Israel’s Chief of Staff ordered a pay raise of 21% for all conscripted (sadir or chova) soldiers, starting in January 2014. Their pay has not been updated since 2002, while salaried employee’s pay has been updated a few times since then.
a few examples:
combat soldiers will earn 847 sh (700 sh- up until Dec 2013)
level A combat support soldiers will earn 618 sh ( 511 sh -up until Dec 2013)
non-combat soldiers will earn 426 sh (352 sh -up until Dec 2013)
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.
Memorial Day of Israel’s Fallen soldiers is Monday April 15th, 2013
According to the fallen soldiers law (1963), any employee who is one of the following:
* parent
* grandparent
* spouse
* child
* sibling
of a fallen soldier, is eligible to be absent from work on this day without liability of deduction from pay.
Independence Day (Yom Ha’atzmaut)
Israel’s 65 birthday is Tuesday April 16th, 2013
According to the Independence Day law (1959), This is a paid national holiday. This applies to all employers in Israel.
The day prior to Independence Day (Memorial Day or Erev Yom Ha’atzmaut) is a shortened work day, by law.
Employees who work an 8 hour workday, need work only 7 hours.
Employees who work a 9 hour workday, need work only 8 hours.
Places of employment that have a collective or personal agreement, or custom which is more favorable to the employee than the law, these would take precedence.
There is no deduction for missing hours for this day.
To be paid for Independence Day, you need to have at least 3 month’s tenure with your employer and you need to work the day before and the day after Independence day.
Employers that are not included in the list of places that need to operate on a holiday which is published by the Prime Minister’s Office are not allowed to force their employees to work on Independence Day as publicized by the Israeli Labor Court.
Employees who work for an employer who is included in the list, are entitled to 200% for all hours worked from 24:00 (midnight) on Memorial Day until 24:00 on Independence Day.
Payment for Independence Day needs to be itemized separately on the payslip.
According to income tax regulation 2: “all employees are required to fill out an employee card (101 tax form) at the start of employment with a new employer and on the 1st of January of each subsequent year. The form includes: the employee’s personal information and sources of income. In addition, the employee is required by law to report any change in the information supplied on the form, within a week of the change.” Responsibility for the accuracy of the information is the employee’s only. The employee signs at the end of the 101 form a statement stating that all the information is correct. Supplying incorrect information is a criminal offense. The 101 tax form has instructions, but they are not too explicit. Employees who do not understand what or how to fill out the form should ask the payroll accountant for help. Veteran payroll accountants attach written instructions to employees along with the form, correctly knowing that any mistakes in filling out the forms will come back to them in the end and they will need to chase after employees to “get it right” or deduct maximum tax, which just causes extra work.
Most employers have issues with employees filling out their annual 101 tax form. In some instances they leave out important mandatory information, in other cases they forget to check the boxes regarding the type of payment they are receiving from the employer or whether they have any other source of income. These things, while correctable in most cases during the tax year, can be very problematic in that until they are rectified, they may incur a maximum tax deduction from the employee’s salary. There can even be serious repercussions, by way of unnecessary fines in the case of an audit by the tax authorities.
The employer in general, and the payroll accountant specifically need to ensure that the proper form is being used (it’s updated frequently and can be found under “forms” on the Tax Authority’s website: http://taxes.gov.il/Pages/TaxesFastForms.aspx
It is important to note that each time a tax form is updated, all previous versions become obsolete and invalid from that point on. Using an outdated form can also result in fine ! However, all computerized payroll systems have the option of printing out pre-printed 101 forms with both the employer’s info as well as the employee’s info as it appears in the program. This is actually a time-saver as it allows the employee to double-check and correct only when information is incorrect or has changed, check the relevant boxes and sign the form, instead of filling out the form from scratch. This usually takes only a few moments. The responsibility for updating the 101 form in the payroll program is the Program’s responsibility.
The employer is responsible for keeping these forms on file along with any letters from the tax authority regarding their employees tax credits, exemptions or reconciliations.
Good news !
