In this section you’ll find the latest news pertaining to changes in Israeli labor law and payroll practices.
The mandatory pension rates have been updated from Jan 2013 onwards as follows:
Employee – 5%
Employer – 5% + additional 5% towards severance pay.
total 15%
This is the 6th update out of 7. The law which began in Jan 2008 to ensure a pension to all salaried employees in Israel.
In 2014, the last update will come into effect.
New e-book released this week on Amazon for Kindle
Tax Benefits for Salaried Employees in Israel
by Moshe Egel-Tal
A guide for the perplexed Israeli salaried employee regarding tax benefits via the payslip and/or when filing a tax rebate.
As of Jan 1st, 2013 the amounts exempt from garnished wages have been updated as follows:
single – 2,122 sh
widower/divorced/single parent + 1 child – 3,432 sh
widower/divorced/single parent + 2 or more children – 4,281 sh
couple – 3,183 sh
couple + 1 child – 3,692 sh
couple + 2 or more children – 4,201 sh
Notes:
1) The above amounts do not apply to garnished wages for alimony.
2) Should the above amounts be more than 80% of the monthly salary (after deductions for income tax and social security and health tax) the amount exempt shall be reduced to 80% of the actual monthly salary.
source: protection of salary law, 1958 update 2013
All employers know that their monthly payments and reporting to V.A.T., the Tax Authority & the National Insurance Institute (Social Security) (including payments deducted from payroll) need to be filed and paid by the 15th of each calendar month for the previous month.
But is this necessarily true ?
A recent notification to employers, by the Israel Tax Authority, dated December 10, 2012 states the following:
1. According to the wording of the V.A.T. law and the directives of the Income tax directives, periodic reports and payments must be filed by the 15th of each month, each report and payment according to the applicable laws regarding them.
2. As per the above laws it has not been determined that if the 15th of the month falls out on the weekly rest day of the person/entity who is required to file and pay, the date of payment is deferred to the next business day.
3. However, in order to facilitate the members of all religions in Israel, the management of the Israel Tax Authority has decided that if the 15th of the month falls out on the weekly rest day of the person/entity who is required to file and pay, according to his/her religion, reporting and payment will be delayed until the next business day after the aforementioned weekly rest day.
What does this mean ?
Usually, when the 15th of the month fell out on Shabbat or Holiday, people would pay the day before, so as to avoid possible interest charges on tardy reporting and payments. the above referendum makes it clear that the Tax Authority is aware and sensitive to the people and will allow reporting and payment after the 15th when the weekly rest day or a holiday falls out on the 15th of the month, without chancing extra charges for late filing/payment, thus easing pressure to finish up prior to the 15th.
The above referendum can be found on the Tax Authority’s website:
http://taxes.gov.il/IncomeTax/Pages/IncoeTaxMeidaMaasikim.aspx
(they recommend best results using internet explorer browser)
We are pleased to announce that we are currently upgrading our site with new features, including:
And more………………………..
Stay tuned for updates !
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
On Aug 13, 2012 The “law for reducing the national deficit and change of the burden of tax 2012” was made public.
This law goes into affect on Jan 1, 2013 and includes 2 items regarding employees:
1) A change in the tax brackets for salaried employees as follows (amounts are from total gross pay):
up to 62,400 sh annually – 10%
from 62,401 sh – 106,560 sh annually – 14%
from 106,561 sh – 168,000 sh annually – 21%
from 168,001 sh – 240,000 sh annually – 31%
from 240,001 sh – 501,960 sh annually – 34%
from every additional sh – 48%
2) Anyone making annual income which exceeds 800,000 sh will incur an additional 2% tax on the amount over 800,000 sh
Great news for all salaried employees who earn minimum wages. After the govt. raised the v.a.t. and the latest price hikes in almost everything we buy, The minister of Industry, Trade and Labor, Shalom Simchon announced today that the minimum wages will be raised from October 1st, 2012. This is the last update according to the last labor agreement signed two years ago between the Histadrut Haklalit and the Israeli Government and the Industry Union. The last update of the minimum wage was in July 2008.
The new hourly rate will be 23.10 sh (prev. 22.04)
The new monthly rate will be 4,300 sh (prev. 4,100) – a 4.9% increase.
This also effects the hourly rate for youth, as follows:
up to age 16 – 3,010 sh
up to age 17 – 3,225 sh
up to age 18 – 3,569 sh
This notification was issued early, prior to the Jewish new year (Rosh Hashana) and according to the Central Bureau of Statistics will effect about 600,000 employees in Israel.
Change in Employer’s contribution to Social Security
As part of “the law to reduce the national deficit and change in the burden of taxes”, which was published today – August 13, 2012, a raise in the employer’s contribution towards Social Security has been authorized for the next 3 years, as follows:
From the higher level (on the part of salary over 60% of the average wage)
In 2013 – 6.5%
In 2014 – 7%
In 2015 – 7.5%
The current rate in 2012 is 5.9%.
This does not include employees who are pension-age, receiving a old-age stipend from Social Security or foreign workers or employees under age 18.
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:
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
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 !
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.
It seems that the Israel Tax Authority is trying to keep up with technology.
As from the year 2012, employees who are employed simultaneously by at least two and up to six employers with a total income of no more than 188,544 shekels (gross) can file their request for a tax reconciliation (teum mas) via the internet. (This is instead of filling out a 166 tax form, going in to your local tax office and waiting in line while losing valuable work hours)
You are able to print out a copy of what you reported for your records and the Tax Authority will send the employee, to the address you specify, the required letters for each of the employers with instructions on how to deal with the tax from what each of them are paying via payroll. This is usually done within a few work days and can save you the trouble of going in each year to renew the letters for your employers.
Note: You can only file online one time during the tax year. If there are any changes you will need to go personally to your local tax office to update the letters for the employers.
They have a simulator for taxes without a need to submit the information.
The taxes are not final, pending filing year end taxes for all the employee’s earnings. This is done by the employers, employees are exempt from this unless they have income other than salary. In any case, to check whether you are required to file taxes it is advisable to consult an Israeli certified CPA or Tax advisor.
You need to be very careful to correctly fill out all the information requested, as any mistake will result in wrong output. Before you attempt to do this make sure you have the last payslip from all employers on hand. The payslip has the employer’s name, address and tax ID number as he is registered with the Tax Authority.
You will first need to download and install a Toolbar for Government forms and you need to be using Internet Explorer (versions 6,7,8,9) or Firefox (versions 3-11) and either Windows or Linux OS
http://forms.gov.il/forms/Resources/DowloadSetup/AGFormsDownloadToolbarEnglish.htm
In 2012, the tax rates (%) and amounts in each bracket have been revised.
The new tax rates for 2012 are as follows:
monthly gross pay tax rate in % tax
up to 5,200 10 520
8,880 14 1,035
14,430 21 2,021
21,780 30 4,046
41,830 33 11,022
each additional shekel 48 ——
Personal credit points have been updated as well to 215 shekels each (from 209 shekels in 2011).
Note: the taxes are gross (prior to credits). All amounts are in shekels. Since taxes are configured annually the following table is for a monthly salary only. In certain situations other restrictions or laws may apply. The above information is meant as general information and in any case of contradiction, the existing tax laws and regulations are the deciding factor.
