According to the president of the Manufacturers Association, Oded Tyrah, 40 percent of employers do not obey the law and pay their workers less than minimum wage. This was just one of the comments that took many by surprise at Tyrah's official farewell party yesterday. Tyrah also said that he supported enforcement of the existing minimum wage law.
However Tyrah has vocally objected in recent weeks to the aggressive campaign led by Histadrut labor federation chair Amir Peretz to raise the minimum wage from NIS 3,300 to NIS 4,500 a month. Tyrah
argues like many others that raising the minimum wage is presently problematic when Israel has yet to fully recover from the recession, suffers from unemployment of more than 10 percent and scores of businesses remain on the brink of collapse.
Relating to the current situation, Tyrah suggested that "a governmental police force should be established, like the immigration police, that would visit factories and businesses to check if employees are complying with the minimum wage law." Israel's minimum wage law, which went into effect in April 1987, set minimum salaries at 45 percent of the national average wage. "If authorities enforce the law efficiently, we'll at least know that we're limiting the frightening abuse of workers and introducing a sense of fairness into work places," he said.
Peretz, who was invited to Tyrah's farewell party, is likely expected to back the idea of increasing enforcement of this law.
On the other hand, Tyrah maintained his position opposing raising the minimum wage. "Raising the minimum wage as Peretz suggests is a destructive step that would bring companies to their knees and drive tens of thousands of citizens into unemployment, most of whom are the ones the Histadrut aims to assist," he admonished. Raising the minimum wage would also cause employers to reduce many of their workers from full-time to part-time positions, Tyrah said.
So, who is cutting corners? "Few member factories of the Manufacturers Association pay salaries below the legal minimum wage," said Tyrah.
"The problem primarily lies in the service sector," said Hanna Zohar, director of Kav La'Oved (an organization working to protect workers' rights) yesterday.
The phenomenon of paying below the legal minimum wage is particularly prevalent among manpower companies and firms supplying outsourcing services to organizations. "The companies compete in tenders published by large organizations. In order to win the bids, they have to submit bids as low as possible without losing money. In order to maintain their profit margin, they cut employee salaries below minimum wage," she explained.
Zohar says that many companies, such as installation and maintenance subcontractors dole out tasks to their workers in a way that forces them to work 10 hours a day or more in practice while still only earning minimum wage. "These companies find a back door to circumvent the law," observed Zohar. "Though they pay NIS 3,300, they do so for hours significantly longer than the average work week of 43 hours. In this manner, the employer is in practice paying workers below what the law permits."
Another method employers use in violation of the law is to fine workers for leaving their job prior to the expiration of their contract, according to Zohar. "Many companies, among them banks, communications companies, and El Al, levy fines of thousands of shekels upon workers who quit the company prematurely. Levying the fine hurts the employee's salary, effectively lowering it below minimum wage," she explained.
Zohar also points a finger at the fuel companies, "which specialized in siphoning off employees' funds in a manner that often lowers their salary below the legal minimum." The companies fine workers by docking their salaries for each instance that they accept counterfeit bills. Public institutions, particularly municipal non-profit operations providing care, also effectively reduce hourly wages of caregivers by employing them many hours above the weekly average, Zohar said.
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