Everything you wanted to know about Financial sanctions to employers

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 !!!!

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

Minimum wage update – April 2013

Effective from April 2013’s payroll the minimum wages will be updated as follows:

Monthly rated employees

Apprentices 2,580.-
up to age 16 3,010.-
from age 16 to age 17 3,225.-
from age 17 to age 18 3,569.-
age 18 and up 4,300.-

Daily rated employees

  5 day work-week  6 day work-week
Apprentices

119.08

103.20

up to age 16

138.92

120.40

from age 16 to age  17

148.85

129.-

from age 17 to age 18

164.72

142.76

age 18 and up

198.46

172.-

Hourly rated employees

Apprentices 14.91
up to age 16 17.40
from age 16 to age 17 18.64
from age 17 to age 18 20.63
age 18 and up 23.12

These rates are mandatory for all employees in Israel, regardless of sector (public and private), industry, vocation or tenure.
Employers who pay less than the above minimum wages risks penalty (stiff fines and even imprisonment) and prosecution in Labor court, by the Ministry of Industry, Trade and Labor, as a criminal felony  for violation of Labor laws.

 

Employers: Do you have issues with employees incorrectly filling out 101 forms ?

According to income tax regulation 2: “all employees are required to fill out an employee card (101 tax form) at the start of employment with a new employer and on the 1st of January of each subsequent year. The form includes: the employee’s personal information and sources of income. In addition, the employee is required by law to report any change in the information supplied on the form, within a week of the change.” Responsibility for the accuracy of the information is the employee’s only. The employee signs at the end of the 101 form a statement stating that all the information is correct. Supplying incorrect information is a criminal offense. The 101 tax form has instructions, but they are not too explicit.  Employees who do not understand what or how to fill out the form should ask the payroll accountant for help. Veteran payroll accountants attach written instructions to employees along with the form, correctly knowing that any mistakes in filling out the forms will come back to them in the end and they will need to chase after employees to “get it right” or deduct maximum tax, which just causes extra work.

Most employers have issues with employees filling out their annual 101 tax form. In some instances they leave out important mandatory information, in other cases they forget to check the boxes regarding the type of payment they are receiving from the employer or whether they have any other source of income. These things, while correctable in most cases during the tax year, can be very problematic in that until they are rectified, they may incur a maximum tax deduction from the employee’s salary. There can even be serious repercussions, by way of unnecessary fines in the case of an audit by the tax authorities.

The employer in general, and the payroll accountant specifically need to ensure that the proper form is being used (it’s updated frequently and can be found under “forms” on the Tax Authority’s website: http://taxes.gov.il/Pages/TaxesFastForms.aspx

It is important to note that each time a tax form is updated, all previous versions become obsolete and invalid from that point on. Using an outdated form can also result in fine ! However, all computerized payroll systems have the option of printing out pre-printed 101 forms with both the employer’s info as well as the employee’s info as it appears in the program. This is actually a time-saver as it allows the employee to double-check and correct only when information is incorrect or has changed, check the relevant boxes and sign the form, instead of filling out the form from scratch. This usually takes only a few moments. The responsibility for updating the 101 form in the payroll program is the Program’s responsibility.

The employer is responsible for keeping these forms on file along with any letters from the tax authority regarding their employees tax credits, exemptions or reconciliations.

Good news !

The tax Authority has launched an initiative that will not only simplify the 101 tax form process, but it will ensure zero mistakes and do away with the need to get the forms to the employees and get them back in a timely manner, as well as eliminating the need to keep them on file, thus saving space and becoming environment friendly (no more paper) !

So how does this work ?

The tax Authority issued instructions for procuring an electronic 101 tax form which is available here:
http://taxes.gov.il/IncomeTax/Pages/IncoeTaxMeidaMaasikim.aspx
look for the item dated May 20, 2012 – there are two. the top one is the one you need (9 page document) and it includes the application form for the employer (pages 8 and 9)

 

As of Jan 2013, this is voluntary, but highly recommended. Keep reading…….

The employer needs to fill out a request to be included in the criteria for filling out electronic 101 forms and use the system. The request needs to be submitted to the Tax Authority not later than 2 months prior to the end of the tax year in order to use the system for the next year.

