salary

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 !

Special ways to hand out payslips

Moshe

In the past I have been asked many times whether sending a payslip via email or posting it on a website is legal. It never reached the court system for a ruling, but the lawmakers, realizing the advances in technology, addressed the issue by updating a new statute in the protection of salary law.

On July 26, 2017 a new statute was added to the protection of salary law (special ways to hand out payslips) was publicized in the records thus making it officially part of the law. The statute states:

An employer may hand out payslips by one or more of the following special ways detailed below, in place of printed payslips;

    1. Via secure internet site on the employer’s behalf * to which an employee may access with initial password supplied by the employer, whereby the employee can view his payslip.

    * An “internet site on the employer’s behalf” is a site that serves the employer and the following two conditions are met:
    A. Allows access to the data saved on it after the employee has been personally identified.
    B. Protective measures are taken, on a regular basis, against unauthorized penetration and disruption of proper useage.

    2. Sending the employee’s payslip to an email address provided by the employer (work email) via an email program.

    3. Sending the employee’s payslip to the employee’s private email address.

      The conditions under which this statute apply are:

    1. The employee agrees and signs written consent to waive receipt of printed payslip via waiver form (see below).

    2. The payslip can be printed at anytime in the future upon demand.

    An employee can retract this consent at any time in the future, in writting, including email notification and the employer will act accordingly from the month after the notification is received.

    The payslip, issued in one of the above special methods, the following directives shall apply:

    1. Issuing the payslip will be done by the determined date (the date salaries are deposited in the bank).

    2. In case of sending payslip to the employee’s personal email address – the employee shall acknowledge receipt, in writting (reply email) shortly after receiving the payslip, and no later than 5 days after the determined date, that
    he has received the payslip.

    3. An employer who has not received email confirmation from an employee acknowledging receipt of the payslip within 5 days of the determined date will issue a printed payslip no later than 10 days after the determined date.

    An employer who issues the employee’s payslip in one of the special ways described above will enable the employee to receive a printed payslip, upon request, for a period of no less than 7 years from the determined date for supplying the employee a payslip according to law.

    An employer who issues payslips via secure internet site, via employee access with password shall allow access to payslips for a minimum period of 12 months from the determined date for supplying the employee a payslip according to law.

    The employer is required to take protective measures that will not allow changes to the payslips that are issued according to this statute.

    The following is an English language wording of the form that needs to be signed by the employee. Note this a legal document and the employer should keep the signed form in the employee’s file.

    Form of consent to receive payslips via electronic media

    Part A

Employee’s name ____________________ Israeli I.D. # ________________________

Name of employer _____________________ Place of work (location) _____________________________

Email address to which payslips will be sent or address of employer’s site to which payslips will be accessable ______________________________________

Employee will choose the method he prefers and check the applicable box accordingly.

I, the undersigned whose details appear above hereby give my consent to receive my payslip for my work in the manner specified below and I am aware that by doing so I waive my right to receive a printed payslip on the determined date according to the law, however I will retain access to the payslip according to statute 3 (A)

[ ] 1. Sent to my email address in the employer’s email system as listed above.

[ ] 2. Via a secure website on the employer’s behalf, accessable by personal password. The site address and password have been provided to me by the employer.

[ ] 3. Sent to my personal email address as listed above.

Note: the employer may erase two of the three options above allowing only one of the options, but he may not erase option 4 below !!

[ ] 4. I, the undersigned whose details appear above do not agree to receive my payslip for my work via electronic methods in any of the 3 options above. I hereby request receipt of a printed payslip each month by the determined date according to the law.

    Part B

This section is to be filled out and signed by the employee only when option 3 above has been chosen as the method in which the employee will receive his payslip.

1. The private email address above has been given to the employer by me and with my consent. I hereby state that this email address is in my own personal use.

Employee’s signature ________________________________ Date __________________________

I have chosen the option to receive my payslip via my personal email address (option # 3), my consent to receive my payslip via this option is with my understanding of all of the following:

1. I am aware that external email systems and accounts are not under the employer’s control.

2. Receiving this form to fill out and sign is the employer’s obligation to take all reasonable measures to ensure that access to my payslips and viewing the information on them will be done soley by me, or with my permission, and at the least the employer has taken measures for encoding the data in order to protect my privacy.

3. Despite the above, I am aware of all of the following:
A. I agree that my payslips be sent to an external email system and the data may be exposed to third parties, amongst them the service provider of the external email service.
B. There is no guarantee that the external email system contains protective measures from hackers, unapproved access and disruption of functionality.
C. It is possible that the data will be lost, not be saved or will not reach the desired destination due to circumstances that are not under the employer’s control.
D. It is possible that the data is stored outside of the borders of the country of Israel and this may have an impact on my rights regarding the usage of the data.
E. I am aware that it is highly recommended that I personally save and backup the payslips that are sent to me via this option.
F. This consent of mine is in effect from now on and until further written notification by me that I have rescinded my consent.

Employee’s signature ________________________________ Date __________________________

Note: This is not legal advice, nor is it meant to be. The purpose of this post is to enhance employee and employer awareness to this addition to the protection of salary law.
The wording is my own and not a literal translation. In any case of contradiction between this post and the law, obviously the wording of the law applies. Employers may use the wording of the above by copying the wording into a word document.

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.

The right to an hour off work/day when spouse is in active reserve army duty

Moshe

IDF soldiers in action
The women’s employment law was updated on July 3, 2017 (correction 58). Accordingly, an employee will be eligible to be absent from work for one hour per day during the period of time when their spouse is in active reserve duty (miluim) in the I.D.F. under the following circumstances:

1. The period of the spouse’s active reserve duty is no less than five consecutive days.

2. The employee has at least one child under age 13.

3. The employee is employed in a full-time position as accepted in place of employment.

4. The employee notified the employer of the intent to utilize this right and presents the employer with a copy of the spouse’s proof of actual active reserve duty.

