uabb domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /var/www/sites/lawfirmbackup_200125/wordpress/wp-includes/functions.php on line 6131Are employee bonuses considered wages for the purposes of severance pay<\/a>? Court rulings have established tests for deciding this issue, by which each case must be examined to determine whether the bonus is a part of the employee\u2019s salary or not. If the bonus is conditional on specific circumstances such as the employee’s performance, it is likely that it is not part of the basic salary. If the bonuses are paid regularly and without variation, it is likely that they can be considered part of the salary for purposes of severance pay in Israel<\/strong><\/p>\n In order to answer the complex question of bonuses and severance pay in Israel, which concerns both employees and employers, it is necessary to know the jurisprudence regarding labor laws. Attorney Joshua Pex, a partner in our firm and an expert in labor law<\/a>, will explain this in the following article.<\/p>\n “R” worked in a successful hi-tech company. During her employment, R. was promoted several times to a more senior position, and she was paid many bonuses in light of her good and effective work. However, due to cutbacks in the company, it was decided to terminate R’s employment 10 years after she joined the company. When her severance pay was issued, R. discovered that all those bonuses she had received were not included in the calculation. Was R.’s employer correct in calculating the compensation, or is R. in fact entitled to increased compensation due to the additional funds awarded for her performance? This hypothetical case, which is intended to illustrate the legal problem we will elaborate on below, may happen, and indeed does <\/em>happen, to many workers in Israel. This is because the law on severance pay and its calculation was established many years ago, and the way it is formulated does not give clear answers on the subject, particularly not ones adapted to the modern work world. In order to help you understand things better, we will explain the law and the resulting legal situation in detail below.<\/p>\n Severance pay is calculated based on regulations<\/a> from 1964. The regulations list specific components for which severance pay must be paid. The list includes the following components: “Basic salary, seniority bonus, cost of living adjustment, family bonus, departmental bonus and performance bonus<\/em><\/strong>.” However, the regulations also deal with fixed fees paid to employees for performing certain work or based on output, and the way they are calculated within the framework of severance pay: “Whether an employee’s wages, in whole or in part, are paid for performing certain work or in part of the proceeds, or if the majority of their wages based on the amount of production, their last salary will be considered in relation to the aforementioned salary the average salary of the twelve months preceding the dismissal<\/em><\/strong>.” It is important to emphasize that apart from these components, the law does not recognize any other wage components that must be taken into account when calculating severance pay.<\/p>\n As can be seen, the above regulations do not define what bonuses are. This is not surprising, since when the regulations came into force, it was not customary to give employees bonuses and salary increases. Instead, a fixed salary was usually paid, with specific and defined additions. The regulations have not been amended to adapt the legal situation to the modern work world, as far as including bonuses when calculating severance pay is concerned. Thus, the decision on questions regarding bonuses has been brought to the courts. Over the years, tests have been developed in the Labor Court\u2019s rulings for deciding on the classification of bonuses. These tests, described below, provide tools to better understand whether a certain bonus may be included when calculating the severance pay.<\/p>\n The Labor Court ruled that for the purpose of classifying bonuses and salary increases, things must be examined on a substantial level. This means that the official name given to the bonus or salary increase by the employer is not important. What matters is whether it is a supplement that is not part of the employees’ basic salary, or whether it is actually part of the salary. In an important ruling<\/a> of the National Labor Court from 1982, a rule was established which remains in force even today. This rule states that in order to decide whether a certain bonus is part of the salary, it must first be determined whether the bonus was dependent on any conditions or not. In practice, if the payment depends on any conditions, it is not part of the employee\u2019s salary. As a result of this rule, many components, including overtime<\/a>, a bonus for working on a day of rest, travel allowance and recuperation pay<\/a> (d\u2019mei havra\u2019ah<\/em>), were not recognized as part of the employee\u2019s wages for the purpose of calculating severance pay.<\/p>\n In contrast, to the extent that the employees are able to prove that a certain payment they received beyond their base salary was artificially separated from their salary, this may be considered as part of the salary that must be taken into account when calculating severance pay. For example, in several Labor Court rulings (including NLC NG\/3-85 Regev Roni v. Telecom Company Ltd., and in the proceeding NLC NA\/3-216 Amget Plastic Ltd. v. Muhammad Abdel Rahman Khalil), it was determined that a bonus that is given regularly and without conditions is considered part of the employees’ regular salary. As can be seen, the question of classification is not simple and depends on the circumstances of each case. Sometimes it is even possible that bonuses that were classified in one case as not<\/em> part of the base salary will be considered in another case to be a component that should be included when calculating severance pay. Thus, it is recommended to seek legal advice in order to understand how bonuses and salary increases should be classified in individual cases.<\/p>\n If you have any additional questions or need advice on severance pay or employee rights in general, an attorney specializing in labor law from our office, in Jerusalem and Tel Aviv, will be glad to be at your service. Our attorneys have extensive experience in providing comprehensive legal assistance to employees and employers from all over the country. You can contact an attorney from our office at the phone numbers and email address below.<\/p>\n [author_and_contact_info]<\/p>\n \n","protected":false},"excerpt":{"rendered":" Are employee bonuses considered wages for the purposes of severance pay? Court rulings have established tests for deciding this issue, by which each case must be examined to determine whether the bonus is a part of the employee\u2019s salary or not. If the bonus is conditional on specific circumstances such as the employee’s performance, it…<\/p>\n","protected":false},"author":6,"featured_media":20618,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[153],"tags":[],"class_list":["post-85916","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-labor-law-en"],"acf":[],"yoast_head":"\n
<\/p>\nBonuses and calculation of severance pay – who is right, the employer or the employees?<\/strong><\/h4>\n
What does the law stipulate regarding bonuses and calculation of severance pay?<\/strong><\/h4>\n
The tests established by the Labor Court for deciding the question regarding bonuses: a substantial decision based on the circumstances<\/strong><\/h4>\n
Bonuses and calculation of severance pay \u2013 contact an attorney specializing in labor law<\/strong><\/h4>\n