(Employers who wish to develop their own system for electronic 101 tax forms or companies who sell payroll programs, or the use of them to employers need to submit 4 months prior to the end of the tax year)

The process

After submitting the form, the employer will receive written approval from the Tax Authority  along with access codes to a secure site and instructions. In general, employees can access the secure site via a unique and personal password ensuring privacy. the employee will update all personal and income information. Any time there is a change in an employee’s information, the employee will log onto the secure site and repeat the process, changing the necessary information. All forms after finalization by the employee become locked PDF files and each update becomes a newer version. All versions are kept on-line and accessible to both the employer and the employee. In cases where employees do not complete the process, it will automatically incur maximum tax (currently 48%) on the employee’s annual salary.

 

The above information is taken from the Israel Tax Authority’s publications and is not a translation of those publications.

Disclaimer:  Israpay has done it’s best to explain this issue in easy to understand terms, however should any discrepancy be found between the information contained in this blog post and the Tax Authority’s referendums and notifications to employers, the latter will prevail. This information is intended as a service and is not legal advise in any way or form. It reflects the author’s opinion only and is not to be taken as more than general information and a friendly recommendation that may be worth checking out. There may be restraints, in the employer’s payroll program or otherwise, that currently will not enable the employer to currently implement use of the electronic 101 tax form.

 

Youth employee ? Download new application to know your rights !

The Ministry of Industry, Trade and Labor has launched an application that can be downloaded for free to an Iphone and will soon be available for smartphones too. If you are between the ages of 14-18 and employed or if you have children or grandchildren who are, this is for them !

What will this enable users to do ?
1. Know your rights and the employer’s lawful responsibilities towards youth
they employ.

2. Enable youth to keep track of their hours in an organized manner.

3. Salary calculator to figure out what you are owed.

4. Contact details for complaints to the Ministry’s labor law enforcement dept.
if they feel their employer is not obeying the laws.

5. Enable users to define a goal to save for, and enable them to track how many
more hours of work they need to reach their goal.

 

For now this application is available only in Hebrew.

It is downloadable from the Ministry’s website, here:

http://www.moital.gov.il/NR/exeres/46273C9D-B2FF-4DB3-A4ED-8D80E5BAC62F,frameless.htm

Employer ! This one is for you

If you employ workers in Israel, regardless of the size of your business, how many people you employ or even the nature of your business or it’s location, you need to read this blog post. It can literally save you legal hassle, fines and in extreme cases imprisonment ! (that’s right – imprisonment, you read correctly)

In attempt to enforce labor laws in more efficient fashion, the government passed several laws in recent years, the latest of which, will go into effect on June 19, 2012 and deals with severe repercussions against employers who are found to be in violation of these laws. This due to the fact that up until the law was passed, any violations by an employer required the affected employee to suit in labor court. This was a lengthy process that lasted years and was not effective in deterring employers. The government in it’s search for quicker punishment and stricter enforcement used a series of new laws. These laws give the Ministry of Industry, Trade and Labor the power to do surprise spot checks on employers, requesting to see documents, such as payslips, time-sheets, contracts and more. The enforcement of regulation is handled by a new department setup specially for this purpose. These laws cannot be waived by an employee and a contract that denies them or diminishes them is invalid and not legal.

To start with, the laws that are being investigated by the investigators are:

  1.  Work and rest hours law

    There must be 8 hours break between work days and 36 hours between the last day of work in a week and the first day of work in the new week. Overtime must be paid for overtime hours worked – unless the employee was notified that there is no paid overtime, unless the employee receives prior written consent. Less than 8 hours between work days, the hours worked are all considered part of the previous day (overtime hours).

If there is no time-clock and an employee claims he worked overtime, it is the employer needs to be able to prove otherwise and refute the claim. If he can’t prove that the employee didn’t work the hours, (for example by producing the employee’s time-sheet) he will have a serious problem. If an automated computerized system does not exist, both the employee and employer need to sign the time-sheet each and every day !

 2.  Minimum wage law

   Base pay of at least 22.04 sh per hour (gross) or 4,100 sh per month (gross) – this obviously does not include travel expenses or other mandatory payments.