The above applies to men and women.
Payment for above hours are not to be deducted from salary.
This does not apply to employees who are eligible for paid parent (breast feeding) hours or pregnancy hours.

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” →

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.

July 2016 updates

Moshe

Effective in July 2016’s payroll there will come into effect several changes in labor laws:
1.  Mandatory pension law

Correction 12 to this law was updated, adding 1% to employee and employer pension plan contributions in a two step update: 1/2% in July 2016 and another 1/2% in jan 2017.
The current update (July 2016) % are now Employee 5.75% and Employer 6%.
This effects all employers in Israel in all sectors by way of a comprehensive ordinance signed by the Minister of Economy. The only exceptions are if the exsisting % are higher (due to a collective agreement or personal contract) or if an employee has a Bituach Menahalim plan or pension plan with lower rates but the employer contributes to a loss of work ability insurance (IWA), whereas the joint % of the Bituach Menahalim and lWA insurance is equal to or higher than 6%. In this case, only the employee’s contribution will increase, as the employer is already contributing at the new % or more.
For comparison, here is a breakdown of pre-change and after:

 

payroll Employee contribution Employer contribution Severance pay (employer) Total
Jan 2016 5.5%    6% 6% 17.5%
Jul 2016  5.75%  6.25% 6% 18%
Jan 2017  6%  6.5%   6% 18.5%

 

2. Vacation day law
The minimum number of mandatory Annual vacation days allotted is to increase by 2 days starting July 1,2016 (In essence 1 day for 2016 as it for half a year) for the first 5 years of tenure with the same employer. Above 6 years there is no change.

tenure                                      # of days allotted

up to June 30, 2016                                                         1 – 4 years                                              14 days
5  years                                               16 days

From July 1, 2016 – Dec 31,2016                                1 -4 years                                                15 days
5 years                                                 16 days

From Jan 1, 2017                                                                1- 5 years                                               16 days

Note: The number of days listed are calendar days, not work days and as such they include the weekly rest day (Shabbat) which is not a vacation day. For example employees who worked a 5 day work week got 10 days for the first 4 years (.083 days per month * 12) and those who worked a 6 day work week got 12 days for the first 4 years (1 day per month * 12).

This is very general, there are other factors that go into what employees receive in actuality, such as full or part-time, if an employee worked at least 200 or 240 days total during the year. In any case the wording of the law is binding, even if difficult to comprehend and this article is not legal advice. In instances where a personal contract or sectorial/ collective agreement entitles employees to more vacation days than listed above, this update does not apply.

3. Minimum wage update

Effective July 1st 2016 the third step of the gradual update of the min. wage to 5,000 sh per month comes into effect. The new minimum wage starting in July 2016 will be 4,825 sh  for a full time monthly rated position.

The new minimum hourly rate is 25.94 sh

Youth min wage rates

Age % of min wage min monthly rate (40 weekly hours) Min Hourly rate
עד 16 70% 3,377.5 ₪ 19.52 ₪
עד 17 75% 3,618.75 ₪ 20.92 ₪
עד 18 83% 4004.75 ₪ 23.15 ₪
Apprentice 60% 2,895.00 ₪ 16.73 ₪

 

Employee’s Rights Handbook

Moshe

The “Employee’s Rights Handbook”

The first comprehensive, English language guide to Israeli payroll.
Whether  you are an employer or an employee, a new oleh or an English speaker who has trouble with the Hebrew terms, this publication is for you!

 

Employees:

Understand the terminology, layout and the Hebrew terms on your payslip

Know your rights

Understand the labor laws

What mandatory things need to be itemized on the payslip?

What are the things you need to know upon termination?

How many vacation days are you entitled to?

Is Purim a paid holiday?

What are the rights of a pregnant employee?

 

Employers:

Do your payslips comply with all the new regulations?

Do you issue employees “notification of terms of employment” as required?

Are employees given a fair hearing prior to termination?

Understand what obligatory payments exist in Israel

What is allowed to be deducted from an employee’s salary?

Is an employee who is on maternity leave allowed to work from home?

Must I pay travel expenses to all employees?

What can and cannot be deducted from an employer’s salary?

Are you aware of penalties for infringement on regulations and labor laws? (avoid this by knowing what needs to be done)

 

In this guide you will find:
* An overview of labor laws, regulations, expanded regulation orders, collective
agreements and statutes

* The make-up of the Israeli payslip

* Social Security

* Health Insurance
* Income tax

* Holiday pay, sick day payment, vacation, overtime payment, bereavement leave,
maternity leave

* Minimum wage

* Youth employment
* Advance notice

  • Tips             And much more!

 

A must for employers and employees alike. Get your copy today! This 107 page publication in hard-copy is not available in stores OR Anywhere else, get your copy today !

Price: 100 sh

For orders please go to: Order Here and fill out your details. You will receive an E-invoice for payment after which your book will be mailed to you. Self pickup is available in Jerusalem: Please state if you are interested in this option.Employee's Rights Handbook

Updated Min. wage for youth – Apr 2015

Moshe

On April 1, 2015 the minimum wage in Israel was updated. This has implications on min. wage for youth, as well.

The new rates are as follows:

Age                               Monthly Rate            Hourly Rate    

up to 16                        3,255 sh                                18.81 sh

up to 17                        3,487.50 sh                           20.15 sh

up to 18                        3,859.50 sh                          22.30 sh

18 +                               4,650 sh                               25 sh

 

There are other restrictions that apply to youth employment, such as max. number of hours pre day and per week, disallowing overtime and night work.