The tax Authority has launched an initiative that will not only simplify the 101 tax form process, but it will ensure zero mistakes and do away with the need to get the forms to the employees and get them back in a timely manner, as well as eliminating the need to keep them on file, thus saving space and becoming environment friendly (no more paper) !
So how does this work ?
The tax Authority issued instructions for procuring an electronic 101 tax form which is available here:
http://taxes.gov.il/IncomeTax/Pages/IncoeTaxMeidaMaasikim.aspx
look for the item dated May 20, 2012 – there are two. the top one is the one you need (9 page document) and it includes the application form for the employer (pages 8 and 9)
As of Jan 2013, this is voluntary, but highly recommended. Keep reading…….
The employer needs to fill out a request to be included in the criteria for filling out electronic 101 forms and use the system. The request needs to be submitted to the Tax Authority not later than 2 months prior to the end of the tax year in order to use the system for the next year.
(Employers who wish to develop their own system for electronic 101 tax forms or companies who sell payroll programs, or the use of them to employers need to submit 4 months prior to the end of the tax year)
The process
After submitting the form, the employer will receive written approval from the Tax Authority along with access codes to a secure site and instructions. In general, employees can access the secure site via a unique and personal password ensuring privacy. the employee will update all personal and income information. Any time there is a change in an employee’s information, the employee will log onto the secure site and repeat the process, changing the necessary information. All forms after finalization by the employee become locked PDF files and each update becomes a newer version. All versions are kept on-line and accessible to both the employer and the employee. In cases where employees do not complete the process, it will automatically incur maximum tax (currently 48%) on the employee’s annual salary.
The above information is taken from the Israel Tax Authority’s publications and is not a translation of those publications.
Disclaimer: Israpay has done it’s best to explain this issue in easy to understand terms, however should any discrepancy be found between the information contained in this blog post and the Tax Authority’s referendums and notifications to employers, the latter will prevail. This information is intended as a service and is not legal advise in any way or form. It reflects the author’s opinion only and is not to be taken as more than general information and a friendly recommendation that may be worth checking out. There may be restraints, in the employer’s payroll program or otherwise, that currently will not enable the employer to currently implement use of the electronic 101 tax form.
2013 Tax Brackets
The value of each tax credit point has been updated to 218 sh.
These changes are effective from Jan 1, 2013 (January 2013 salary).
|
Tax Bracket |
Gross pay |
Tax |
|
10% |
5,280 |
528 |
|
14% |
9,010 |
1,050 |
|
21% |
14,000 |
2,098 |
|
31% |
20,000 |
3,958 |
|
34% |
41,830 |
11,380 |
|
48% |
Each additional sh |
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)
Here is an explanation of the Israeli payslip for the perplexed: Broken down into color-coded sections. This article was a guest post I wrote for www.israemploy.net in 2010.
http://www.israemploy.net/The_Israeli_Pay_Slip_/
The Israeli Pay Slip – An in-depth Explanation for the Perplexed
For those of you that are working in Israel, or have worked in the past, trying to decipher your pay slip is one of the most complicated things you will experience in the workplace, right up there with understanding how to use the coffee machine.
We are fortunate to have Moshe Egal-Tal available to provide us with a comprehensive article about the intricacies of the pay slip, so that you can better determine how you are being compensated, and confirm that there are no mistakes.
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.
All of the payroll programs in Israel (which generate the pay slips) must be approved by the tax authority that they meet the mandatory requirements as defined by laws and regulations. Regardless of the program your employer uses, all the programs have common attributes. The layout and placement will differ a bit from program to program, but there are basic requirements that are mandated by law. 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.
There are payroll programs for the PC that are off-the-shelf software (as is) that are commonly used by small employers / CPA offices who run payroll for their clients. There are also more complex programs that use a large number of variables that are user-defined by the employer. These programs are usually used by medium-sized and large companies. The PC programs generally allow printing pay slips on plain paper or pre-printed forms, which are more costly and as a result many employers are reluctant to use them. A plain paper pay slip is legal as long as it contains all the data required by law and as long as it is signed and has the company stamp on it.