3. Mandatory pension law

For all employees after 6 months of tenure or immediately if the employee has an existing plan that is live (deposits were made in the last 3 months prior to start date with present employer. This needs to be itemized on the pay slip according to the % in effect, employee and employer portions as well as severance pay portion (employer).

4. Woman’s employment law

5. Youth employment law

6. Protection of wages law

Criminal offences are specified in section 25 b, including not issuing a payslip on time, issuing payslips that do not include all mandatory information, deduction of sums from an employee’s pay not in accordance with the wording of the law, not paying salaries on time, deduction of sums from an employee’s pay and not transferring them to the appropriate party to whom they are meant on time (social benefits, etc)

7.  Dealings with employment agencies
First of all, all employers who use employment agencies or third party companies (outsourcing) must ensure that they have a valid license to operate in Israel from the Ministry of Industry, Trade and Labor. Contracting a company who is not licensed is a criminal offense.

Secondly, the responsibility to ensure that the employees they employ on your premises receive minimum wage, payslips, overtime, etc is now your responsibility ! Any clause in a contract between an employer and an employment agency that stipulates the responsibility is the employment agency’s alone and that the employer has no responsibility or dealings with this – are rendered illegal and not valid – even if the contract was signed prior to the new law going into effect. What does this mean ? Well, basically, employers who employ workers via employment agencies (guards, cleaning staff for example) now need to reconstruct their contracts with the employment agency to include a clause that they can request at any given time, any document that will prove that the labor laws are being complied with for the employees they employ at the employer’s location(s). This means that your payroll controller needs to check the employment agency’s time-sheets and payslips periodically. Any infraction of the labor laws by the employment agency, the employer needs to send a letter of notification of the infractions and demanding rectification immediately or this will considered a breach of contract which will result in termination of the contract.

The idea behind this is simply that the place of employment cannot close it’s eyes and say that they are not responsible because they aren’t their employees. the employer hired the employment agency, so now he is responsible for this too. The consequences could be a fine for both the employment agency and the actual place of employment who hired them.

If you have questions about working with employment agencies, contact the Ministry of Industry, Trade and Labor – 03-7347425 (Efrat Gur) or  Hasdara-k@moital.gov.il

8. Foreign workers law

The Ministry of Industry, Trade and Labor published a foreign workers rights handbook on their site – You can read it in English here:

http://www.moit.gov.il/NR/exeres/C95B7D30-1105-47C7-85D8-17B26C284C31.htm

What happens if Moital’s regulation dept. finds flaws in any of the subjects ?

They can issue fines from 2.5k-35k for each misdemeanor for each employee, they can start legal prosecution of the employer and the CEO (or holder of position as it’s defined in the law) can be held personally responsible and be fined as well. The employer is not allowed to pick up the tab for the CEO (it is not a recognized expense) and it is forbidden to purchase insurance against this sanction. For many small businesses /employers this can be a serious threat to their existence – do not take chances !

To wrap this up, my advice to employers is simple:

1. Issue written notification to all employees on their terms upon start of employment and upon any change of their terms, including termination. Employer’s who have written contracts with employees should continue to do so in addition to this notification.

Example copies of these forms as well as what information needs to be included in them can be found on The Ministry of Industry, Trade and Labor’s website: http://www.moit.gov.il

2. If you do not have one, purchase a computerized time-sheet program (preferably one that is compatible with your payroll program) and inform all employees that clocking in and out is mandatory.

3. Make sure your employee’s payslips have a detailed breakdown of their vacation and sick day balances.

4. Make sure you are paying according to law and all payments are itemized separately on the employee’s payslips.

5. Company policy on various employment issues should be made public (sent out to all employees via email for example)

6. Make sure all employees  receive a hard-copy payslip each month.

Remember !
Not knowing the law is not a valid excuse and doing things properly will ensure you have no issues with the Ministry of Industry, Trade and Labor’s regulation department. Don’t say you weren’t warned.

Employers interested in consultation on implementation of issues contained in this blog, including determining a suitable time-sheet system or other payroll, labor law issues are welcome to contact me at: moshe.israpay@gmail.com

We are here to assist you in doing your job according to the law.