Payroll

This section covers Payroll laws, rules and practices including minimum wage, severance pay, vacation pay and more.

Is preliminary hearing notification via whatsapp legal?

Moshe

In a recent court case, The labor court reprimanded an employer who notified an employee of a date set for a preliminary hearing prior to possible dismissal.

The court said “This is not another regular directive to an employee regarding his day to day job duties, but rather a possible life-altering event! As such, it should be handed to the employee in person (printed and signed letter), giving the employee a minimum amount of respect.

That said, the court did not find any other issues with the preliminary hearing process that was carried out properly and therefore did not award the employee any compensation for this misdemeanor.

court case סע”ש 40162-06-19

Are you a salaried employee or self-employed ?

Moshe

Are you a salaried employee or self-employed ?

There is a huge difference ! Not only in the benefits you are entitled to, but in regard to your responsibilities. No, I am not talking about your social benefits or your salary. I am talking about Social Security (or Bituach Leumi as it is known in Israel). Before you say that of course you know what your status is, I suggest you read this post through to the end. It may have some eye-opening surprises for you that can have serious impact on you, financially.

Many people own companies or are suppliers of services as self-employed. There are people who work legitimately as salaried employees, and some do a little of both.
Others have start-ups they run from home: anything from selling things, to doing work over the computer, whether it be building internet sites or translating work, or whatever.  It is this last group that this post is targeting.

First, it is important to understand that while both self-employed and salaried employees pay Social Security, the rates are different and so is the coverage for various stipends as well as the base amounts for the stipends.

If you are considered by Bituach Leumi to be self-employed, but you are reported on a company’s payroll (not a placement or manpower agency), that fact does not make you a salaried employee. What counts is your actual status. Bituach Leumi, by law, can change a person’s status one-sidedly and even retroactively ! As a result of such a change they can demand back payment at the rates that existed for self-employed persons ! If you received in the past, during the said changed period, a stipend from Bituach Leumi, your eligibility for that stipend may be re-evaluated and even disallowed.

Recently, a verdict was released by the labor court in a case of “stage and communication ltd” and others vs. Bituach Leumi (case # 5062/06). Bituach Leumi one-sidedly changed the status of certain “employees” in the company. The company and the employees filed suit in labor court contesting the change.
The court, asked the simple basic question “did employee-employer relations exist between certain employees who were on the company’s payroll as salaried employees and reported as such ?”. The verdict explicitly stated that there were no such relations and these “employees” should have been reported as self-employed for all purposes.

The Judge stated in his verdict the following: “The model of employment, which all of the plaintiff companies involved in the suit, used was in actuality a front. These companies only designation was to relieve self-employed people from the burden of managing their affairs with the tax authorities and the defendant (Bituach Leumi). There is no relationship or connection between the plaintiff companies and the services the employees, who were reported as salaried workers, provided to the recipients of the services. The only reason the employees were on payroll as salaried employees was to avoid having to manage their affairs with the authorities.”

This is a precedent setting, important verdict, the first of it’s kind, in a very lengthy case.

This is how you can check yourself to see if you qualify as a salaried employee or as a self-employed person

Answer the following questions truthfully. If your answer to any of these questions is negative, this very well could mean that you are self-employed:

1. Is there someone who arranges your schedule at work ?

2. Is there someone at work who assigns or re-assigns you to a project/position ?

3. Is there someone at work who has the power and authority to fire you and terminate your job ?

4, Is there someone at work that you need to request vacation leave from ? Or to notify regarding tardiness, sick days, reserve army duty, etc  ?

5. Is there anyone at work who supervises your work and you report to as a superior ?

6. Is there any type of time-sheet reporting and follow-up for your work hours and days ?

and if your answer to any of these questions is positive this very well could mean that you are self-employed:

7. Do you decide which clients/ jobs to accept and which to reject ?

8. Do you negotiate with clients the price they will pay or determine the cost for jobs ?

9. Are your wages implemented by sharp up and down changes due to the cash inflow that you receive from third parties ? And as a result is it difficult to point out your monthly base pay ?

10. Is payment of your wages delayed until the amount is received in full from a third party ? (not paid on a set date)

If the answer to these questions is negative, chances are you are not eligible to be a salaried employee. You need to register as a self-employed individual at your local Bituach Leumi office in order to ensure your rights. Don’t wait for them to rescind your salaried employee’s rights retroactively. More information can be found on Bituach Leumi’s website:  www.btl.gov.il

This is not something to be taken lightly !

