Employee Benefits

Guest Contributor: Russell D. Mayer, Adv.

To borrow the motto of a well-known U.S. retailer – “an educated consumer is our best customer”. Knowing some of the perks that are available in Israel and how reasonable it is for you to expect to receive some or all of those benefits, will allow you to make informed decisions regarding prospective employment opportunities.

Since there is always demand for quality employees and competition among employers for competent and experienced employees can be quite stiff, employers often provide employees with benefits in addition to base salary (itself the subject of negotiation) that are beyond those which are mandatory under Israeli law. Employees who seek more senior and responsible positions can expect even more attractive benefit packages. In this article, we will briefly address the most common benefits (“hatavot”) available to employees. I also note that employment benefit packages can be assembled in various combinations agreeable to the employer and employee.

For purposes of this article, I will not address the very basic benefits to which employees are entitled by law but will only list them as follows (employers may be more but not less generous than the default provisions under the law):

(a) vacation pay (“דמי חופשה”) – there are minimum provisions under the law although some employers are more generous;

(b) sick pay (“דמי מחלה”) – note your employer’s policy. by law there is no pay for the first sick day of an incident and half pay for days 2 and 3 – some employers are more generous and give credit from day one;

(d) relaxation pay (“דמי הבראה”);

(e) minimum, statutory notice of termination and resignation ("הודעה מוקדמת");

(f) severance pay (“פיצויים”);

(g) overtime pay (“שעות נוספות”);

(h) breaks during the day (“הפסקות”);

(i) statutory penalties for late payment of salary (“הלנת שכר”);

(j) statutory notice of employment terms (“הודעה על תנאי עבודה”);

(k) statutory statement confirming employment period (“אישור לעובד על תקופת עבודתו”);

(l) a pension or manager’s insurance policy (“פנסיה” or “ביטוח מנהלים”);

(m) prohibition against sexual harassment (“הטרדה מינית”);

(n) maternity/paternity leave and rights (“חופשת לידה”);

I. Financial Benefits

Performance Bonus

As the name indicates, it is an amount of money which some employers give to some employees whose performance met or exceeded expectations. It is typically given at year end or at or around the employee’s anniversary date with the employer.

Maskoret 13 (13th Salary)

This is a bonus equal to a regular month salary which is usually paid at the end of the year. This benefit is typically given only in larger businesses but may be available in small operations as well.

Pitzui Piturim (Severance Pay)

While payment of severance is mandated by law after the first full year of employment with an employer calculated at the rate of the last regular month salary multiplied by the number of years working for that employer, the provisions of the law guide the terms for which an employer is required to pay for severance. Generally, an employer is not required to pay pitzui piturim if the court decides that the employee was discharged for cause (as defined in the law and case precedent) nor if the employee resigns. While it is customary for Israeli employers to pay severance pay to employees who resign and leave on good terms, in the absence of a contractual commitment, an employer would not be required to pay the severance. An employee can negotiate a “parachute” in the event of termination of employment which might be a combination of (a) higher rate of severance calculation, (b) additional months of severance pay and (c) an employer’s commitment to make those payments even if the employee were to resign.

Keren Pentzia (Pension Plan)

Pension plans typically include coverage for a combination of retirement pension payments, severance, disability coverage and life insurance. Payment towards the plan is made both by the employer and employee. Until relatively recently, pension plans were considered a standard benefit in the public sector but reserved for the elite in the private sector. The government, in 2005, entered into a collective bargaining agreement regarding the mandatory imposition of a requirement to provide every employee covered by the agreement (typically companies with Histadrut affiliation), with a pension plan. In 2007, the State promulgated an Extension Order which imposed a requirement upon all employers in Israel to provide at least a minimum pension benefit to virtually every employee in Israel.

Bituach Minahalim (Managers Insurance Policy)

Managers Insurance is one of the most popular benefits, primarily in the hi-tech sector and among white collar professionals. Many employees may choose between Bituach Minahalim and a pension plan. A Bituach Minahalim Policy has coverage similar to that of pension plans but is issued by an insurance company. When offered you would be well advised to consult initially and periodically with a trusted insurance agent to ensure that you are maximizing your benefits.

