This section covers Payroll laws, rules and practices including minimum wage, severance pay, vacation pay and more.
Employees in the public sector, that are able to benefit from discounted meals. the new ceiling for employer participation, effective from Jan 1, 2014, is 569 shekels per month.
This memorandum doesn’t enable employers, who previously did not participate in the cost, to now do so. The above regards places of employment that offer discounted meals or via meal tickets (which are regarded as employer participation).
this has no bearing on the private sector.
Source: Ministry of Finance bulletin
1. The tax brackets that were in effect since Jan 2013 will remain in effect in 2014, unchanged.
10% up to 5,280 sh
14% from 5,281 sh – 9,010 sh
21% from 9,011 sh – 14,000 sh
31% from 14,001 sh – 20,000 sh
34% from 20,001 sh – 41,830 sh
48% from 41,831 sh – 67,630 sh
50% each additional sh.
2. The value of tax credit points remains unchanged at 218 sh.
3. The following tax amounts have been updated from Jan 2014:
A. Ceiling for employer’s contribution toward pension – 36,356 sh per month.
B. Expense for foreign expert – 330 sh per day.
C. Salary for foreign expert – 13,100 sh per month.
D. Ceiling for linked to consumer index only loans to employees – 7,800 sh. (any loan above this amount carries a mandatory interest rate of 4.31%
(+ v.a.t. where applicable).
E. Value added to taxable income for cell phone usage – 105 sh.
F. Ceiling for employer’s contribution toward Keren Hishtalmut – 15,712 sh per month.
G. Tax benefit for shift work: Ceiling – 10,710 sh. Tax credit 15% – up to 940 sh anually.
H. Ceiling for tax exemption from severance pay – 12,360 sh per year for amounts paid from 1.1.2014 onwards.
I. Income credits for deposits to Gemel/ Pension plan savings: section 45 – 169 sh per month, section 47 – 8,700 sh per month.
J. Value added to taxable income for company/leasing car (per month):
group 1 – 2,730 sh
group 2 – 2,960 sh
group 3 – 3,810 sh
group 4 – 4,570 sh
group 5 – 6,330 sh
group 6 – 8,200 sh
group 7 – 10,550 sh
L3 motorcycle (engine capacity over 125 cc and over 33 hp) – 910 sh
For cars first registered from Jan 1, 2010 onwards (linear module), the ceiling for list prices is 506,580 sh and the deduction for Hybrid cars is 560 sh.
K. Update for extra tax credit points for higher education (starting in Jan 2015):
Anyone completing an academic BA during 2014-2015, will be eligible for 1 additional tax credit point per month in the following tax year or the year after
(employee’s choice) .
Anyone completing an academic MBA during 2014-2015, will be eligible for 1/2 additional tax credit point per month in the following tax year or the year after
(employee’s choice) .
In fields where an apprenticeship is required, the employee can defer receipt of the additional tax credit point (or half point) to the tax year following the end of
apprenticeship.
Anyone completing an academic Phd in medicine or direct track, during 2014-2015, will be eligible for 1 additional tax credit point per month in the following
tax year or the year after (employee’s choice), and another 1/2 additional tax credit point per month in the year following.
In 2014, all employees claiming additional tax credit points for academic studies, must fill out the appropriate boxes on the 101 from, attach a tax form 119 and all required documents.
L. Tax discounts for settlements / border areas: Ceiling for section 11 (Kiryat Shmona, Eilat and confrontation line settlements – 241,320 sh annually.
Ceiling for residents of other communities as defined in section 11 B of the first section – 160,800 sh annually.
The validity of tax benefits to the southern confrontation line residents (Sderot and the western Negev) has been extended until Dec 31, 2014.
The following communities have been removed from the list of eligible places, effective 23.02.2014: Eilot regional council, Bet Shean, Hazor Haglilit, Arava
Tichona regional council. This section is not final and may be subject to change.
