Employee Benefits

You can find information in Hebrew on the employee benefits and legal rights that are required by law in Israel at the of employees to the benefits guaranteed by law at the Ministry of Industry and Business site (www.tamas.gov.il). The Israeli The Ministry of Industry, Trade and Labor also posts "unofficial" English language explanations of Israeli Labor Laws

General Overview

The information below is a summary of the benefits as I understand them. However I am neither a lawyer nor an expert on Israeli law. You are responsible for checking this information with an authoritative source.

Vacation Days

During the first 4 years the law mandates 2 weeks. This number goes up gradually and steadily up to 4 weeks.

Vacation has to be coordinated with a manager/supervisor, but an employee is entitled to take a certain number of days consecutively. A company can mandate vacation (e.g., a week in the summer, chol ha'moed, etc.), and an employee can be forced to take vacation even if it will put the employee into a deficit of vacation days. Vacation can be accrued, up to a limit, after which the employee simply loses them. Technically, a company cannot prevent an employee from using vacation time, but practically speaking, it happens, especially to those in managerial positions. However, some companies make provisions for exchanging vacation days for pay.

Havra'ah (Rest and Recovery)

An employee is entitled to Havra'ah pay annually. An employee must be employed for a given period of time before this is applicable (6 months? possibly one year), but it must be paid retroactively. In other words, if companies pay Havra'ah in July, and a new employee begins in February, the new employee will receive nothing the first year, and Havra'ah for a year and five months the second year. The law currently mandates 5 days for the first year, 6 for the second and third, 7 for the fourth, and so on. The current rate listed is 318 NIS per day.

Travel

A company must pay an employee's travel, at the rate of a bus pass. If an employee has a company car, this satisfies the requirement.

It is fairly common for various companies to take some portion of an employees global pay and call it "travel" expenses. Benefits are not paid on this portion. There is a minimum that the employer must pay, but there is also a maximum, such that if an employee moves and chooses to spend large sums of money commuting, the employer's liability is capped.

Bituach Menahalim, Kupat Gemel, and Severence Pay

Bituach menahalim is common to the point of being expected, and as a rule, it consists of some package, often customized somewhat per employee, including future savings (pension component), insurance components (life insurance, ovdan kosher avoda, etc.), and severance pay. Of this, only the severance pay is mandatory, and at that, it only has to be paid for an employee that worked for at least a year.

That having been said, there are very few if any decent companies that do not offer a full bituach menahalim package.

Severance pay must be paid to an employee who is terminated by the employer after at least 12 months of work. Most high-tech companies, whether they write it into an employee's contract or not, will pay out the money or at least some portion of it, regardless of who initiated the termination, provided the employee was not fired for cause (e.g., embezzlement, etc.).

It should, however, be duly noted, that often, if there is no financial reason to withdraw the money immediately, it is important to consider whether the money from severance payments should be withdrawn as soon as it is available, because it is taxable upon withdrawl. As such, it is often best left for the future (when possible), when incomes are lower and changes in financial circumstances lead to lower tax brackets.

The Israeli government publishes the financial results for these plans at http://gemelnet.mof.gov.il/Tsuot/UI/DafMakdim.aspx.

Updated information taken from the Nefesh B'Nefesh site (http://www.nbn.co.il/site/kb/questions/438/Pension+Plans):

On January 1, 2008, a law went into effect requiring employers to provide pension plans for their employees and regulating their terms. Prior to the passing of this law, only about 50% of employers offered pension plans. Though Bituach Leumi (the National Insurance Institute) provides retirement benefits, the amount is generally not sufficient to cover the reasonable living expenses of retirees.

According to the new law, all employers must open a pension plan (Keren Pensia) for their employees after 6 months of employment. This applies to both full and part time employees but is not obligatory when employment is on a freelance (“atzmai”) basis. An employer is not obligated to provide retroactive pension plan contributions for the initial 6 months of employment.

This law is being instituted in stages. In the first stage, the minimum contribution by the employee is 1.66% of his gross (“bruto”) salary while the employer must contribute a total of 3.33%. The employee’s portion goes toward the pension plan exclusively. The employer’s 3.33% is broken down as: 1.66% toward the employee’s pension and 1.67% toward “pitzuim” (severance pay which, under Israeli law, an employee who is fired is entitled to receive at the rate of one month’s salary for each year that he worked.)

These calculations are based on an average monthly (gross) salary of 7800 NIS. If an employee earns less than that amount, the percentages remain the same. Some employers offer a perk to their employees and contribute higher percentages. By law, both employer and employee are allowed to contribute up to 5% of the gross monthly salary toward the pension plan and the employer can contribute up to 8.33% toward the severance pay (pitzuim). The pension law will eventually require both the employer and employee to contribute these amounts, though, as yet, no date has been esetablished.

