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Finance Minister Abraham Hirchson announced yesterday that business sector and labor representatives have signed a compensation agreement over financial damages resulting from the war in the North.

The agreement, which covers damages incurred over the past two weeks, will cost the state NIS 800 million, according to Tax Authority Director Jack Matza. In addition, the state has paid out a few hundred million shekels in property damage compensation in northern Israel.

The agreement does not cover the tourism and agriculture sectors.

The pact will reimburse employers for worker absenteeism on condition that they pay employee salaries. Workers are to receive their salaries in full, 52.5 percent of which will be paid by the state, 27.5 percent to be paid by employers, and the remaining 20 percent will be paid by the workers themselves via paid vacation deductions. In addition, the state will compensate employers for indirect financial damage equivalent to 80 percent of the salaries of absent workers, bringing the total compensation to 180 percent of wages.

Business sector representative Shraga Brosh said the compensation will not cover the full extent of corporate losses and business, will have to shoulder their remaining indirect costs.

Hirchson said that compensation agreements for the tourism and agricultural sectors are scheduled to be signed Monday, which means that all economic sectors will be covered.

Retailers were not represented in the talks, and they said the agreement is not suitable for the commercial sector. For example, stores at which all employees arrived to work but sales collapsed is not entitled to any compensation based on details of the agreement. ?Turnover was not a criteria, while absenteeism was,? Federation of Chambers of Commerce President Uriel Lynn said. ?This [agreement] is more suited to industry than to retail and service businesses.?

?Small business owners and the self-employed are addressed in the agreement,? Matza said. ?A self-employed person with a small business and no employees will receive real compensation at the rate of profit reported in the previous year,? he said, adding that a NIS 20,000 salary cap was instituted.

Hirchson said that the state is not planning to impose new taxes to finance the war spending. He said that discussion of the 2007 budget has been postponed for one month in order to review the war?s impact on the budget.