Written by Guest Contributor Russell Mayer, Adv.
Take One: You finally found the ideal job in the Holy Land! You are so excited with the prospect of options and hitting it big, that you thought you would do without a written contract – after all, you don’t want to rock the boat!
Take Two: Your efforts have begun to pay off. Your hi-tech business is up and running. You’ve hired new employees including a CEO, CTO and a CFO (and maybe a few other O’s), and something tells you they’re going to be superb. Now you can sleep peacefully, share the responsibility with people you trust, and it seems that all that is left to do is for the founders to count the money. Can it really be that simple?
Take Three: You are a venture capitalist considering investing in a young enterprise. What should you insist on seeing in the company from an Israeli perspective?
A relationship between an employer and an employee is no different than any other relationship – it begins with high aspirations. An employment relationship creates legal obligations on both the employer and the employee which should be considered and evaluated before commitments are made and before the relationship is established.
Israel’s labor law system is a remnant of the country’s original socialistic character. The State of Israel was founded a bit more than 55 years ago mainly by workers and peasants raised on socialistic principals (people who lived in Kibbutzim or who belonged to the Labor party); this philosophical approach was adopted by the Israeli legislature and incorporated into the legal system – at least with respect to labor laws and regulations.
Israeli labor law can be found in numerous laws. regulations issued by the government, circulars, instructions, orders and expansion orders issued by ministers or chief officers, particular or general agreements signed between employers andthe Histadrut (Israeli employees organization) and customary practices. All of these govern the relationships between employers and employees.
Among other things, employees must receive vacation and sick leave, time off during the day, transportation expense reimbursement, overtime pay for additional hours and severance pay under certain circumstances. There are provisions which govern ownership of intellectual property generated by an employee. There are rules and regulations which pertain to non-competition provisions imposed or accepted by employees. In subsequent articles we will address some of these individual topics.
Notice of Employment Terms and Conditions
Even if current law did not already require it, we would suggest that it is crucial for parties to a contractual relationship to have at least the basic terms of that relationship concretized in writing.
The Notification Law (Employment Conditions) – 2002 (the “Law”) obliges every employer to provide employees with a written notification within 30 days from the beginning of the employees’ employment. The notice, which constitutes an employment agreement, must include details regarding the employment conditions, such as the date the employment commences (and if the employee is hired for a fixed period, the date the employment is to end), a general description of the job, the salary and other payments, including the times when these payments would be transferred to the employee), regular working hours, social payments, etc. The Law also states, that if employment conditions change during the employment period, the employer must provide the employee with written notification within 30 days.
Employees that began their employment at a particular employer before the law became effective (i.e. before June 21, 2002), are entitled to receive the notice if they specifically request it in writing.
If the employer does not comply with the provisions of the law and fails to provide an employee with the required notice, it might be obliged to pay penalties/fines. The employee could also bring a cause of action against her employer for damages she suffers due to the failure to receive the proper notification.
The notices (employment terms notice, social benefits notice and change in employment conditions notice) must be in the statutory forms set forth in the Notification Regulation (Employment Conditions) (The Form and the Details of the Notification) – 2002, even if there is a separate employment agreement. However, an employer need not provide foreign employees who have an employment agreement according to Foreign Employees Law (Prohibition of Unlawful Employment and Unfair Conditions) – 1991 with the initial notice of employment terms (all foreign employees are required to have written employment agreements and receive special visas and work permits).
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Generally, according to the Severance Pay Law, 5723-1963, an employee, who has worked for his employer for a year, is entitled to severance pay, at the rate of one month’s pay for each year of employment at her employer, provided that the employment is terminated by the employer without cause (the parameters of “cause” are not within the scope of this article). Under certain circumstances, an employee may be entitled to severance pay upon his resignation due to constructive termination (i.e. under particular conditions, if the employee can prove that he was forced to resign). There are other limited situations in which an employee may be entitled to severance pay, even if he resigned at his own discretion.
Some employers may voluntarily pay their employees severance pay, even if the employees would not otherwise be entitled by law or contract. Some employment agreements may entitle employees to more generous severance terms than those provided by the law (i.e. parachutes).
Many Israeli employers insure themselves against their potential obligation for the payment of severance pay, through Bituach Minahalim (Managers Insurance) policies or pension plans. Depending on how these plans are structured, funded and established, release of the amounts accumulated on behalf of particular employees may cover some or all of the employer’s obligations for severance pay.
In advance of terminating the employment relationship, the party seeking the termination (whether it is the employer who is terminating the employee or the employee who is resigning) must provide the other with advance written notice, pursuant to the Advance Notice of Termination and Resignation Law, 5761 – 2001.
The length of the advance notice period to which the recipient is entitled, in the absence of agreement to more generous terms, depends on such factors as the type of employment basis (e.g. daily, monthly, open-ended) and the amount of time that the employee worked for that employer (generally, the notice period will be 30 days after a year of employment).
The employer may decide to allow (or require) the employee not to come to work during the advance notice period, but must still pay her normal salary during that period. The parties may agree on a longer notification period than that prescribed by the law, but not on a shorter one.
Generally, the obligation to provide the advance notice applies in the absence of termination (by the employer or employee, as relevant) for cause.
Upon termination, the employer is also required to provide the employee, within the earlier of 14 days of the date of termination or a week of the employee’s request, with written confirmation of the period of the employee’s employment (including beginning and ending dates). Under some circumstances, the managers or directors can be personally liable for payment of part of the fines, that may be assessed by the Labor Court for lack of compliance with the law.
This arrticle 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.
If you have any comments or questions with respect to this article, please contact Russell at
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See the following link for a comprehensive video given by accountant Philip Stein, President of Philip Stein and Associates on Understanding Your Pay Slip. He will take you through a Tlush Maskoret (Israeli pay slip) line by line, explaining all terms and sections in detail.