The government also now regulates the actual investment, meaning the percentage of the investment that can be high risk is lowered by law as the employee gets closer to retirement age.

The pension fund covers three scenarios:
 
  1. Pension: At retirement age, (67 for men, 65 for women) the individual will receive a monthly payment. In the past, the retiree was able to opt for a lump sum distribution rather than monthly payments, but the new law requires that payments be made monthly.
  2. Disability (“Kitzvat Nechut”):  Every pension fund allows for disability coverage, but the coverage only kicks in when it is determined by a physician that the employee is at least 75% disabled and has been unable to work for at least 90 days. And, the amount of monthly disability is reduced by the sum that Bituach Leumi (National Insurance) pays the disabled employee. For example, if the employee is entitled to a 2000 NIS monthly disability payment from his pension fund and Bituach Leumi pays 1000 NIS a month, he will only receive 1000 NIS through the pension fund.
    Because of these terms, some employees choose to take out private disability insurance which has more favorable terms. It starts earlier than 90 days, requires a lower percentage of disability and isn’t reduced by the amount of the Bituach Leumi payments.
  3. Life Insurance (“Kitzvat Shearim”, literally, “allowance for heirs”): Under the pension plan, the surviving spouse will receive 60% of what the deceased would have been entitled to had he/she lived to retirement age. If, at the time of death, the deceased had children under the age of 21, there is a supplement to which the family is entitled until the child or children reach the age of 21.
Please note:

  1.  
    1. The benefits to which the beneficiary of a pension plan is entitled differ based on the age at which he/she entered the plan.
    2. The sums that are put aside for the pension plan are reduced from the gross monthly salary and, as a result, lower taxable income. Therefore, when an employer offers a higher percentage, it is considered to be an employment perk.

Keren Hishtalmut (Education Fund)

This is pre-tax money deposited on an employees behalf in a non-taxable fund. The common arrangement is the employer contributes 7.5%, and the employee contributes 2.5%. This is not mandatory. Not all companies have this. Most large ones do.

A keren hishtalmut can be withdrawn (tax-free) after 6 years. An interesting note for those who have multiple karnot hishtalmut: In principle, if one keren hishtalmut has matured (6 years have passed) and you leave it untouched, it makes your others available as well.

The Israeli government publishes the financial results for these plans at http://gemelnet.mof.gov.il/Tsuot/UI/DafMakdim.aspx.

Updated information taken from the Nefesh B'Nefesh site (http://www.nbn.co.il/site/kb/questions/438/Pension+Plans):

Keren Hishtalmut is an employee savings plan.  It is not obligatory upon an employer to offer it to an employee, but rather it is considered to be a perk. These plans are typically offered to government workers and those in hi-tech related fields. Those who are self-employed also have the option of opening a Keren Hishtalmut privately.

Generally, the employer contributes 7.5% of the employee’s monthly salary while the employee contributes 2.5%. The funds put aside by the employer are not taxable either at the time of deposit or withdrawal, and this amount does not appear on the employee’s salary stub. Both the principle and the interest are tax free. The employee’s portion (2.5%) is taxable.

The funds put aside for a Keren Hishtalmut are closed for 6 years. The beneficiary of the plan can withdraw the money after the 6th year but is not obligated to do so.

Medical Insurance

This is not the norm in Israel, but is becoming more common.

Stock Options

Stock options for technical writers are not the norm, but they are not uncommon either.

Company Car

Many hi-tech companies allow their employees to give up part of their gross income in return for use of a company car. This usually includes all maintenance costs and a gasoline allowance, but details vary from employer to employer. A small number of companies offer this as an additional benefit, unrelated to giving up gross salary.

Company Cell Phone

Company policy on company cell phones for their technical writers varies. This benefit is taxed.

Unemployment Insurance

Employers are required to deduct 5% of your salary and pay a certain percentage of your salary to Bituach Leumi (National Insurance). Among other things, this is for unemployment insurance. You can find more details at the Bituach Leumi site (Hebrew...)  (English...)

Who is Your Employer and Who is Responsible for the Above Benefits?

This is not always clear, especially for employees of subcontractors and personnel agencies when the employee works in-house for a single client. 

It appears that under certain circumstances section 12 A of the  "Law on Employment of  Workers by a Human Resources Company, 1996" can make the client of a subcontractor or human resources company responsible for providing benefits to employees supplied by the subcontractor/HR agency. You can find information and a copy of the law in Hebrew at http://www.ovdim.org.il/Page10910.asp .

 

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