Social Security for household workers

Moshe

Unknown information can be like a mountain

The rights of employees are defined by labor laws and the Social Security (Bituach Leumi) law defines who is defined as a salaried employee for Social Security purposes. The labor courts in Israel have adopted the Social Security law when trying to determine whether someone was a salaried employee or self-employed. The implications are wide-ranging because there are many issues such as mandatory pension, work and rest hours, sick pay, vacation just to name a few.

In this post, I aim to give an overview of the Social Security law regarding workers who are employed in household work, their rights, and their employer’s responsibilities in this regard.

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General

A household worker is insured according to the Social Security law as a salaried employee. The payment of  Social Security for a household worker is the employer’s responsibility. This law applies to anyone, even if they are not a resident of Israel.

Who is considered a household employee?

A household worker is one who is employed in various household chores, under the condition that the work is not being done for the business or profession of the employer, rather, for the employer’s personal or family’s needs. A few examples of household workers: maintenance, gardener, cleaning person (including cleaners of a shared property – stairway cleaners in an apartment building), caretakers of elderly or disabled people.

Note: Family members are not usually considered household workers, unless there are actual employer-employee relations between them. If someone employs a family member in household work the employer needs to sign a declaration as such at their local Social Security office.

Who is considered an employer of a household worker?

An “employer of a household worker” is anyone who employs someone in household work for more than 6 days, even if those days are not consecutive. A one-time home cleaning job would not fall under this category, However, employing someone on a weekly basis or several times a week would.

The responsibilities of an employer of a household worker

  1. The employer is required to register the employee at their local Social Security office within two weeks of commencement of employment.
  2. The employer and employee should have a written agreement of terms of employment, signed by both sides.
  3. There is no requirement to issue a payslip, as the employer is not a company.
  4. All labor laws apply: Work & Rest hours, Protection of salary, Vacation, Sick days, Mandatory pension, Severance pay, Overtime, Advance notice upon resignation/termination, etc.

Why is this an issue and why is it important?

If god forbid a household employee should be injured in a work related accident and need medical treatment or hospitalization, the employee is insured by Social Security who covers the cost of the related expenses, loss of work ability insurance and/or disability stipends. Failure by an employer to register the employee and pay Social Security for said employee may result in a law suit by Social Security against the employer. This holds true for a va’ad bayit (apt. bldg committee), as well.

In addition, all residents are required by law (mandatory health insurance law, 1995) to be registered with one of the health funds (kupat cholim).
Household workers – payment for health insurance is 1% of their total pay. 

Percentages of payment for employer and employee

The payment is as follows:
Employer = 5.25% Social Security
Employee = 1% Social Security and 1% health tax = total 2%
   This amount is deducted from the payment to the employee and transferred along with the Social Security by the employer.

Reporting and payment of Social Security for household workers

The reporting is done via form 614 four times a year;
1. On the 20th of April, for the period January – March
2. On the 20th of July, for the period April – June
3. On the 20th of October, for the period July – September
2. On the 20th of January, for the period October – December of the previous year.

The form can be filled out and paid at any post-office or bank or online on the Social Security’s website.

The amounts are in shekels with no agurot (rounded-off to the nearest shekel).

Late payments incur fines and the amounts owed are linked to the consumer index.

know and do it right

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This article is NOT legal advice, nor is it meant to be. It is also not a translation of the law, but rather an explanation. In any case of contradiction between this article and the law, the wording of the law prevails. In cases where legal assistance may be needed please consult with a certified attorney.
Private paid consultation is available: moshe.israpay@gmail.com

Are work contracts mandatory ?

Moshe

All employers are required to issue either a work contract or an “employer’s notice of employment terms and conditions” to all employees within 30 days of starting employment. If the employees are youth (under 18) this must be done within 7 days of starting employment. Any change in the employment terms and conditions must also be issued to an employee within 30 days of the change (7 days for employees under age 18).

The only changes that do not require notification to the employee are:
1) Changes due to laws, comprehensive ordinances, collective agreements.
2) Update in salary listed in original contract or employer notification (although it is recommended).
3) A change that is itemized on the payslip.

The regulations state that for an employer to be considered as complying with this regulation the following information must be included in either the work contract or the notification:
1. Employer’s name
2. Employer’s address
3. Employee’s name
4. Employee’s address
5. Employee’s job title and discription of main duties and responsibilities
6. Full name and job title of employee’s direct supervisor
7. Address / location where employee is to be employed
8. Employee’s work days and hours and length of work day
9. Employee’s weekly rest day
10. Employee’s salary and any other payments he/she is entitled to
11. All social benefits employee is entitled to, their % or amounts
12. Employee’s start date, and duration of contract (if applicable)

The notification needs to be signed by the employer. In cases of foreign workers, it needs to be in the foreign worker’s native tongue or a language that they fully understand and be signed by both the employer and the employee.
Failure to comply may result in any or all of the following scenarios:
1) lawsuit in labor court by the employer – there is a specified amount that can be claimed for failure of the employer to comply which can be awarded by the court without need to prove any monetary damage.

