already serving for six months;
- a seasonal employee who resigns after working for 3 consecutive seasons (180 working days) for an employer who couldn’t promise continuous employment in the future;
- retirement upon reaching retirement age;
- joining the police or prison service.
Some employers may voluntarily pay their employees severance pay, even if the employees would not otherwise be entitled by law or contract. Some employment agreements may entitle employees to more generous severance terms than those provided by the law (i.e. parachutes).
Even before the mandatory pension law came into effect, many Israeli employers insured themselves against their potential obligation for the payment of severance pay, through Bituach Minahalim (Managers Insurance) policies or pension plans. Depending on how these plans are structured, funded and established, release of the amounts accumulated on behalf of particular employees may cover some or all of the employer’s obligations for severance pay. We will address the new pension law below.
Notice of Resignation/Termination
In advance of terminating the employment relationship, the party seeking the termination (whether it is the employer who is terminating the employee or the employee who is resigning) must provide the other with advance written notice, pursuant to the Advance Notice of Termination and Resignation Law – 2001.
The length of the advance notice period to which the recipient is entitled, in the absence of agreement to more generous terms, depends on such factors as the type of employment basis (e.g. daily, monthly, open-ended) and the amount of time that the employee worked for that employer (generally, the notice period will be 30 days after a year of employment).
The employer may decide to allow (or require) the employee not to come to work during the advance notice period, but must still pay his/her normal salary during that period. The parties may agree on a longer notification period than that prescribed by the law if it is reciprocal, but not on a shorter one.
Generally, the obligation to provide the advance notice applies in the absence of termination (by the employer or employee, as relevant) for cause.
Upon termination, the employer is also required to provide the employee, within the earlier of 14 days of the date of termination or a week of the employee’s request, with written confirmation of the period of the employee’s employment (including beginning and ending dates). Under some circumstances, the managers or directors can be personally liable for payment of part of the fines that may be assessed by the Labor Court for lack of compliance with the law.
Keren Pentzia (Pension Plan)
Pension plans typically include coverage for a combination of retirement pension payments, severance, disability coverage and life insurance. Payment towards the plan is made both by the employer and employee. In 2007, the State promulgated an Extension Order which imposed a requirement upon all employers in Israel to provide at least a minimum pension benefit to virtually every employee in Israel.
Unemployment Payment (דמי אבטלה)
Employers withhold and disburse monthly payment of a percentage of their employees’ salary to Bituach Leumi. Among other things, this payment provides an employee with insurance for unemployment payments (calculated as a percentage of their salary), if and when their employment comes to an end. To qualify for unemployment, an employee must be an Israeli citizen, have been previously employed for 12 out of the last 18 months, and must register with and report to the Israeli Employment Service to receive assistance in job-hunting.
An employee who is terminated and meets the criteria for unemployment benefits, is immediately eligible to receive unemployment; whereas, if the employee resigns, s/he must wait a 3 month period before qualifying.
Aside from resigning or being terminated, there is a third category of employees who may be entitled to unemployment benefits: those on leave without pay / chalat (חופשה ללא תשלום / חל”ת). While this concept was relatively unknown in years past, it became a popular “trend” in dealing with the complexities of the economic volatility during the COVID-19 pandemic. Chalat essentially pauses an employment relationship for a limited period of time following a mutual agreement between employer and employee. If an employee fulfills the criteria mentioned above and is on chalat for more than 30 days, s/he may qualify for unemployment. During COVID-19, the Government eased the criteria to temporarily include those who were employed 6 out of the last 18 months.