Keren Hishtalmut (Continuing Education Fund)

Keren Hishtalmut was originally devised to serve to fund an employee’s continuing education costs but morphed into a savings plan. It is more rare to have employers offer this coverage which is often reserved for valuable and senior employees or those in the public sector. Both the employer and employee contribute to the fund (it is similar to a 401-k plan in the U.S. with significant differences). It is a medium-length saving program from which the employee can withdraw deposits 6 years, on a rolling basis, after they are made. Employers can contribute at a high rate so that generally this is a significant benefit to employees.

II. Other Benefits

Car

Some employers, particularly those in the public sector for their senior employees and hi-tech firms, provide their employees with a car for “commuting and business travel purposes.” The type and price of the car, as well as whether fuel and maintenance fees are included, varies by employer and employee. Since the government realized that cars were not only being used for business purposes but for the personal convenience of the employees as well, the Income Tax Authority began taxing employees for the “fair personal value” of the car. As the taxable value were considered to be relatively low, the number of leased cars in this country became disproportionately high. The Israeli tax code was revised, therefore to dramatically increase the deemed value of the benefit to the employee– in some cases by doubling it. The change better reflects the economic reality and discourages the proliferation of leased cars (which result in traffic and pollution). As the economics of leasing changed you would be advised to consult with an accountant to determine whether it is feasible for you to accept a car from your employer and to help you choose whether to downsize the vehicle offered to you in order to minimize your tax obligation.

Cellular Phone and Laptop

Many employers, particularly in the hi-tech sector, provide some or all employees with “equipment” intended to allow employees to be accessible to work other than during office hours. The equipment may include a laptop or home computer (often with wi-fi or DSL service), a cellular/smart phone, fax (less popular in recent years) and a beeper. This equipment can be considered a convenience but also may be a “ball and chain.” As with cars, some years ago the Income Tax Authority began taxing employees who receive cellular/smart phones from their employers on the theory that they are also usable for personal purposes.

Shai LaChag (Holiday Presents)

Many employers customarily give to their employees gifts for Rosh Hashannah and Pesach. The gifts are often coupons usable in certain stores but may also include personal items. The value typically varies according to the rank of the employee.

Miscellaneous Benefits

Some additional benefits given by some employers include payment for home delivery of periodicals, payment for professional licenses and membership in professional organizations, payment for lunch or provision of a cafeteria with discounted meals and discounts at various stores or organizations and often with respect to the employer’s own products or services.

III. How to Get Benefits

The ideal time to request/insist upon particular benefits is before commencement of work for an employer. Benefits that are important to you should be reflected in your employment contract. Aside from our standard recommendation that you utilize a lawyer knowledgeable in the field to review your contract before you sign it, it is particularly important that you obtain advice from a lawyer or someone in your field familiar with standard practice in your industry to consider what is typical and which demands may be considered excessive.

IV. Contract in Hebrew - How do you even know your benefits and obligations?

We are frequently contacted by people who have signed or been asked to sign employment and other contracts in Hebrew even though they do not comprehend Hebrew at a level sufficient for them to understand the document. We have also been asked whether an employee can insist upon a contract being in English or whether the signer can get out of a contract in Hebrew by claiming that he/she did not understand the words. It is crucial for readers to realize that:

(a) Hebrew (and Arabic) are official languages in Israel – English is not;

(b) the previous comment is not intended to suggest that contracts in English (or other languages) are not binding – contracts in non-official languages are binding to the same extent as Hebrew or Arabic language documents;

(d) if you do not understand a contract (whether because of its language or otherwise), you should consult with someone who does (and, if practical, with a lawyer) before you sign.

(e) Under Israeli law, there is a presumption that a person who signs a contract, understood its terms and conditions. Overcoming that presumption is difficult. Courts will generally not allow an argument of Non Est Factum (it is not my deed – I did not know what I was doing or signing) certainly if there is negligence on the part of the party that signed (e.g. indiscriminately signing without trying to understand). Even if the presumption is overcome, a court will not automatically cancel a contract, particularly if the signer did not bother to understand or consult before signing and more so if there would be injury to the other side if the contract is cancelled.

(f) Israeli law requires parties to a contract to act in good faith in its negotiation and performance.

(g) caveat emptor

Good luck!

This article is not to be considered as a legal opinion. For legal advice, we suggest you contact legal counsel directly

Russell D. Mayer is senior partner at the Jerusalem-based law firm of Livnat, Mayer & Co. (www.LMF.co.il). If you have any comments or questions with respect to this article, please contact Russell at mayer@LMF.co.il

Nefesh BNefesh

Employee Benefits