The rules on severance pay in detail

In general, an employee who is dismissed after completing at least one year of service with a particular employer or in a particular workplace is entitled to statutory severance pay. The calculation is based on the employee’s monthly base salary in effect at the time of termination multiplied by the number of years’ service (prorated where applicable). 

On dismissal, the employer must pay the statuary severance pay, less the amount accrued in the severance component of the employee’s pension arrangement. Beneficial severance entitlements may also stem from other binding sources applicable to the parties.

The parties may choose to adopt an arrangement pursuant to Section 14 of the Severance Pay Law. This arrangement provides that the amount accumulated in the severance component can be paid in full satisfaction of the employer's statutory severance pay obligation. This means that, at the time of termination, the employer need only release the amount accrued in the severance component, subject to compliance with required conditions.

A Section 14 arrangement also provides that the accrued amounts of the severance component will usually be released to the employee however the employment relationship ends, including resignation, which generally, would not entitle an employee to severance pay. 

In addition to severance pay, an employer is generally entitled to prior notice of termination, all or part of which may be paid in lieu, and to receive any other outstanding entitlements, including to outstanding vacation and recuperation pay.

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Author: Herzog Fox & Neeman

Date: December 2018


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