employer

New info on Tax reconciliation

Moshe

bankrupt cartoon

 

The Israel Tax Authority has updated their website for citizens who want to apply for a tax reconciliation due to several simultaneous sources of income as a salaried employee. In the past, applying on line may have saved the time of physically going in to your local tax authorityoffice and waiting on line, but you still had to wait two weeks for the official documents to be sent to you via snail-mail. So, the first improvement of this process is an immediate procurment of the documents and the ability to immediately print them directly from the site !

In addition, every application recieves a serial number that can be accessed from any computer with internet capability to print extra copies at will.

The 3rd upgrade is that in the past, this was limited to a combined gross salary ceiling (from all sources) of 188,712 sh, this amount was updated to 436,272 sh !

And last, but not least, in the past you were allowed 3 tries, if you input mistaken information via the site, now that has been doubled to 6 tries, three and another three tries after 24 hours have past from the first three tries.

Save the time and do your tax reconciliation on your own time and in the comfort of your home ! No lines and no waiting !

Highly recommended

 

https://www.misim.gov.il/shteumeimas/frmPreMain.aspx

 

Havra’a payment in several installments – at which rate are they paid ?

Moshe

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.

New Havra’a rates for 2014

Moshe

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.

 

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).

 

 

 

 

 

Employer’s contribution towards employee’s meals

Moshe

Employees in the public sector, that are able to benefit from discounted meals. the new ceiling for employer participation, effective from Jan 1, 2014, is 569 shekels per month.

This memorandum doesn’t enable employers, who previously did not participate in the cost, to now do so. The above regards places of employment that offer discounted meals or via meal tickets (which are regarded as employer participation).

this has no bearing on the private sector.

 

Source:  Ministry of Finance bulletin

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.

 

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.