payroll

Why you need to update your address on your Israeli I.D. card

Moshe

Many people move, sometimes temporarily, whatever the circumstances are, according to the law, an employee needs to update his/her employer within 7 days of the change (i.e. fill out the changes on your 101 tax form).
Notifying utilities and Municipality, etc can also be challenging, but many allow phone or email notifications. These are almost always done, as it’s in the person’s best interest, so they will recieve their mail, services (or stoppage of service). But people usually don’t have the time to go in to their local Ministry of Interior office and waste several hours in order to update their Israeli I.D. card (Teudat Zehut). People are working or studying and just do not want to be bothered. There should be some form of secure on-line form that can be updated with the relevant information, but that would be too efficient and some public sector employees might lose their jobs.

Well, the following is a completely true story that may make one reconsider taking the time off and updating their I.D. card:

My friend, Yossi lived with his parents and when he married, he moved with his wife to a different town. The town was a few hours travel from his parent’s house. He didn’t update his address on his I.D. card. He got a job in the new town and worked for the same employer for 3 years. One day Yossi gets a letter from Social Security (Bituach Leumi) saying he hasn’t paid social security for the past three years and failure to do so, as legally required by law, may result in fines or imprisonment.

Obviously, Yossi gets scared from the letter and shows up at the local Social Security office in the town where he lives. He brings with him his payslips from the last three years. On the payslips is Yossi’s full name, his Israeli I.D. number and his address of residence. Yossi shows the payslips to the clerk and to his astonishment he is told that the money that was deducted from his pay was not credited to his account because he does belong to this particular branch of Social Security, but rather in the town where his parents live !

The fact that all branches are connected via computer network and it seems just a silly beaurocratic issue, he was told that he needed to physically go into the local Interior Ministry office nad change his address and then travel to his former town, to the Social Security office and ask that his file be transferred to the new town. All his reasonable arguing to no avail. To top it off, while he is sitting in the Social Security office he gets a phone call from his wife who tells him that their car and some possesions have been confiscated by the Social Security office as collateral until he pays his due!

Needless to say, he had to take a day’s vacation and waste it on setting the records right with the authorities. After all is said and done, they actually refunded him 600 shekels that he was overcharged.

Food for thought.

 

 

Everything you wanted to know about travel expenses to and from work

Moshe

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).

 

 

 

 

 

2014 tax update for salaried employees

Moshe

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%)!

Raise in employer’s social security contribution rates from Jan 2014

Moshe

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%).

Pension plan contributions for salaried sales employees

Moshe

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. 

 

 

Everything you wanted to know about Garnished wages

Moshe

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
or more

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

Partial Vacation Days

Moshe

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.

 

Israeli soldiers to receive 21% pay raise in Jan 2014

Moshe

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)

e-Book: 2013 Tax Benefits for Salaried Employees in Israel

Moshe


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.

Get your copy today !

 

Severance Pay – a minor detail you should be aware of

Moshe

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.

 

So, what exactly is a “keren hishtalmut” ?

Moshe

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.

Aug 25th – mini-seminar: understanding your payslip and employee’s rights

Moshe
This unique mini-seminar, in English, is meant for salaried employees who want to know how to read their payslip and understand it.
It is also geared towards employers who want to better understand their legal obligations regarding payslips and the implications of failing to do so.
Don’t miss out on this amazing opportunity to learn from a senior payroll professional with over 20 years experience in all facets of Israeli payroll and labor laws.
DATE: Sunday  August 25, 2013
Time: 09:30 – 11:30
Venue:  JBC
             24 Hillel st. 5th floor
             Jerusalem
Speaker: Moshe Egel-Tal, CSPP
               CEO & Founder ISRAPAY “making payroll simple”
Price: 120 sh
Limited space available – register today !
Don’t miss this great opportunity to learn how to read and understand your payslip
Send your name and contact info to moshe.israpay@gmail.com