The tax discounts for settlements have changed from Jan 2014:
section 1 (north settlements) – 11% (in 2013 was 12%)
section 2 (Kiryat Shmona) – 22% (in 2013 was 24%)
section 3 A – (Mitzpeh Ramon) – 22% (in 2013 was 24%)
section 3B (Dimona and Yerucham) – 18% (in 2013 was 19%)
section 3C – 14% (in 2013 was 15%)
section 3D & 3E – 11% (in 2013 was 12%)
Employees who work at more than one place of employment and received a tax co-ordination, need to reapply before Feb 28, 2014, otherwise employers have been instructed to deduct maximum tax (currently 48%)!
Employer’s contribution rates towards Social Security (Bituach Leumi) for salaried employees, on the portion of salary over 60% of the average salary (currently 5,297 sh but due to be updated) will be 7% starting January 2014’s payroll (up until Dec 2013 it was 6.5%).
If you are an employer of salaried employees who work on a base pay with sales commissions or if you are an employee who works in a sales commission job, this is for you:
Joe worked as a sales rep for a company for several years. He resigned his position and sued his employer for payments towards mandatory pension, that were done only from his base pay, without taking into account the sums he earned from sales commissions.
In a recent verdict in labor court (11.2013), the court recognized the fact that sales commissions are a major component of salary, and as such, they are to be taken into account for pension purposes, as well as severance pay!
This despite the fact that sales commissions are not a set rate or fee, but rather they change monthly, based on the employee’s performance and actual sales.
What are garnished wages ?
Garnished wages are amounts that require one party who owes another party money, to transfer all or part of the owed sum to a third party. The third party can be the Tax Authority, Bituach Leumi, or any entity to whom a court decision has rendered a decision to their credit. In most cases the collection and distribution of collected funds are via the Authority of Enforcement and collection’s execution chamber (Hotza’a lepoal).
How are employer’s notified of garnished wages orders?
Written notification is issued by the Autority of Enforcement and Collection and sent to the employer of the entity who owes money. This notification is binding and includes the creditor’s name and address, the total sum owed and what the reason for the debt is. It is common for such notifications to be sent to companies, garnishing sums owed to suppliers, or to employers, garnishing sums owed to salaried employees (payroll) – which is the focus of this post.
What do I need to do if I received a garnished wages order ?
The recipient of a garnished wages order must send a written reply within 7 days of receipt, as to whether they can comply, or not (such as if the employee no longer works for them, is unknown, or no money is owed to them.
Employers who do not send a reply to notifications and/or do not comply with the instructions on the garnished wages order notification open themselves up to legal action by the creditor which can result in them absorbing the debt themselves!
Are all garnished wages orders the same ?
No! There are two basic types of garnished wages: 1) alimony and 2) everything else.
1) Garnished wages for alimony payments.
2) Everything else
In addition, there are garnished wages orders for set amounts per month, there are those that only state the total sum owed and there are those that specify a set % of the wages owed. It is extremely important to note the reason for debt, because if it is alimony, the table below does not apply and all the net pay needs to be garnished until the sum of debt is paid.
Am I required, as a recipient of a garnished wages order, to zero out all of the employee’s net wages?
The protection of salary law specifies amounts (see table below) that are exempt from garnished wages orders, based on marital status and the number of children up to age 19 in the debtor’s care. If the exempt amount is more than 80% of the monthly salary, the garnished pay will be reduced to 80% of the monthly salary.
If an employee is employed at a daily rate, the garnished wages shall not exceed 25% of the daily rate.
In general, the amounts relate to net pay after deduction of mandatory deductions (tax, social security, health tax). Any other deductions are considered wages for all purposes and intents.
This does not apply to alimony payments.
