Working in Israel January 2010

 

Israel offers varied opportunities for professionals in both the private sector and government (including university professors and school teachers).

This survey cant tell you how soon you will work or how much you will earn, but it will attempt to describe the basic components of salary and benefits which you may receive.

 

The following is a table of approximate monthly gross incomes (in shekels divide by 3.8 to translate to dollars) for full time positions for salaried workers by profession:

Field

Entering Salary*

Experienced Professional*

Computers

6,000 9,000

10,000 25,000

Accountants**

4,000 6,000

10,000 20,000

Engineers

5,000 7,000

10,000 20,000

Economists

6,000 8,000

10,000 20,000

Technical Writers

5,000 7,000

10,000 20,000

Marketing

5,000 8,000

10,000 20,000

Doctors

5,000 8,000

10,000 20,000

Lawyers**

4,000 6,000

8,000 20,000

Architects

4,000 - 6,000

8,000 15,000

Secretaries (Hebrew/English)

4,000 5,000

5,500 6,500

Pharmacists

5,000 8,000

8,000 15,000

Teachers (university)

6,000 - 8,000

10,000 15,000

Teachers (high school)

4,000 5,000

7,000 8,000

Teachers (grade school)

3,000 4,000

5,000 6,000

* Based on income information used for tax filing purposes. Includes the value of company cars, but does not include the value of employee contributions to savings plans (explained in Monthly Pay Slip below)

** An apprenticeship at low salary is needed in order to receive full professional certification.

 

Salary levels for middle and senior management in these professions are higher than for experienced professionals, and it is difficult to fix an upper limit on management salaries. Certainly, salaries of 40,000 shekels per month are not unheard of.

The salary levels listed above are for people who have full Hebrew language skills and for experienced professionals, the intent is for those with experience in Israel. In general, when attempting to determine a reasonable starting salary for a position, bear in mind that whatever you told your employer about your background abroad, it is looked upon skeptically until he sees your work in person and learns to appreciate it. For this reason, most new immigrants take a step backward in professional responsibility when they begin to work in Israel.

 

Monthly Pay Slip A monthly pay slip in Israel is usually more detailed than that which you received abroad.

The salary slip is generally divided into two parts, gross pay you received, and deductions from pay. Gross pay less deductions equals net salary received.

The following is a brief summary of potential data on a salary slip (not every employer pays all of the categories of gross pay):

 

Category

Sub-category

Explanation

Gross Pay

Base Salary

Everyone gets this

Overtime Pay

Hours multiplied by hourly overtime rate

Experience Premium

Addition of 1% per year of experience

Month 13 salary

Since there are 52 weeks per year, but only 12 months, some employers pay a 13th month salary

Vacation pay

By law, employees are entitled to a salary addition for at least one week of vacations. This payment is over 1,000 shekels and depending upon the employers generosity, can reach at least 5 times this amount. The amount is either paid in full at the beginning of the summer or divided into 12 monthly payments

Public Transportation Allowance

Covers the cost of traveling to work by public transportation. By law, a public transportation allowance must be paid unless this cost is expressly dealt with in the framework of base salary, or in the form of a car allowance

Car allowance

Allocation per kilometer multiplied by cost of operating vehicle per kilometer traveled

Deductions

Income Tax

The more you earn, the more you pay (see Table below)

National Insurance

About 5% of gross pay. Insurance for unemployment, disability, retirement

Health Insurance

About 5% of gross pay. Insurance for doctors visits, operations, including childbirth

Pension*

About 7% of workers base salary (the employer contributes too). Provides for monthly pension upon retirement

Kupat Gemel**

5% of worker salary (the employer contributes too). Sometimes paid on non-base salary as an addition to pension, and sometimes on whole salary. Funds a one-time lump sum payment upon retirement.

Manager Insurance (generic term not limited to managers)**

5% of worker salary (the employer contributes too). Generally paid on base salary only. Funds a one-time lump sum payment plus disability insurance.

Keren Hishtalmut**

 

2.5% of worker salary (the employer contributes 5% or 7.5%). Generally paid on base salary only. Funds a one-time payment every 6 years, which may in theory be for education, but in practice may be used however the worker chooses

Union Fee

1% of base salary, when a union exists

* As of 2009, by law employers must have a pension plan  

* These deductions are considered optional worker benefits. Some employers give them to all workers, some employers give them to some workers and not others, and unfortunately, some places of employment wont offer them at all.

Given that money set aside for pension and manager insurance is usually paid only on base salary, it is important to structure your salary so that your base salary represents a high proportion of total salary.

One benefit that all workers are entitled to without deduction from pay is Pitzuim (separation pay). The employer sets aside 8.3% of the base salary (one month per year), which is paid to the employee if he is laid off.

