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.