There are three separate forms for employer notification to employees:
1. Employer’s notification form of details & terms of employment.
2. Employer’s notification form of contributions towards social benefits (pension, study fund, etc)
3. Employer’s notification form of change in terms of employment (any of the above information that changes require this notification)

All 3 forms are available for download on the Ministry of Economics website: Working Conditions Notification Forms

In work contracts for “net pay” who gets the new “family net” benefits, employer or employee ?

Moshe

The “family net” plan, or Kachlon law (named after the Finance Minister Moshe Kachlon) which recently went into effect retroactively from January 2017 added tax credit points for parents of children under 5 and made equal the tax credit points for those children given to men and women. The law will be in effect for the tax years 2017 and 2018 only, unless the knesset decides to add in additional years. If not, the tax credits will return to present state in Jan 2019. Everyone knows that employees with regular gross salaries will receive a larger net pay as a result of this law. But what happens when an employee’s work agreement lists his salary as net ? In general, changes that occur to the tax brackets in a net pay salary will lower the employer’s expense by lowering the gross pay and as a result the taxes, while the employee’s net pay remains unchanged.
In general it seems that this is acceptable practice. But in cases where substantial tax benefits are given to employees, such as the 2001 Negev residents tax benefit, the lawmakers intent was to give this benefit to the employees and not to employers of Negev residents. the same would apply here regarding the Kachlon law. A recalculation of the new net pay would need to be done by using the gross pay, pre change and after adding the change configuring the new net pay.

The above is not legal advice nor is it a replacement for seeking such legal advice. It is the professional opinion of the author based on a labor court decision regarding net pay and tax benefits.

Employers – 6 simple rules to follow and substantially illiminate law suits by employees

Moshe

From our years of experience, it is very clear that employers who follow these six simple rules (which just happen to be labor laws and regulations that are mandatory for all empployers, in both public and private sectors, in Israel) will reduce drastically the number of suits by employees and former employees. Most of the lawsuits filed in recent years deal with these issues. They are really simple to adhere to and can save you literally time and money.

1. Sign all new employees, within 30 days of their start date (or within 7 days of start date if they are under 18 years of age), on a notification of employment conditions or a contract. This should be done prior to starting to work, or first thing on the first day of work along with other technical things like filling out 101 tax form, issuing a time card, etc
If you use a contract it must contain all of the information on the notification of employment terms form, which is downloadable here:
http://economy.gov.il/Employment/WorkRights/WorkingRelationshipsCreation/Pages/WorkingConditionsNotification
This will illiminate any disputes regarding terms of employment of employees and possible monetary lawsuits for failure to provide this for sums of up to 15,000 sh without need to prove any damage.
A new notification needs to be issued any time that any of the mandatory details change.

2. Make sure all employees have received their salary, payslip and time-sheet by the 9th of the month following the month of salary being paid (For example: June salary – by July 9th). Make sure the payslip is itemized and clear and includes all mandatory information required by law. Eliminate future lawsuits for up to 5,000 sh for each payslip, without need to prove damge. Failure to provide a time-sheet can result in lawsuits for overtime pay and a fine for each month for each employee by the regulation dept of the Ministry of Economics.

3. Do not fire an employee before correctly holding a preliminary hearing according to protocol and avoid lawsuits of tens of thousands of shekels for Illegal termination.

4. Keep track of all employee’s sick days and vacation days balances to avoid unnecessary disputes during employment and possible monetary lawsuits for failure to do so.

5. Insure your employees with mandatory pension plan after six month’s tenure, if they dont have a previous pension plan, or after three month’s tenure if they do have a previous pension plan – in which case its retroactive to the employee’s start date.

6. The more you are transparent with your payslips: itemizing each payment separately and clearly it will be easier understood and avoid any unnecessary disagreemtns and future lawsuits.

Israpay has over 20 years experience in implementation, setup and fine-tuning payroll programs and we will be happy to assist you in ensuring you comply with all the labor laws, regulations and statuary instructions. Get in touch today and see how we can help you save time and money !

