If you are a company or organization planning to operate in Israel or currently operating in Israel, you may need to employ Israeli workers. If that is the case, you will need to know the Israeli laws governing pensions and severance pay. This article by lawyers specializing in Israeli labor law at our law firm will give you a brief explanation of the most frequently asked questions.<\/p>\n

Pension Provisions<\/strong><\/h3>\n

Any employee who is an adult (21 for males, 20 for females) is entitled to a pension provision by the employer. Pension provisions include a pension fund, \u201cexecutive\u201d insurance, or a provident fund. These payments do not replace the severance pay owed to the employee if the contract with the employer is terminated, unless otherwise agreed in the employee contract (collective contracts or contracts subject to the approval of the Minister of Labor).<\/p>\n

In any case, the employer is required to set aside at least 6%\u00a0of the employee’s salary or the average wage in the economy (whichever is lower) every month for the employee\u2019s pension insurance. This pay is considered to be a compensation component on account of the severance pay owed to the employee.\u00a0In turn, the employee is obliged to set aside 5%\u00a0of his remaining pay for the pension insurance.<\/p>\n

Severance Pay<\/strong><\/h3>\n

Severance pay is owed to the employee\u00a0provided they worked with the employer for at least one year. The pay is calculated on a yearly basis, based on the employee\u2019s current wages. The pay is calculated as one month\u2019s wage per year employed, based on the average wages of the last<\/em> year of employment. Unless otherwise specified in a contract, severance pay is only paid to employees who were\u00a0fired<\/em> rather than employees who quit voluntarily.<\/p>\n

“Article 14” Agreement regarding Severance Pay<\/strong><\/h3>\n

Should the employee and employer specify this in the employee\u2019s contract (such a contract is colloquially known as \u201cArticle 14\u201d of the severance pay law), the employer may pay the entirety of the employee\u2019s severance pay (8.33% of the employee’s monthly paycheck) in advance and on a monthly basis into the employee\u2019s pension insurance. The funds are the employee\u2019s property, and he will receive them when his contract is terminated, even if the employee<\/em> is the one to terminate it. This form of severance pay is not retroactively increased to account for any raises the employee may have received.<\/p>\n

Advantages and Disadvantages regarding an Article 14 Contract<\/strong><\/h3>\n

The agreement has positive and negative aspects for both the employer and the employee. Having the severance pay advanced is better for a new employee who may not last long in the organization. A long-standing employee will lose a fair deal of money as his paycheck increases, but this does not retroactively affect the severance pay already paid to him. Conversely, if the employer believes the employee may soon leave voluntarily, an Article 14 agreement would entitle the employee to severance pay that they would not otherwise receive.<\/p>\n

To summarize, an Article 14 contract is better from the employer’s perspective when contracted with an employee who is expected to be employed for a long period of time. The benefits of such a contract with a young employee likely to leave in search of better opportunities are minimal.<\/p>\n

Contact Us<\/strong><\/h4>\n

Contact us for more information about employee benefits in Israel and for help with employment contracts.<\/p>\n

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If you are a company or organization planning to operate in Israel or currently operating in Israel, you may need to employ Israeli workers. If that is the case, you will need to know the Israeli laws governing pensions and severance pay. This article by lawyers specializing in Israeli labor law at our law firm…<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[153],"tags":[],"class_list":["post-5981","post","type-post","status-publish","format-standard","hentry","category-labor-law-en"],"acf":[],"yoast_head":"\n