By Amit Acco | Partner
The minimum employer pension contributions for a foreign expert working in Israel is 12.5% of their salary (6.5% for benefits component and 6% for severance pay component), and 6% of their salary by the employee (deducted from the salary by the employer).
This right to payment is a cognitive right of employees against the employer, and employees cannot settle for part of the amount due to them as a “suitable compromise,” meaning: it is the employer’s obligation to pay them according to law.
According to the Extension Order (Combined Version) for Mandatory Pension (published 2011), the mandatory contributions apply to either the expert’s gross salary or the average wage in the economy, as defined annually by the National Insurance Institute: whichever is lower.
An exception to this is if agreed between the employer and expert that contributions higher than the average wage in the economy will be paid, as mentioned above.
Employer contributions must be made to a pension fund, provident fund, or managers’ insurance according to the employee’s choice. Since there is difficulty finding pension funds that will accept foreign experts’ money (due to their foreign status), an alternative deposit arrangement has been defined with Bank Mizrahi in a special account for this purpose.
Conclusions:
According to the above, and in the absence of another agreement between the employee and their employer, the employer can base the pension deposits on the average wage according to National Insurance, which is NIS 12,536 per month (2024), rather than on the experts’ gross salary.
Regarding Employer Deposit: from our experience, to release deposits for foreign experts, all the company will be required to provide is exit confirmations from the country to verify that the workers have left. We have not encountered cases where we were asked to provide proof of pension deposits and/or any other payment made for experts.