The Makeup of the Pay Slip
The Israeli pay slip is made up of several sections (see Appendix for example):
· Specific information (header)
· Payments (tashlumim)
· Mandatory deductions (nikuei chova)
· Voluntary deductions / commitments (nikuei reshut / hitcheivuyot)
· Informatory information / accumulated sums (meida klali / mitstabrim)
The Specific Information Section (or header) (see sections #1, #2, and #7 on the demo payslip below) contains the employee’s name and will usually contain the name and/or number of the department/project where the employee works. Typically the employee number is also listed and the employee’s teudat zehut number and home address.
The pay period is also listed, for example: March 2010. The employer’s name, address and tax identification number and the employee’s bank account details and start date. If you work in the public sector, you will also have your pay table and rank listed as well as your % of position (full-time [100%] or part-time). There will also be a detailed account of your vacation and sick days; balance at start of pay period, credit for the pay period, debit for the pay period (how much you utilized) and your new balance.
The Payments Section (see #3 in red on the demo pay slip below) contains an itemized breakdown of all the components paid to the employee for the pay period. For example; Base pay, travel expenses, overtime hours, etc. Also in this section will be any tax value components (Holiday gift, company car or any other benefit that isn’t paid in money). The total gross pay will also be listed at the bottom of this section.
The Mandatory Deductions Section (see #8 in light blue on the demo pay slip below) contains an itemized breakdown of all deductions that are mandatory by law.
For example; Income tax, Social security, Health tax and mandatory pension payments. These are the employee’s part and as such are deducted from the total gross pay. The total of all the mandatory deductions will also be listed.
Some programs have added underneath the itemized breakdown of mandatory deductions, the employer’s part for any pension or savings funds or health insurance that the employee is entitled to. Other programs detail this in the informatory information section. The law stipulates that this must be detailed on the pay slip, but not necessarily where. It is usually categorized with an underlined or bolded headline or in a pre-printed field.
The Voluntary Deductions Section (see #10 in orange on the demo pay slip below) contains an itemized breakdown of all deductions that are voluntary.
For example; advances on payroll, repayment of loans to employer, charges for purchases to employees from a company store/collective purchase, payment for subsidized vacation or any other social or cultural events sponsored by or promoted by the employer which entail a cost to the employee or money deducted from an employee for loss or damage to equipment. The total of all the voluntary deductions will also be listed. This total amount is also deducted from the total gross pay.
The Informatory Information Section (see #4 in bright green on the demo pay slip below) will contain the monthly gross pay for tax and social security purposes and the monthly gross base pay for pension.
This section also will contain various informative details: total accumulative gross pay for the current tax year, number of actual days worked in the pay period, total number of potential work days in the pay period, the employer’s tenure is usually listed here as well. The employee’s tax credits as well as the value for each credit will be listed as well as a detailed account if there are any special tax benefits (oleh chadash, discharged soldier, national precedence area, etc) or a tax coordination was done.
The footer of the Pay Slip (see #4 in bright green on the demo pay slip below) {note: On this payslip this section is incorporated as part of the Informatory section} will contain the amount of days for tax purposes for each of the months worked. Monthly salaried employees will see 25 for each month worked, although there are payroll programs that put a check mark near each month worked.
The employee’s marital status and number of children under 19 years old will also show up here or in the specific information section. The employee’s marginal tax percentage and the accumulative amounts for the employee’s part of each of the funds/savings plans and whether the employee’s spouse is employed or not is included as well.
The minimum wage must also be listed (monthly and hourly rates). This section will usually have the total gross pay, total deduction, net pay, total voluntary deductions and pay in the bank listed.
Income Tax (will show up in section #8 in light blue, on the demo pay slip below)
The 2010 tax brackets are as follows:
Up to:
4,590 shekels 10%
8,160 shekels 14%
12,250 shekels 23%
17,600 shekels 30%
37,890 shekels 33%
Every additional shekel 45%
The tax is configured anew each month on an yearly-accumulative basis which takes into account all payments paid by the employer since January of the current year and after configuring the tax, the accumulative amount of tax that was paid is deducted and the remainder is the tax for the current month.
