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Pension Insurance:
Every employee in Israel is entitled to pension insurance consistent
with an Extension Order issued by the Minister of Economy. According to the Extension
Order,employersmust contribute6.25%(6.5%asof January1st2017) of anemployee's
gross salary to a pension plan (the rates may be slightly different if the employee chose
a ‘manager insurance policy’) and 6% of an employee's gross salary as severance pay,
with the employee also contributing 5.75% (6% as of January 1st 2017) toward the
pension plan. Generally, an employer must make provisions for pension insurance after
theemployeehasbeenemployed for sixmonths.However,if theemployeehadapension
plan with a previous employer, the employee is entitled to the pension arrangement as
of the first day of work.
Severance Pay:
Under the Severance Pay Law (1963), an employee who has completed
a full year of employment and is terminated by the employer is entitled to one month
of salary per each year of employment based on the monthly salary at the time of
termination. However, Section 14 of the Severance Pay Law provides an alternative
whereby an employer is exempt from the severance pay obligation in cases of dismissal.
This would apply if the employer implements an arrangement according to Section 14
in which the employer makes monthly payments out of the employee's monthly salary
towards a pension plan in the name of the employee, which includes a component of
severance pay and a component of pension payment. The amounts accrued in the
severance pay component may be substituted for the statutory amount if the employer
and employee agree to the Section 14 Arrangement in writing; provided, however, that
the funds must be released to the employee even if the employee resigns.
Termination - Prior Notice:
The Prior Notice for Resignation and Dismissal Law (2001)
stipulates specific minimum periods of prior notice that employers must provide
employees before a dismissal. During the first year of employment, the period varies
from 1 day to 21 days based on the length of employment and, following the first year
of employment, the period is set at onemonth.According to Israeli National Labor Court
rulings, an employer that wishes to transfer the ownership of its business to another
entity should provide prior notice to employees.
The "Unionization Flooding" in the Israeli Labor Market
An interesting development in Israeli labor law in recent years is the "unionization
flooding." In a unionized company, a labor organization represents the employees vis-
à-vis the employer and, therefore, negotiations regarding salaries, employment terms
and the process of termination of employees are no longer conducted on an individual
basis between each employee and the company, but rather in a collective manner. This
results in the signing of a collective agreement between the company and the labor
organization.Incase a collective agreement has not been achieved the labor organization
may declare a labor dispute and take organized measures such as work stoppage and
strikes.
In recent years,theunionizationprocesswasmoreprevalentwithblue-collar occupations
(such as port employees, and employees in the electricity and building industries);
however, in the past three years, we are witnessing a great change in this field, as white-
collar employees (such as employees in the cellular, insurance, accounting and high-
tech industries) are unionizing as well. A major factor encouraging this phenomenon
is the Israeli labor court's precedents which support the employee's right to unionize.
In a precedent-setting case (known as the Pelephone case), the National Labor
Court set new guidelines and prohibitions for employers.