Table of amounts exempt from garnished wages orders (except alimony):
|
From |
Single |
Single + 1 child |
Single + 2 children |
Female widow + 1 child |
Female widow + 2 children or more |
Couple |
Couple + 1 child |
Couple + 2 children or more |
|
01.2013 |
2,122 |
3,008 |
3,517 |
3,432 |
4,281 |
3,183 |
3,692 |
4,201 |
|
01.2012 |
2,093 |
2,966 |
3,467 |
3,384 |
4,221 |
3,139 |
3,641 |
4,143 |
|
01.2011 |
2,040 |
2,892 |
3,381 |
3,298 |
4,114 |
3,059 |
3,549 |
4,038 |
|
01.2010 |
1,995 |
2,863 |
3,347 |
3,266 |
4,074 |
3,028 |
3,512 |
3,997 |
|
01.2009 |
1,921 |
2,723 |
3,183 |
3,106 |
3,875 |
2,881 |
3,342 |
3,803 |
|
01.2008 |
1,838 |
2,605 |
3,047 |
2,973 |
3,708 |
2,757 |
3,198 |
3,639 |
|
01.2007 |
1,788 |
2,534 |
2,963 |
2,892 |
3,607 |
2,682 |
3,111 |
3,540 |
The Authority of Enforcement and collection’s service and information hot line is: *35592 and operates: Sun –Thurs 08:00 – 16:00
What happens if an employee takes a half day of paid vacation ?
In terms of payment, they would receive a full day’s pay. However, the issue isn’t as simple when debiting an employee’s vacation day balance. Apparently, as reflected by a recent labor court verdict, which determined that any day that an employee shows up at work is to be considered a work day. The same day cannot be counted twice !
The same would apply towards half days taken as sick days. In actuality, they are work days and travel expenses will need to be paid for them. The missing hours should be deducted as such and the payment should be itemized separately.
The employer and employee can agree on payment for half days and there are certain sectors that have explicit sections about this issue.
This week is the last week to file for a 2012 tax year negative tax stipend !
Hurry before it’s too late and check your eligibility today ! Dec 28th 2013 is the last day to file !
Here is a link to the simulator, on the Israel Tax Authority’s site: https://www.misim.gov.il/shmhshlili
The following are the basic criteria for eligibility:
1. Age 23 and up with children (up to age 19) or age 55 and up with no children
2. Aside from living quarters you (or your immediate family) do not own any other property.
3. If you have 1 or 2 children or if you are 55 yrs or older w/o children – Total annual income as a salaried employee or as self-employed in 2012 divided by the number
of dependants in your care: between 2,051 sh – 6,109 sh
or if you have 3 children or more – between 2,051 sh and 6,717 sh
Finally released via Amazon kindle – The 2013 updated version of the Tax Benefits for Salaried Employees in Israel, in English !
Just in time for the end of the tax year, find out if you have correctly utilized all the tax benefits you are entitled to, as a salaried employee.
If your employer failed to credit you or you were not aware of certain tax benefits that you qualify for, no worries !
Taxes are configured annually, so if you update your employer before December’s payroll is processed you will be credited retroactively to January 2013.
And if you weren’t able to update your employer’s payroll dept by Dec’s payroll, just file for a tax rebate.
Everyone knows that when an employee is terminated and he has worked for at least one year for the employer, he is eligible for severance pay. Most employees also know that severance pay is one month’s pay (according to the last full salary) multiplied by his tenure. Or in layman’s terms, one month’s pay for each full year worked and prorated for any portions of a year.
The “minor” detail that everyone should be aware of is the question of what actually is the “last full salary” ?
Well, it really depends on how you are employed. The simple case is that of an employee who receives a monthly based salary, then the above would apply.
However, there are other types of salaries: Hourly based, Daily based, job based.
Many unique scenarios can also have an effect on what the “last month’s pay” actually is and thus effecting how severance pay is calculated.
For instance, an employee who worked full-time and changed to part time at some point (or vis-versa), an employee whose pay was reduced, an employee that had a temporary change in his last salary, an employee whose type of employment changed in essence, an employee whose position changed in essence or an employee who receives a base pay and changing commissions.
