Severance and Provident benefits - Israel

 

In conjunction with passing a collective agreement concerning the severance benefits for employees in Israel and pending the approval to expand the collective agreement to all sectors of the economy by the ministry of industry  and trade; it will be mandatory commencing January 1, 2008 to include all employees under a pension plan as follows:

 

Date from 

Provident

Severance Allowance

Total 
Employee Share Employers Share Employers Share
1.1.2008 0.833% 0.833% 0.833% 2.5%
1.1.2009 1.66% 1.66% 1.68% 5%
1.1.2010 2.5% 2.5% 2.5% 7.5%
1.1.2011 3.33% 3.33% 3.34% 10%
1.1.2012 4.16% 4.16% 4.18% 12.5%
1.1.2013 5% 5% 5% 15%
1.1.2014 5.5% 6% 6% 17.5%
1.1.2015 5.5% 6% 6% 17.5%
1.1.2016 5.5% 6% 6% 17.5%

 

  •  The Maximum Employer Contribution in Severance 8.33% and in provident 7.5%, the maximum employee contribution in provident fund is 7%.
  • The amounts calculated based on gross salary.
  • The collective agreement applies on men from the age of 21 and women from the age of 20.
  • The pension plan becomes applicable to all employees after 6 months of employment, if the employee not previously covered by a similar plan.
  • If the employee previously covered by a similar plan, then the new employer must deduct and contribute the stipulated amounts at the time employee commence working but the amount deducted from employee and contributed by employer must paid to the pension and provident fund no later than three month from the date employee start work.

Severance

Upon termination of an employee he/she is entitled to one month’s gross salary for every year worked and a fraction thereof starting from the first year of employment. Therefore the employer must pay directly to the employee the difference between the severance benefit and the employer contribution in severance fund. The terminated employee can get the amount in severance fund directly from insurance company after submitting form #161 for end of service.

Upon resignation of an employee he/she is entitled only to the employer contribution in severance fund and cannot get the remaining amount to arrive to the amount of one month’s gross salary for every year worked. The terminated employee can get the amount in severance fund directly from insurance company after submitting form #161 for end of service.

Provident fund

The main purpose for provident fund is to guarantee a sufficient income to help retired or disabled worker to live and cover his/her expenses, following is ways the employee can benefit from provident fund:-

1-     At retirement age (67 for men, 64 for women), as monthly salary.

2-     In case of Disability, as monthly salary.

3-     In case of Death, as monthly salary to his/her spouse and children.

The accumulated provident amount could be withdrawn from the fund before the above cases in the following ways:-

1-     After 6 months of unemployment

2-     At any time but %35 of the accumulated amount will be deducted as income tax.