By Amit Acco, Partner
Under Israeli law employer of a foreign national must pay the social contribution towards his employee pension plan, as well as deduct from the employee his part of the pension. This is done in order to protect foreign employees and equalize their social rights as local Israeli employees.
There is no mention within the Israeli law of payment in other countries as part of the employer contribution towards pension. Nevertheless, the regulator agreed* that in the instance where a pension fund cannot be arranged (recognizing the fact that the individual’s concern will not go to a pension while living in Israel), the employer should save the money in lieu of the actual transfer to the pension fund and pay the employee upon completion of the work in Israel.
In light of this last regulator clarification, one would argue that payments for a pension plan to the employee in the US may be sufficient under Israeli law, under the condition that:
- The actual employer’s pension contribution is made in the percentage that is at least equal to the one required in Israel, and
- The Pension contribution is clearly defined as such and visible within the monthly pay slip of the employee, and
- The contribution is made on top of the required prevailing wage.
* According to the regulator instructions, employer payments on account of severance pay, pension fund, and continuing education fund etc.,(hereinafter: employer work condition payments) for foreign construction workers, hotel workers and workers employed in projects requiring special technology, as well as for foreign caregivers who receive part of their salary from Caregiving Companies, must be deposited by those employers into a deposit account held by PIBA in the name of each worker.
The amount to be transferred monthly to the deposit fund by each employer is figured according to the amount each employer is required to pay for the above employer work condition payments as set out in the relevant Collective Agreement or Extension order, or a higher sum if set out in a relevant contract. The current minimum deposit to the deposit fund by employers of foreign workers is no less than 12.5% of the worker’s regular monthly salary for full time work. Nonetheless, for the first and last months of a worker’s employment only, the employer may deposit a proportional sum figured as per the number of days worked by the foreign worker in that first or last employment month.
The above employer deposit for foreign workers is over and above the employee’s salary and may not be deducted from the salary. The foreign employee shall receive the accumulated amount in the deposit fund, including interest accrued, less bank fees and less tax of 15%, upon legally and permanently exiting Israel. The money may be received by the employee in US dollars or in Euros at the bank in the airport in Israel after passing through border control (if the employee or his employer filed an application for such with PIBA at least 10 working days in advance of departure) or via bank transfer to the employee’s bank account abroad, within 30 working days of the filing of the application.