This section covers Payroll laws, rules and practices including minimum wage, severance pay, vacation pay and more.
The following are the new tax changes as published by the Israel Tax Authority:
Tax credits
value of tax credit point 209 shekels
qualifying income ceiling for section 45 alef 8,200 shekels
25% credit ceiling 143.50 shekels
35% credit ceiling 200.90 shekels
minimum annual donation (charity) 310 shekels
Tax deductions Continue reading “Additonal 2011 Tax Changes”
“Night shift” is specifically defined in the “work and rest hours” labor law (1951): “Any work day of which at least two hours are between 22:00 and 06:00 shall be considered night shift.”
Note: It is enough that a minimum of two hours of the work day/shift are between these hours for the employee to receive all the rights regarding night shift, for all of the hours worked in continuity with the two hours (the two hours can be at the beginning, end or middle of the work day. Continue reading “Night Shift Work”
If you completed higher education or vocational training at a recognized university or college in Israel from 2005 and onwards, you may be eligible for a reduction in taxes. You need to fill out a 119 tax form and attach a photocopy of the degree / certificate as well as a letter from the academic institution, which specifies your name and Israeli ID # and the date upon which you are eligible for the degree and the number of years you studied. You also need to check the appropriate box on the reverse side of your annual 101 tax form and attach the 119 form and photocopies listed above to be handed in to your employer (payroll or HR) Continue reading “Tax Reduction for University Graduates”
Submitted by Moshe on Sat, 09/10/2010 – 23:18
The mandatory pension law was recently updated (Sept 7, 2010).
Originally planned for gradual annual updates from 2008 – 2013, when the mandatory % will reach 15% (5% employee, 5% employer and 5% severance pay -employer)
The new revision now ads another year (2014).
Starting Jan 1, 2014 the mandatory pension will be 17.50% as follows:
employee – 5.5 %
employer – 6.0 %
employer (pension) – 6%
The mandatory pension revision also specifies:
1) that it applies to employees who retired at retirement age and receive a stipend from social security (Bituach Leumi).
2) An employee who begins work at a new place of employment and is insured in a pension plan from his previous place of employment, will be eligible to receive the percentages specified in the mandatory mandatory pension law from day one with the new employer.
see the full wording of the mandatory pension plan here:
Submitted by Moshe on Mon, 30/08/2010 – 23:51
What is Havra’a payment ?
Havra’a payment (or convalescence pay) is an annual, mandatory payment effecting all employers in the state of Israel via an expanded regulation order signed by the Minister of Labor. This means it is treated as a law.
Havra’a pay is paid to all employees who have at least one year of tenure with the employer.
Those who don’t are not eligible, but the following year are eligible to receive Havra’a payment for the full year plus the portion of the first year.
The payment is a number of days (see table below) multiplied by the rate (currently 351 shekels), which is updated every June. Employees who work less than full-time positions, it is prorated according to your % of position actually worked (including sick days, vacation, reserve duty and maternity leave).
There are two rates, one for the private sector and another, higher rate for the public sector. There are also separate tables of days of Havra’a eligibility for Histadrut employees, municipal employees and teachers.
Since most of the users of this site are employed in the private sector I have chosen to relate to this only.
Tenure with employer Number of Havra’a days
1 year 5
2-3 years 6
4 -10 years 7
11-15 years 8
16-19 years 9
20 years and upwards 10
Example: an employee who has been employed with the employer for 4 years in the private sector would receive as follows:
7 days * 351 sh = 2,451 sh (gross)
Note: There are employers who prefer to pay Havra’a on a monthly basis instead of a one-time annual payment. This is legal and the result would be an additional payment on each payslip of 1/12 of the Havra’a payment. Of course the amount needs to be updated annually (usually in June or July payroll).
Submitted by Moshe on Mon, 26/07/2010 – 09:23
In response to many recent questions, following is a short and very general explanation.
A detailed and thorough explanation is available in English on Bituach Leumi’s website:
http://www.btl.gov.il/English%20Homepage/Benefits/Old%20Age%20Insurance/…
In general, there are mnay conditions based on age, sex, marital status, for olim – their age when they made aliyah as well as total gross income.
The old age stipend is one of the most important branches of insurance in the social insurance system in Israel and is part of the social benefits detailed in the Social Security Law (Bituach Leumi).
It’s purpose is to ensure a monthly income to Israeli Residents who are eligible in their retirement years.
The old age stipend, as defined by the Social Security Law, makes eligible Israeli residents who have reached the eligible age, provided they have been insured at least the minimum time as defined by the law and the insurance money has been paid for them.
There are two ages defined by law: retirement age and entitlement age.
In instances where an employee goes on early retirement (before old age) they may be eligible, depending on their total gross income (excluding pension payments).
When a person reaches the old age defined by law, they are eligible regardless of their gross income provided they meet the other criteria.
Both the retirement age and entitlement age are defined specifically by the Social Security Law, and they are different for men and women. Up until June 30, 2004 retirement age was 65 for men and 60 for women. Begining July 1, 2004, the law redifined the retirement age for men to 67 and 64 for women.
Because of this change in the law, Men who were born between 7/1939 and 4/1942 and women who were born between 7/1944 and 4/1953, the age is gradual. (see the chart on Social Securty’s site)
The site is very informative and also has instructions as to how to file and what documents are needed.
Submitted by Moshe on Sun, 27/06/2010 – 16:29
As part of correction 161 to the tax ordinations, anyone who is required to file an annual tax report (form 1301) is now required to file on-line.
