2013

Are you a salaried employee or self-employed ?

Moshe

Are you a salaried employee or self-employed ?

There is a huge difference ! Not only in the benefits you are entitled to, but in regard to your responsibilities. No, I am not talking about your social benefits or your salary. I am talking about Social Security (or Bituach Leumi as it is known in Israel). Before you say that of course you know what your status is, I suggest you read this post through to the end. It may have some eye-opening surprises for you that can have serious impact on you, financially.

Many people own companies or are suppliers of services as self-employed. There are people who work legitimately as salaried employees, and some do a little of both.
Others have start-ups they run from home: anything from selling things, to doing work over the computer, whether it be building internet sites or translating work, or whatever.  It is this last group that this post is targeting.

First, it is important to understand that while both self-employed and salaried employees pay Social Security, the rates are different and so is the coverage for various stipends as well as the base amounts for the stipends.

If you are considered by Bituach Leumi to be self-employed, but you are reported on a company’s payroll (not a placement or manpower agency), that fact does not make you a salaried employee. What counts is your actual status. Bituach Leumi, by law, can change a person’s status one-sidedly and even retroactively ! As a result of such a change they can demand back payment at the rates that existed for self-employed persons ! If you received in the past, during the said changed period, a stipend from Bituach Leumi, your eligibility for that stipend may be re-evaluated and even disallowed.

Recently, a verdict was released by the labor court in a case of “stage and communication ltd” and others vs. Bituach Leumi (case # 5062/06). Bituach Leumi one-sidedly changed the status of certain “employees” in the company. The company and the employees filed suit in labor court contesting the change.
The court, asked the simple basic question “did employee-employer relations exist between certain employees who were on the company’s payroll as salaried employees and reported as such ?”. The verdict explicitly stated that there were no such relations and these “employees” should have been reported as self-employed for all purposes.

The Judge stated in his verdict the following: “The model of employment, which all of the plaintiff companies involved in the suit, used was in actuality a front. These companies only designation was to relieve self-employed people from the burden of managing their affairs with the tax authorities and the defendant (Bituach Leumi). There is no relationship or connection between the plaintiff companies and the services the employees, who were reported as salaried workers, provided to the recipients of the services. The only reason the employees were on payroll as salaried employees was to avoid having to manage their affairs with the authorities.”

This is a precedent setting, important verdict, the first of it’s kind, in a very lengthy case.

This is how you can check yourself to see if you qualify as a salaried employee or as a self-employed person

Answer the following questions truthfully. If your answer to any of these questions is negative, this very well could mean that you are self-employed:

1. Is there someone who arranges your schedule at work ?

2. Is there someone at work who assigns or re-assigns you to a project/position ?

3. Is there someone at work who has the power and authority to fire you and terminate your job ?

4, Is there someone at work that you need to request vacation leave from ? Or to notify regarding tardiness, sick days, reserve army duty, etc  ?

5. Is there anyone at work who supervises your work and you report to as a superior ?

6. Is there any type of time-sheet reporting and follow-up for your work hours and days ?

and if your answer to any of these questions is positive this very well could mean that you are self-employed:

7. Do you decide which clients/ jobs to accept and which to reject ?

8. Do you negotiate with clients the price they will pay or determine the cost for jobs ?

9. Are your wages implemented by sharp up and down changes due to the cash inflow that you receive from third parties ? And as a result is it difficult to point out your monthly base pay ?

10. Is payment of your wages delayed until the amount is received in full from a third party ? (not paid on a set date)

If the answer to these questions is negative, chances are you are not eligible to be a salaried employee. You need to register as a self-employed individual at your local Bituach Leumi office in order to ensure your rights. Don’t wait for them to rescind your salaried employee’s rights retroactively. More information can be found on Bituach Leumi’s website:  www.btl.gov.il

This is not something to be taken lightly !

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

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 !

 

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

Minimum wage update – April 2013

Moshe

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.

 

Working hours on Israel’s Memorial Day & Independence Day

Moshe

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.

 

 

Employee’s Rights Lecture – Tel-Aviv – May 5th 2013

Moshe

Are you receiving all you should from your employer, by law ?

Is your payslip hard to understand/ decifer ?

What should you do if you’re not ?

And what are your rights ? What can you do about it (aside from quitting your job) ?

Come find out the answers to these questions and more…….

What: Employee’s Rights Lecture

 Date: Sunday, May 5th, 2013 at 18:30 

 Where: AACI Tel-Aviv  –  94/a Allenby Street 

       

Pre-registration required. There is a small fee to attend. Please contact to register:

 contact: Helen Har-Tal –    Tel: 03-6960389       Email: aacicentralregion@gmail.com

Tax Authority adds more hours in the afternoon to customer service

Moshe

The Israeli Tax Authority released a memorandum to the public on March 10th, 2013 regarding the hours in the afternoon/evening that the tax reconciliation department is open to the public. The memorandum can be found in Hebrew on the Tax Authority’s website: www.taxes.gov.il

In an effort to better serve the public in a more efficient manner, The Tax offices in Jerusalem 3, Tel-Aviv 5, Be’er Sheva and Haifa will be open on Sundays from 3 p.m. until 6 p.m. on a trial basis up until (and including) April 14th, 2013.
After which it will be determined whether to continue this service and to what extent.

The service is meant for anyone who wishes to procure a new tax reconciliation for more than one employer for 2013 and those who wish to file for a tax rebate for previous years.

 

 

 

Employers: Do you have issues with employees incorrectly filling out 101 forms ?

Moshe

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.

 

Coming soon ! Hebrew on Israpay !

Moshe

In order to widen our services to a broader audience, we have successfully upgraded to a Multilingual site and Integrated Hebrew into the site.

The Hebrew pages are currently in draft mode and not visible yet.

As we post the translated pages, they will be posted and become visible. Thank you for your patience.

 

Enjoy !

 

Your comments are always most welcome

 

 

Moshe

Mandatory Pension Rates updated from Jan 2013

Moshe

The mandatory pension rates have been updated from Jan 2013 onwards as follows:

 

Employee – 5%

Employer – 5% + additional 5% towards severance pay.

total 15%

 

This is the 6th update out of  7. The law which began in Jan 2008 to ensure a pension to all salaried employees in Israel.

In 2014, the last update will come into effect.