 

Calculating Income Tax As in your country of origin, income tax is calculated according to marginal tax rates and deductions from tax owed.

The following is a table of marginal tax rates for 2010:

Monthly Salary (in shekels)

Marginal Tax Rate

The first 4,470

10%

4,471 to 8,470 (the next 3,700)

14%

8,471 to 12,720 (the next 4,250)

23%

12,721 to 18,250 (the next 5,530)

30%

18,251 to 39,340 (the next 21,090)

33%

Above 39,340

45%

 

 

The primary deduction from tax is tax credit points. Each point is worth 205 shekels. Tax credit points are allocated as follows:

Category

Points

Male Resident of Israel unmarried or married

2.25

Working woman without children

2.75

New Immigrants

3 extra points - first 18 months in Israel, 2 points next 12 months, 1 point next 12 months

Working woman with children

2.75 points plus one extra point per child

 

 

 

 

 

The following is a short, simplified example of a pay slip for a married man who is a new immigrant:

Line Item

Amount

Base Salary

9,000

Overtime

1,000

Total Salary

10,000

Less:

Income Tax (based upon marginal tax rates and 3 extra tax credit points)

270

National Insurance

500

Health Insurance

500

Total Deductions

1,270

Equals:

Net Salary

8,730

* For simplicity, it is assumed that there are no employee deductions for

Pension, Kupat Gemel, Manager Insurance and Keren Hishtalmut.

 

Job Offer Pitfalls

1. Total Salary versus Net Salary Some employers will make you an offer of Total Salary, which is prior to total deductions, and others will cite a Net Salary figure, which is after total deductions.

Recommendation: Since the size of deductions for Pension, Kupat Gemel, Manager Insurance and Keren Hishtalmut are related to gross salary, have th employer cite you offers for Total Salary and Net Salary.

2. Optional worker benefits some employers will start putting aside money for Pension, Kupat Gemel, Manager Insurance and Keren Hishtalmut from the beginning of your employment, others will start them only after completion of a trial period, and others will not offer them at all.

Recommendation: Since employer payments can amount to over 10% of total salary, be sure to understand whether they are included and under what conditions.

3. Annual Pay versus Monthly Pay some employers will quote an a monthly wage that includes the proportionate monthly amount (1/12) of one time or periodic payments for month 13 salary and of vacation pay. This provides the illusion of a higher salary than you will receive on a month-to-month basis.

Recommendation: Ask whether the monthly salary offer factors in these payments.

4. Vacation and Sick Leave by law, your employer is obligated to give you 10 vacation days per year, and need not pay you if you are out of work for less than 3 days. Many employers are much more generous, and will give at least 20 vacation days per year, and pay you if you are out of work for 1 day.

Recommendation: Ask what the employer provides.

 

Miscellaneous

Basic Training and Reserve Duty If you are called to serve, you will be paid either by National Insurance, or directly by your employer, who will then get refunded by National Insurance.

 

Job Sources and Contacts

                                    Nefesh BNefesh provides a network of contacts and job placement assistance.

                   Networking with friends and neighbors

                               Tehillah and the Association of Americans and Canadians in Israel (AACI) provide employment counseling and maintain data banks of available positions that were sent to their offices.

                                    Newspapers, both the Jerusalem Post and the Hebrew papers, advertise available jobs, particularly on Fridays. 

                                    Various internet groups for professionals

                  

Telecommuting with your pre-Aliyah Job

This option appears to have spread among immigrants who liked their pre-Aliyah job, and whose work does not involve direct daily contact with other employees. If you think this is a potential option, check with your pre-Aliyah employer before you move to Israel, because by the time you get settled in Israel and look into it, the job may very well be filled.

 

Setting up a Business in Israel

Despite objective difficulties with language, lack of familiarities with the system and with the market for the good or service to be provided, some new Olim decide that working on their own beats working for others.

However, we caution new immigrants from exploring this option before you have mastered the language, know the system (including reporting to the Income Tax Authority (Mas Hachnasah) and the Social Insurance Institute (Bituach Leumi), and have researched the outlook for the service you wish to provide. Running a new business in Israel can be a very formidable challenge.

 

Job Stability versus Potential for Improved Compensation

As in seeking employment in the United States, two major considerations in choosing an employer in Israel are Job Stability and Potential for Improved Compensation.

Lets define terms:

Job Stability the chance of achieving long-term employment without fear of layoffs due to efficiency measures or of business closure.

Potential for Improved Compensation the opportunity to improve your compensation package over time. This opportunity depends on the financial health of the employer and the extent to which the employer is geared to promote professional advancement.

 

In general, employment opportunities in which both job stability and the potential for improved compensation are high are fairly limited. In many cases, there exists an inverse relationship between the two.