This is to be done in one of two ways:
1) transmition via the tax authority’s computer (sha’am) thru tax representatives (CPA, Tax Advisor or Lawyer) that are connected to the sha’am computer.
2) transmition via the internet
this change is effective immediately and includes tax reports for 2009
On June 16, 2010 the knesset finance committee authorised the tax regulations which enable exemptions from filing on-line for individuals whose income does not exceed 75,000 shekels annually.
Married couples 150,000 sh (75,000 each) as well as for individuals that they and their spouse have reached retirement age (65).
This does not apply to individuals or their spouses who are controlling owners of companies as they are defined by the tax regulations.
This new regulation will also not apply to those who filed to receive the negative tax stipend.
It should be noted that the above exemptions are only applicable for the on-line report but do not exempt from filing an annual report as per the tax regulations.
To find out if you need to file contact a certified tax representative (CPA or tax advisor).
Submitted by Moshe on Thu, 29/04/2010 – 15:13
However, some employers will only do this after you have tenure of three months in order to ensure that employees stay on. If the tax year ends prior to your three month tenure date, it is required for the employer to forgo the 3 month waiting period because the pension funds do not allow retroactive deposits for previous years due to new regulations.
Submitted by Moshe on Wed, 28/04/2010 – 08:38
An employer may be exempt from paying out severance pay to a terminated employee, if the employee purposely acted in such a way as to cause his termination, by way of serious disceplinary offences. For example; An employee had been working for several years at his job and approached his employer, demanding to be fired,therefore making him eligible to receive severance pay, or so he thought. This based on the assumption that if he quit his job he would not be entitled to severance pay, where as if he were terminated the employer would need to pay severance pay.
The employer refused to fire the employee saying he was very happy with his work and he was due for a promotion, but if he so wished he could resign his position. The employee refused to resign, but started purposely doing acts that can only be described as “serious disciplinary offences”;showing up late, not completing tasks, or ignoring others, as well as frequent, unexcusable absences and basic indiferrence to his job, in hope of getting fired. The employer repremanded the employee both verbally and in writing and when this had no effect, summoned him to an internal hearing. As this also had no effect, the employer notified the employee of his decision to fire him.
The labor laws specifically state that in such cases the labor court can order a reduction or a complete cancellation of in severance pay !
This was the scenario in this case as the employer had no problem proving that the employee’s actions had been purposely done with the intent on causing the employer to fire him. Therefore it is the employee who acted towards ending the employer-employee relationship and is thus seen as resigning for all purposes and intents with regard to severance pay.
1. Employees are obligated by law to fill out a 101 tax form for each and every place of employment where they receive a salary (via payslip).
This needs to be done close to your start-date as well as annually, at the beginning of each tax year. The employer usually will issue existing employees a printed version from the payroll program which includes all the existing data, as supplied previously, as it currently appears in the employer’s payroll database. Continue reading “Employee’s Responsibilities Toward Their Employers”
What is Social Security Payment Co-ordination ?
This is called Teum Dmei Bituach Leumi in Hebrew. There are two stages for calculating Social Security and Mandatory Health tax that are automatically deducted from employees’ gross pay. The first stage or reduced rate is 0.4% for Social Security and 3.1% for Health Tax up to a ceiling of 4,809 shekels (Jan 2010)
Any income over this amount, the deductions rise significantly to 7% for Social security and 5% for Health Tax.
If someone is employed by several employers, they will need to have a payment co-ordination done (in addition to the better-known tax co-ordination) in order to avoid paying the higher rates from the first shekel for income earned from the additional employer, as it is possible that there is unutilized portion of the 4,809 shekels that the additional employer can use for the reduced rates.
Who needs to do s.sec co-ordination ?
If a person is employed by more than one employer they will usually need a s.sec. co-ordination.
How do i get a Social Security Co-ordination ?
Up until Dec 2009, anyone who declared on their annual 101 tax form that they have additional income, was required to apply at their local Social Security office for a Co-ordination. If the employee didn’t bother doing it, the employer automatically deducted the higher rates from the first shekel.
Do to a change in the Social Security laws, effective January 1, 2010, the additional employer is allowed to do the co-ordination himself, on several conditions, thus eliminating the need for the employee to take time off work and go in to the Social Security office.
What are the conditions that allow an additional employer to do the co-ordination ?
1. The employee must fill out a declaration via a 644 form (available on the Social Security website – www.btl.gov.il)
I advise using the Hebrew site and not the English as the form doesn’t appear there yet. It is a PDF file that can be downloaded.
The 644 form is a declaration which states the employee’s last gross pay from his main employer.
note: if the pay is over the ceiling (4,809 shekels) this is irrelevant as he has utilized the full amount at the reduced rate and therefore all pay from the additional employer will be at the higher rates.
2. If the employee works for more than 2 employers or he earns more than 75,000 shekels per month, he will need to apply personally at the Social Security office and this form is irrelevant for him.
This declaration needs to be renewed annually along with the 101 tax form and tax co-ordination forms.
What happens to the money I overpaid in previous years ?
While there is a chance that you paid too much money via the Social Security and Health Tax deductions on their payslip from the additional employer, this needs to be checked out individually. You will need to write a letter to Social Security requesting a refund.
How can I know if I was overcharged ?
It is advisable to have this pre-checked by a payroll professional. This is one of the paid services Israpay offers. Interested employees should send an email toMoshe@Israpay.com with their name and contact information