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Regulation of the Severance Pay under the Palestinian Labor Law

In cooperation with the Faculty of Law and Public Administration, the Institute of Law (IoL) at Birzeit University held the fifth legal encounter in the 2009-2010 Legal Encounters season. IoL hosted Mr. Farid Jallad who made a presentation on the Regulation of the Severance Pay under the Palestinian Labour Law.

Mr. Ahmed Nassrah, lecturer in law at the Faculty of Law and Public Administration at Birzeit University, welcomed the audience. In addition to lawyers, legal advisors and law students, the legal encounter brought together representatives of labour unions, Ministry of National Economy, Ministry of Justice, and insurance companies.

In his opening remarks, Jallad highlighted the relevance of regulating severance pay under the Palestinian Labour Law No. (7) of 2000 to a broad sector of Palestinians. The Palestinian society largely relies on workers, who are subject to provisions of the Labour Law. Promulgated nine years ago, the Labour Law was drafted under critical political conditions. The Palestinian legislature could not issue forth the law immediately after it had been endorsed. The law was published only a year and a half later.

According to Jallad, provisions of the Palestinian Labour Law were drafted as to provide protection to workers as well as make clear their rights and duties. Therefore, these provisions should be interpreted in the interest of workers. Following a prolonged conflict between labour unions and employers, the Labour Law was promulgated in order to preserve workers’ rights. Jallad also explained that provisions under the Labour Law are closely associated with the economic situation in Palestine. An improved or deteriorated economy will impact workers accordingly.

With respect to the regulation of severance pay, Jallad stated that Article (45) under the Palestinian Labour Law provides that the severance pay will be counted on the basis of one month for each year the worker spends at work, on condition that the worker has spent more than one year at the workplace. Consequently, the worker who has not spent the prescribed period may not obtain the said honorarium.

Addressing the bases for calculating the severance pay, Jallad explained the concept of the ‘salary for the purposes of calculation’ as provided in Article (1) under the Labour Law. Severance pay is calculated on the basis of the last salary a worker has received. Citing Article (42/2) which provides a different method for counting the severance pay in the case of resignation, Jallad concluded that the said provision applies to other cases of service termination other than revocation of the employment contract.

According to the Palestinian Labour Law, estimation of the severance pay exceeds the amount prescribed under the Jordanian Labour Law No. (21) of 1960. Pursuant to the latter Law, severance pay is counted on the basis of one month for each of the first three years of employment as well as half a month for each of the ensuing years, provided that the total of pay does not exceed the total salaries of nine months.

Jallad raised a question about the manner of calculating a worker’s severance pay during the period of their work, which precedes enforcement of the Palestinian Labour Law. Will the severance pay be counted for the period preceding enforcement of the Law in line with the basis prescribed under the Law in force then? Will the severance pay be counted according to Article (45) under the Palestinian Labour Law for the period ensuing enforcement of the Law?

In conclusion, Jallad admitted that the severance pay is established during each year of employment. It is a cumulative right, to which workers are entitled at the end of each year of employment. The severance pay will also be cumulatively due by the employer until a worker’s service is de facto terminated. Establishment of the severance pay means that it applies to each year of employment. The date on which this right is established will be the date of de facto entitlement as long as it does not rise at once. Jallad also asserted that certain employers do not calculate the severance pay every year, considering it to be preserved for workers. Employers claim that the Law prescribes that the severance pay is disbursed to workers following termination of their service.