The employer’s contribution towards Social Security (Bituach Leumi), on the higher bracket, has been raised from 6.75% (Dec 2014) to 7.25%, for employees age 18 to retirement age, starting in January 2015.
A raise of 0.5%.
The employee’s contribution remains without change.
Q: What is Breast-feeding hours and whom is eligible ?
A: Breast-feeding hours is a special perk that is embedded in the Women’s employment law (1954). Any woman who gave birth is entitled to be absent from work for up to one hour, without deduction from her pay,for a period of up to 4 months from the end of maternity leave (currently 98 days from date she gave birth). This is regardless of whether she actually breast-feeds her baby or not. However, since a woman can take additional leave without pay immediately and in continuation of her maternity leave, she may lose this right as eligibility starts from the end of the maternity leave and does not include non-paid vacation.
In addition, there is no additional time allocated by the law if a woman had more than one baby in a birth, but the time of eligibility would start and end later, as she is entitled to a longer maternity leave. In this case she still gets 4 months.
Breast-feeding hours is a mandatory labor law in Israel in both public and private sectors.
The only criteria, aside from being within the 4 month period from the end of maternity leave is a full-time position.
If a woman works less than full time, she is not eligible at all.
The minimum wage in Israel (currently at 4,300 sh per month or 23.12 sh per hour) is being updated in three stages, according to an agreement signed by the General worker’s union (Histadrut klalit) and the Presidency of the Business Organizations in Israel. This will be voted into the book of labor laws by the knesset soon.
The changes are:
per month per hour
From 4/2015 – 4,650 sh 25 sh
From 8/2016 – 4,825 sh 25.94 sh
From 1/2017 – 5,000 sh 26.88 sh
From 4/2017 onwards – 52% of the average salary (but no less than 5,000 sh) to be updated quarterly (Jan, Apr, Jul, Oct) of each year.
Bracket Gross pay Accumulated tax
Ceiling for 10% 5,270 527
Ceiling for 14% 9,000 1,049
Ceiling for 21% 13,990 2,097
Ceiling for 31% 19,980 3,954
Ceiling for 34% 41,790 11,369
Ceiling for 48% 67,560 23,739
Every additional shekel 50%
David is a small employer. In order not to raise his monthly payroll costs but at the same time abide by the labor laws, he pays the annual Havra’a payment in 3 installments: in April, June and August. The first two payments were paid at the known rate at the time of payment (previous June’s rate) and the last payment in August employees received the updated new rate.
While employees would rather receive the full amount in one payment, it is the employer’s decision and yes, it is legal. There are some employers who divide the payment into 12 installments thus making their monthly payroll costs even more evened out.
This payment needs to be itemized separately on the payslip and the rate must be updated annually, on the 1st of July each year.
David’s employees signed a petition requesting a retroactive payment for all employees on the rate used to for the first two payments.
So, is David required to pay the difference in the rate for the first two installments to his employees in April and June when the new rate becomes known in July or on August’s installment ?
The answer is no. Since the payment is always according to the last known rate, the employer has fulfilled the wording of the general collective agreement.
The new rates for convalescence pay (dmei havra’a) have been updated as of July 2014 as follows:
Private sector = 378 sh per day
Public sector – 427 sh per day
Payment is mandatory for all employees with min 1 year tenure with the present employee.
The number of days an employee is entitled to depends on the sector and the number of years of tenure they have incurred.
reimbursement of travel expenses to and from work to salaried employees is an expanded regulation order. As such it is mandatory for all employers in Israel.
The only exceptions are:
1. employees whose terms of employment are under a collective work agreement that has favorable terms.
2. employees with physical or mental disabilities who are employed in protected places of employment that the State of Israel contributes towards their upkeep.
3. employees who live within walking distance from the place of work (less than 2 bus stops).
4. employees who receive a ride to and from work at their employer’s expense or on behalf of the employer. (employees who receive a ride one way are eligible for
half of the travel expenses below). This includes employees who have a company/leasing/rental car from their employer.
The maximum mandatory amount per day is 26.40 sh (from Jan 2014). This amount is updated periodically according to the changes in public transportation rates and it is incorporated into the expanded regulation order.
All employees who need transportation in order to get to work, are entitled via the expanded regulation order, to their employer’s participation for travel expenses by public transportation (bus and or train, not taxis). If an employee needs more than one bus to get to work, he is entitled to participation for that as well (under the condition that he needs at least 3 city bus stops to reach the place of work), up to the maximum mandatory amount per day.
Payment is via the payslip along with salary, in a separately itemized line on the payslip. In general, travel expenses are paid gross (not net) and are subject to income tax, social security and health tax (as salary is). If an employee’s contract or work agreement specifies that travel expense will be paid as a net payment, this means that the taxes are paid by the employer, which is legal but not very common.
The amounts are the fare for a single ride multiplied by the number of rides per day needed by the employee multiplied by the number of days worked (regardless of the number of hours worked). If there is a monthly bus card or a reduced rate bus card, the employer can pay the cheapest of the options. For absent days (no matter what the reason, even if they are paid absences, employees are not eligible for travel expense reimbursement).
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.