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The government, employers and the Histadrut labor federation made progress yesterday on a deal to compensate the business sector in the North and its workers for the month of August. The talks suggest that workers will receive their regular salary for the days they were forced to miss from their place of work because of the war, but they will need to contribute 20 percent of their salaries through a reduction of their vacation days. A similar step was taken with the previous agreement on July salaries.

In a meeting held this week between the Finance budget director Koby Haber, Tax Authority director Jacky Matza, Federation of Israeli Economic Organizations chair Shraga Brosh and Histadrut chair Ofer Eini, it came out that workers would receive their full August paychecks but would not receive special extra payments such as overtime, emergency readiness increment or bonuses.

Shift workers will receive salaries based on the average of their previous three paychecks. While the agreement is almost certain regarding employee salaries, no agreement has been reached yet regarding compensation for factory owners and businesses in the north. However, according to one of the participants, "the atmosphere in the talks is positive, heading towards a solution this week".

Brosh raised two demands on behalf of factory owners and businesses. First, he called on expanding the 70 percent government-backed loan program - which are extended at prime plus 1.5 percent. He wants the program to include not only small businesses with less than NIS 2.4 million in annual turnover but also industrial factors with annual turnover of tens of millions of dollars.

The second demand by Brosh is to allow factory and business owners to choose one of two compensation options. Either they should be able to receive 50 percent of the difference between their projected August 2006 income and their August 2005 income or to receive a promise of compensation worth 160 percent of their employee payroll. The July deal set the cap at 132.5 percent of payrolls.

Haber and Matza announced yesterday they were currently examining Brosh's proposals ahead of the next negotiation meeting to be held this Sunday.