By Yoav Noy, Partner |
For those who haven’t noticed, at the beginning of each year, the National Insurance updates the average wage in the economy. This figure serves as an indicator for changes in wage levels in the economy and as a basis for various payments associated with it, including taxes, income tests, and the calculation of certain allowances and grants, as well as determining the salary of foreign workers employed in Israel. At the top of the wage pyramid are foreign experts, who, according to regulations, have a minimum base salary calculated as a multiple of the average wage in the economy for periods of over 90 days. The rationale behind the government’s decision was to ensure that these workers do not come at the expense of the employment opportunities of Israelis seeking jobs, and to prevent the country from relying on cheap labor. According to data from the Population and Immigration Authority, the number of foreign experts employed in Israel stood at less than 7,000 in 2023, out of approximately 123,000 legal foreign workers, constituting less than 6% of all foreign workers.
On top of the mentioned base salary, unique salary expenses for foreign workers must be added, which are not present in the case of an Israeli worker. These include housing, health insurance, flights, as well as all social rights that an Israeli worker is entitled to, such as overtime, pension, vacation, sick leave, travel expenses, and more. This constitutes a minimum addition of 50% to the base salary and sometimes even more.
For those unfamiliar with the details, foreign experts are essentially all those foreign workers employed in Israel who do not fall into one of the following categories: nursing, construction, agriculture, industry, and unique technology. Therefore, the category of experts encompasses a very wide range of professionals with varying salary levels.
Due to the pandemic and in order to prevent distortions resulting from the dismissal of hundreds of thousands of low-wage workers, the average wage in the economy was artificially frozen in 2021-2022. In early 2023, the wage was updated by 12.5%, and in 2024 by an additional 5.5%. The implication for employers of foreign experts was that while in December 2022 they were required to pay a minimum salary of 20,526 shekels to a foreign employee, today in January 2024, the same employer is required to pay a minimum salary of 24,758 shekels. This is a minimal addition of 4,232 shekels, to which must be added the social rights derived as a percentage of the salary, as well as the unique supplements for foreign workers, which have also increased. All this leads to the fact that the cost of hiring a specialist technician is not lower than that of hiring an engineer with 5 years of experience in a high-tech company.
As a result of the variability between professionals at different salary levels within the expert categories, and in the absence of almost any intermediate categories including the “blue-collar” professions, problems arise that should be addressed seriously. For example, a researcher in a biotechnology company, a manager, or a senior engineer coming to support the subsidiary company in Israel, their salary is likely already high, so the minimum threshold, even after the increases in the past two years, is not a barrier. However, a significant portion of foreign experts coming to work in Israel are not senior managers but rather technicians, engineers, consultants, mid-level engineers, and so on, whose salary in their home country is significantly lower than the mentioned threshold. The presence of these experts in Israel is essential and cannot be replaced in the local market. These experts have the necessary training, qualifications, and experience required to perform their roles. Without them, no turbine at a power station will start providing electricity commercially, no light rail will begin transporting passengers, and no machine participating in the semiconductor manufacturing process will operate.
In the current situation, employers are forced to raise the salaries of these “experts” by tens of percentage points at best and by hundreds of percentage points in cases where they are experts from countries where wages are very low. For example, an engineer working in India, talented and knowledgeable as he may be, earns less than half the minimum salary of a foreign expert in Israel.
Raising the salary, which indeed serves as a filter so that only those truly needed for work in Israel will come here, ultimately leads to an increase in the burden on the end consumer, whose electricity bill will rise, and whose monthly income has not increased by a rate of about 20% in the past two years, but much less than that, if at all. This assumes that the employer can afford to pay such a high salary to that technician, which may lead to delays or halts in projects and harm the economic growth due to the lack of suitable human resources.
All of these factors cannot ignore the negative global sentiment, especially in this challenging period of struggle, which increases the concern and reluctance of foreign workers to come to work in Israel.
Since it seems that Israel will not establish an extensive vocational training school system anytime soon, including a system of professional certifications at an international level, a move that will require many resources and will take many years from the moment it is decided, it seems that the proper solution is to expand the categories of “blue-collar” jobs and to set a salary threshold equivalent to that paid to an Israeli worker. Such a move will not significantly increase the number of foreign workers and will not result in the usurpation of jobs from Israelis, as it still involves significant salary costs that do not exist in the case of hiring an Israeli worker. On the other hand, it will allow those who need to bring foreign experts in intermediate categories to bring them to Israel, to complete projects on time without burdening Mrs. Cohen from Hadera.
*The writer is a partner at the law firm Kan-Tor & Acco, specializing in the employment of foreign experts and workers to Israel and worldwide.