This is easily explained via the following example: for the first 3 months an employee earns the same gross pay. In the 4th month he receives a 3,000 shekel bonus. Obviously this will raise his taxes for this month. Occasionally, employees receive a tax rebate on their payslip via the form of a negative sum of tax.
Tax Credits/Points
All employees are eligible for tax credits (each worth 205 shekels – JAN 2010). The tax credits are allotted as follows: Every employee 2.25 points, Female employees an additional 0.50 points Single parents who have care of children under 19 get an additional point for each child and a half of a point for children the year they were born or the year they turn 19. There are other instances where employees may be eligible for extra tax points, but these may be given by the employer only upon written instruction by the tax authorities. Examples are: handicapped children, invalids, crippled or blind employees.
Consult the Israel Tax Authority’s web site for more information: (the total # of tax points will show up in section #4 in green on the demo pay slip below)
Social Security (Bituach Leumi) (will show up in section #8 in light blue, on the demo pay slip below)
Social security is mandatory for all female employees between 18 – 62 and male employees between 18 – 65. There is an employer’s portion and an employee’s portion. The money insures an employee against bankruptcy of the employer, reserve army duty, unemployment, old-age stipends, work-related accidents, just to name a few. For the first 4,806 shekels the rate for the employee is 0.4%, anything over this is calculated at 7%.
Mandatory Pension (will show up in section #8 in light blue, on the demo pay slip below)
The mandatory pension law went into effect in Jan 2008. All employees who either have an existing “live” pension plan from a previous employer or anyone with tenure of 6 months are eligible for pension. In 2010, the rates are: 2.5% employee, 2.5% employer and 2.5% severance pay (employer). The employee’s contribution is deducted from his payslip and must be deposited to the fund of the employee’s choosing.
Appendix
Explanation of the Above Demo Pay Slip: (click on the image to enlarge it)
1. Employer’s Information (name, address, tax i.d. #)
2. Employee’s Name and Address
3. Payments Section (itemized and total of all gross payments)
4. Additional Information, annual accrued totals and vacation and sick pay balances
5. Space reserved for notice to all employees such as “happy Holiday” (see example above), or personalized message for specific employee(s) such as “Happy Birthday”
6. Information Regarding this Pay Slip (the pay period and date the pay slip was printed)
7. Personal Information (Israeli ID #, basis of employment (monthly/hourly), bank account details, tenure, start date, marital status, etc)
8. Mandatory Deductions (itemized and total)
9. Net pay (prior to voluntary deductions)
10. Voluntary Deductions (itemized and total)
11. Net Sum Transferred to Employee (bank account/check)
Submitted by Moshe on Mon, 23/08/2010 – 20:44
The protection of salary law specifies that salaried employees must be paid by the last day in the period of time for which they are being paid (i.e. the last day of the month), however salary will only be considered to be have been paid late if 10 days have passed since the due date. In plain English, this means it cannot be enforced until the 10th of the following month, thereby creating the myth that salaries can be paid by the 9th of the month.
But what actually is the penalty for late payment ?
The law specifies that for the 1st week of tardy payment the employer is penalized 5% of the amount that hasn’t been paid and from the second week onwards, for each additional week (or part thereof) an additional 10%.
The same applies for monies that were deducted from the employee’s pay but not transferred by the employer to it’s rightful destination on time; For example pension plan savings.
Labor courts tend to be lenient on penalizing employers when the employer claims that it wasn’t purposely done or for reasons that weren’t in his control.
There are things that can be done, like filing an anonymous complaint with the Ministry of Trade, Commerce and Labor’s hotline (see essential phone numbers in the menu bar on this site)
Late payment of payroll on a recurring basis is usually a just means for resigning your position and retaining rights to severance pay if you have worked at least 1 year with the employer.