However, in Israel, this inverse correlation doesnt always hold up. Setting aside initial starting compensation based on profession, the following diagram attempts to map types of employers according to risk/reward tradeoffs:

 

 

 

 

 

L=low, M=medium, H=High

 

Chance for Improved Compensation

L

M

H

Job

Stability

L

Small businesses

 

Start-ups

M

 

Non-bank financial, academia

Large Israeli owed companies,

H

government

 

Subsidiaries of foreign companies, banks

From this diagram, it can be seen that:

1.                    Small businesses (private stores or companies with only a few employees) tend to offer limited job stability and limited opportunity for improved compensation.

2.                    At the other end of the scale, Israeli subsidiaries of foreign companies and commercial banks tend to be stable employers who also offer good opportunities for professional advancement and as a result, increased compensation.

3.                    As in other countries, Israeli start-ups tend to be risky but offer potential for compensation growth (assuming the company stays viable long enough).

4.                    Government (both national and local) tends to be a stable employer with relatively limited opportunities for improved compensation. However, government jobs sometimes provide a good starting point for obtaining initial Israel work experience.

 

Tax Issues in Israel

Beyond an understanding of how various taxes are calculated (see Monthly Pay Slip and Calculating Income Tax above), the following are several tax issues that you should be aware of:

1.                   First year in Israel In a common scenario, you will arrive in Israel in mid-year, having worked abroad until your Aliyah, and then will study in an Ulpan for several months before seeking work. The tax year in Israel corresponds to the 12-month civil calendar year. This scenario has several implications:

                        You were likely taxed in your pre-Aliyah nation based upon earning a monthly salary for a 12 month calendar year. Even if Israel has a tax treaty with the nation, given that you moved to Israel in mid-year and did not work for several months, you very likely paid excess taxes which can be obtained as a refund.

                      If you work in Israel in the same tax year, you should notify the payroll department of your employer that you did not work in Israel during the entire 12 month calendar year. This will allow that employer to reduce the income tax you pay on your Israeli earnings.

Be aware: Even though the professional person who hired knows that you are a new Oleh, chances are that he/she will not realize that there are tax implications and wont notify the payroll department.

If you dont get income tax reduced during the year, you can file a short form with the Income Tax Authority and receive a tax refund after the year is over.

2.             American Citizens in Israel from year 2 and on formally, American Olim are expected to file U.S. federal tax returns. Most dont bother.

Aside from being a good citizen, in the 2001 2010 period there is a less altruistic reason to file:

Families with children age 16 and under are entitled to substantial tax credits for each of these children. For example, if a U.S. family living and working in Israel shows that its Israeli income tax is higher than the income tax it would have paid on that income in America, which is usually the case, its tax obligation to the Internal Revenue Service is zero, and in addition it is entitled to a refund of $1,000 per child age 16 and under.

 

There are cases where the childcare credit may not lead to a refund:

                         Self employed workers who owe social security tax the credit will only partially offset social security tax

                       The family has substantial taxable income on interest and dividend income from America

 

Foreign filers who elect to take the child care credit must commit to filing this way for a 5 year period. If you will only have children under age 17 for a year or two, this method may not be worth the trouble. As this is written, the child care credit has yet to be renewed beyond 2010,

 

Nevertheless, for families with several children in this category, serious money is involved. The procedure for filing is somewhat complicated and it is advised to employ the services of a competent accountant who is familiar with U.S. tax law.

 

Leaving Work and Layoffs

Almost no one spends their entire work life in Israel with one employer. Therefore, it is important to understand various terms which are relevant if you leave a job:

Pitzuim Separation pay. If you are fired, by law you are entitled to one month per year separation pay for every year you worked. Some places may give more. If you quit a job voluntarily, some employers pay Pitzuim, even though the law does not mandate it.

Taxes of Separation pay: An exemption from taxes exists on approximately the first 10,000 shekels per year. For example, if you work 5 years at a monthly salary of 7,000 shekels per month, and are paid for 5 months, all 35,000 shekels are tax free. If you work for 5 years at a monthly salary of 12,000 shekels per month, the first 50,000 shekels (10,000 times 5 years) of the 60,000 is tax free, and the remaining 10,000 is taxed at the workers marginal tax rate.

The following are payments which employer may pay in certain situations:

Maanak Peraydah a one- time payment for leaving, above and beyond Pitzuim. Dmai Histaglut adjustment pay, usually amounting to several months of extra salary.

 

Once you have left the job, you are entitled to:

Dmai Avtalah - unemployment compnesation, paid through the National Insurance Institute (Bituach Leumi). To obtain this benefit, you should obtain a letter from your former employer indicating that your employment ended as of a particular date, and bring it the National Insurance Institute, together with pay slips from that job. You will receive a percentage of your average salary for a period not exceeding 175 work days, and perhaps less depending upon age and family situation.