Youth minimum wages – Jan 2017

Moshe

Due to the mandatory raise in minimum wages in Israel, the minimum wages for youth was also updated.

up to age 16 = 3,500 sh for a monthly wage or 20.23 sh /per hour.

up to age 17 = 3,750 sh for a monthly wage or 21.68 sh /per hour.

up to age 18 = 4,150 sh for a monthly wage or 23.99 sh /per hour.

In addition, for full time, the work week for youth is 40 hours and 173 hours per month. For partial work (not full time – prorated accordingly)

All youth need to be given an employer’s notification of terms and work conditions within 7 days of their start date and monthly payslips and timesheets, same as adult employees.

The Israeli Pay Slip – An In-depth Explanation for The Perplexed

Moshe

As with most things, payroll is much more complicated in Israel than in other countries. In January 2009 a new law was passed to ensure uniform mandatory information that must be specified on all pay slips.

The purpose of this article is to familiarize you with the terminology and help you understand what is printed on your pay slip. For those of you working, it is highly advised to examine your pay slip each month in order to ensure that there are no mistakes. Understanding what was paid/deducted from your pay is critical and to your benefit.

Continue reading “The Israeli Pay Slip – An In-depth Explanation for The Perplexed” →

Everything you wanted to know about Financial sanctions to employers

Moshe

dollar stacks

The second addition of the Increasement of regulation law empowers the Ministry of Economics, Department of regulation of labor laws to impose financial sanctions on employers who are found in violation of labor laws, such as minimum wage, sexual harassment, failure to supply an employee with notification of terms of employment, etc.
The infringements are divided into three categories of financial sanctions with a distinction made between an employer who is not a business and a business:

Level Business Non-Business
level one ₪5,110 ₪2,550
level two ₪20,420 ₪10,210
level three ₪35,740 ₪17,870

A complete list of the infractions and which level they are assigned to is on the Ministry’s website: http://www.economy.gov.il/Employment/WorkRights/WorkRightsEnforcement/Pages/FinancialSanctionSums

The Ministry of economics can file a suit against the employer in court, which if convicted, is a criminal offense! The names and details of the employers who were fined are listed on the Ministry of Economics website.
To help avoid these situations it is recommended to consult with a payroll expert like Israpay who can help employers fine-tune their payroll practices, payslips, etc according to the law. Get in touch today !

Before you apply for a job – must read !!!!

Moshe

You decide to apply for a job, or better yet, you applied and were invited to an job interview. Wait a second, not so fast !!!
The Ministry of Labor and social affairs within the Ministry of Economics has a list of employers that you are not going to want to miss reading prior to applying for a job with one of them.
This list is a list of offenders of labor laws that were fined by the department of regulation, who do spot checks on employers as well as acting on tips and complaints from the general public.
The full list can be seen here:
http://www.economy.gov.il/Employment/WorkRights/WorkRightsEnforcement/FinancialSanctions/Pages/default.aspx

Tax credit point update (Kachlon law) June 2017

Moshe

The Israel Tax Authority published a new directive to employers on May 28, 2017 regarding tax credit points to parents of children who are salaried employees via their payslip.
1. The number of tax credit points will now be equal for men and women. All parents are now eligible for 1.5 tax credit points in the year their child is born and 2.5 tax credit points in the years the child is age 1 to age 5.
2. This directive is effective for the tax years 2017 and 2018 only (from Jan 2019 it is cancelled, unless an extension is approved by the government).
3. Effective in June 2017 salary (to be paid by July 9, 2107), employers will credit their employees to whom this applies with the additional tax credit points, retroactive to January 2017.
For women: In the year the child is born you will receive 1.5 tax credit points (instead of 0.5 up until now) and in the years the child’s age is 1-5 you will get 2.5 tax credit points (instead of 2 up until now). You can elect to defer 1 tax credit point of the 1.5 allotted for each child to the following tax year (2018). This is done by filling out a 116 D tax form and giving it to your employer (HR or salary dept). You will need to also fill out this form in 2018 (section dalet).
Men do not have this option of deferring tax credit points.
For men: In the year the child is born you will receive 1.5 tax credit points (instead of 1 up until now). In the years the child’s age is 1-2 you will receive 2.5 tax credit points (instead of 2 up until now) and in the year the child’s age is 3 you will receive 2.5 tax credit points (instead of 1 up until now) and in the years the child’s age is 4-5 you will receive 2.5 tax credit points (instead of none up until now).
This will lower taxes on working parents salaries and raise their net pay. The tax credit points are monthly.
Employers: you need to keep this form 116 D with the employee’s 101 tax form.