Pitsuim (Severance Pay) Calculator — Israel
Pitsuim is statutory severance pay in Israel: one month's salary per year of service, paid when employment ends for any reason (resignation in good faith, dismissal, retirement, death). Section 14 of the Severance Pay Law allows employers to deposit monthly into pension funds in lieu of cumulative liability — most modern contracts use Section 14 arrangement.
Section 14 vs Cumulative Liability
Section 14 of the Severance Pay Law (1963) lets employers deposit monthly contributions into employee's pension fund instead of carrying cumulative severance liability. Standard rate: 8.33% of monthly salary (1 month per year ÷ 12). At termination, the employer is released from further liability for the period covered. Most post-2008 employment contracts include Section 14 — check your contract.
Tax Exemption Mechanics
Section 9(7a) of the Income Tax Ordinance exempts severance up to 13,310 ILS per year of service (2026 cap, indexed annually). For 6.5 years service: 86,515 ILS tax-free. Above exemption, the excess is taxable income — at high marginal rates. Section 8 lets you spread severance over 6 years if used for retirement — significant rate reduction for older employees.
When Pitsuim Is Not Owed
Resignation for non-protected reasons (career change, relocation by choice, dissatisfaction without unbearable working conditions) generally does not trigger Pitsuim unless you've worked 7+ years (then 50% is owed in some collective agreements). Termination for proven serious misconduct can be cause for partial or full forfeiture. Always consult employment attorney for borderline cases.
Source: Severance Pay Law 5723-1963, Income Tax Ordinance Section 9(7a), Israel Ministry of Labor 2026 indexed amounts. Last updated: May 2026.