The Labor laws all specifically address these scenarios by dividing up the salary into several parts, before and after the change and a separate calculation is done for each part accordingly.
Those who receive changing salaries due to hourly or daily rates that change each month due to the number of hours/days worked or due to commissions – an average of the last 12 salaries is used as a basis for severance pay calculation.
Keren Hishtalmut
Roughly translated, a keren hishtalmut is an advanced study fund. This is in actuality a savings plan. In the past it used to be a dedicated savings plan, meaning that the funds could only be used for enhanced studies. Today, it can be used for any purpose.
In recent years, the monetary market has undergone revisions and changes, and at present keren hishtalmut is the only medium length savings plan, that the earned interest is still tax exempt (provided of course that the deposits are within the ceiling published by the Tax Authority)
What are the % of contributions towards keren hishtalmut ?
For salaried employees, The employee’s contribution is deducted directly from the gross pay via the paylsip.
Employee contributions are usually 2.5% and employer’s contributions are 7.5%.
For self-employed, the contribution is 7% (up to 17,040 sh annually)
How much can I deposit into a keren hishtalmut ?
The annual ceiling from which contributions can be made is currently 188,544 sh (or 15,712 sh per month). Contributions from higher amounts result in taxation on the portion over the ceiling.
How long is the keren hishtalmut plan ?
Keren Hishtalmut savings plans are a six-year plan. The accumulated sums in the fund can be used after 4 years tenure towards advanced studies. They cannot be used towards a university degree, but rather on enhancement courses, regardless of the subject.
At the end of 6 years tenure, all the accumulated sums can be withdrawn and be used for any purpose, However they do not have to be withdrawn and remain available for immediate withdrawl upon request, while at the same time continue to gain interest.
Since this type of savings plan is very attractive, it would be wise not to withdraw the money after 6 years, if you do not need to.
Is keren hishtalmut mandatory ?
No, it is not. The labor laws do not mention it at all.
In the public sector (Government, Municipalities, etc) it is mandatory due to existing work agreements and custom procedure in the place of employment.
In the private sector, it is a nice perk that you may be able to get instead of a higher salary via contract negotiations.
Some places of employment will give keren hishtalmut after certain tenure has been reached.
The employee worked for a gardening company. Upon recieving his last payslip, he discovered that his daily rate had been reduced substantially !
He contacted the employer, demanding that his daily rate be restored to what it was previously, as no-one notified him of any change and he also did not agree to any such change.
The employer refused on several request attempts by the employee, stating that it was a simple “computer mistake” but the bottom line is the same. As a result the employee resigned his position and sued the employer in labor court, demanding his daily rate be restored, as well as severance pay and social benefits from the full rate and not partial from the new, reduced rate, as the employer calculated.
The employer countered, in his response to the court, that the employee resigned his position and as such is not entitled to severance pay. In addition, the employer requested that the employee pay him for failure to give 30 days advance notice.
The court ruled that relevance of section 11a of the severance pay law, which enables an employee to resign his position and still be eligible for severance pay, is upon the employee.
Basically, the employee was able to prove that the employer single-sidedly reduced his wages, by submitting photocopies of his payslips to the court as evidence.
Reducing salary is considered a “worsening of work conditions” that an employee is not expected to continue working under.
The employer stated to the court that after amendment 24 to the “protection of salary” law in 2008, the employer was instructed by his bookkeepers and legal advisors to itemize all payments on the payslips, instead of the one line – “salary” which was used up until then. The employer “fixed” this by lowering the salary rate and adding other mandatory items seperately, such as travel expense and Havra’a. The court ruled that these other items should have been added in addition to the existing pay and not all inclusive, since the item listed was only salary.
The court awarded the employee full severance pay and the employer was instructed to pay the employee the remainder of his salary (restore the original rate) and the social benefits from the full amount, as well as back pay (from his start of employment) for travel and Havra’a.
It pays for employers to configure payslips properly, according to the law, and avoid such scenarios.
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.
