Section 14 (Severance Savings)
The Israeli employment mechanism that converts mandatory severance-pay liability into ongoing monthly deposits, freeing employers from lump-sum exposure at termination.
Under Israeli law, every employee who is terminated is entitled to severance pay equal to one month's salary per year of employment. Section 14 of the Severance Pay Law converts this lump-sum liability into ongoing monthly deposits — typically 8.33% of salary — directed into the employee's pension or severance fund. Once the employer elects Section 14 and the deposits are made, the accumulated fund belongs to the employee and the employer is released from any additional severance obligation at termination. This is the mechanism that makes Israeli labor costs predictable: without Section 14, employers carry a growing, unfunded liability on every employee that compounds with tenure. With it, the cost is current and the balance-sheet risk is zero. Section 14 interacts directly with Kupot Gemel and the 2008 Pension Reform — the deposits route through the same institutional savings infrastructure that handles pension and provident contributions via the maslaka.