Not All Contracts Are Created Equally: An Inside Look at the Israeli Pay Grade

Public or private sector, individual employment contract or collective bargaining agreement? If you're in a high-demand profession, like data security, a short stint with the state could pad your bank account.

Israel's top-earning public employee working on an individual contract, rather than a collective agreement, has a gross salary of just NIS 44,838 a month, which is low compared to top private-sector wages.

The figure is from the July 2013 salary adjustment, which includes data for 8,600 individually employed public-sector workers, a copy of which was obtained by TheMarker.

Only 12.5% of Israel's 67,000 state employees work under individual employment contracts rather than collective bargaining agreements. Individual contracts were introduced in the public sector in the 1990s, as a way to compete with the private sector on wages in hiring skilled personnel.

Although state employees under individual contract typically earn 30% to 35% more than their colleagues who are bound by collective agreements, that is often less than the going wage in the private sector.

The pay ceilings for state employees under individual contract are not very high. In addition, there is a big gap between the pay for high-demand professions and others. For example, while a novice economist can command a starting salary of NIS 8,500 a month, pay for professionals in the interior or environmental quality ministries starts at just NIS 5,000 to NIS 6,000 a month. Beginning lawyers also earn relatively little in the public sector, around NIS 6,800 a month, presumably due to the glut in the profession in recent years. The monthly salary for civil-service lawyers tops out at about NIS 18,245.

With the exception of a few professions that are in high demand in the private sector, such as economics and computers, entry-level salaries for most individually employed public-sector workers is far below the average Israeli monthly wage, which is about NIS 9,000 gross. The union for individually employed state workers, Ahdut, says very few reach the highest pay grades.

According to the Finance Ministry, the average monthly pay for state employees with "specialist" individual contracts is NIS 23,300, but this definition applies to only 391 workers, or 4.5% of all state individual-contract employees, in high-demand professions such as actuarial science and specialized engineering fields.

The bottom line is that individual contracts in the civil service are an attractive option mainly for people with high-demand skills who do not plan on staying in the public sector their whole career. A Bank of Israel study last year found that workers who switched to individual contracts in 2001-2002 were almost three times more likely to leave their jobs as their collective-agreement colleagues.

Low pay for patent reviewers

Pay for college graduates under individual contract, mainly in the humanities and social sciences - a category that applies to 45% of Israel's public sector - starts at NIS 4,542 a month and tops out at NIS 12,653. Clergy in the Interior Ministry earn NIS 4,458 to NIS 8,916 a month, while security guards earn between NIS 5,000 and NIS 5,468. Entry-level patent reviewers in the Justice Ministry earn NIS 6,000 to NIS 7,500 a month, and paramedics with nine years of experience are paid between NIS 5,578 and NIS 9,317 a month.

Trainee diplomats in the Foreign Ministry, who sign 5-year individual contracts at the beginning of their service, also earn very low salaries: NIS 5,398 to NIS 6,636 a month. These figures support claims by Foreign Ministry employees that their pay is unrewardingly low at all levels, prompting a months-long battle for salary hikes.

The highest wages in the public sector, unsurprisingly, are in specialized fields. Economists can earn as much as NIS 21,644 a month while pay at the Civil Aviation Authority, while starting out at NIS 5,512 a month, can go as high as NIS 43,262. Jobs in the National Security Council, which advises the prime minister on diplomatic and security matters, pay between NIS 8,652 and NIS 35,045 a month.

The National Cyber Bureau, established in 2011 and operational since January 2012, also offers enticing pay: NIS 16,223 to NIS 35,043 a month. Chauffeurs of cabinet ministers and ministry directors general are also paid handsomely – between NIS 12,248 and NIS 14,199 a month –according to the treasury, because overtime can't be reported since the job is a position of "personal trust" and the drivers must be available "around the clock."

Seven new individual contract formats were introduced this summer for computer experts and system analysts, whose work had previously been outsourced. The pay scales are similar to the private sector, at NIS 11,765 to NIS 25,406 a month.

According to Ahdut chairman Aviram Zolti, the switch away from outsourcing in information technology was due to the government's recognition that outsourced workers are less committed than employees. "The state realized it was illogical for the government computers to be operated by outside companies," he explained. The treasury said the move was also due to the sensitive nature of the work.

According to Ram Kandil, one of Ahdut's founders, the government has been introducing new individual contracts at lower pay for new hires. "That's how they divide and control workers," he says, adding, "It's a recent invention, and we're against it. All these contracts need to be combined into one contract." The wages in some of the new contracts are 12% below those in equivalent existing contracts.

But one of the reasons for this is that the new contracts, in contrast to their predecessors, allow for overtime pay. On the other hand, the base salary is lower and incentive pay and on-call bonuses have been eliminated. Ahdut says the new contracts work against employees, especially women, who tend to do less overtime.

"In addition to the salary in these contracts, in cases where the worker puts in overtime he'll be paid for these hours," explains the treasury. "In these jobs the workers are required to put in overtime – women and men alike."

In any case, contract workers in the public sector are eligible for many of the benefits received by workers under collective agreements, boosting the economic value of their overall compensation. They are entitled, for example, to 22 vacation days and 30 sick days a year - more than the average in the private sector - as well as allowances for clothing and child care, keren hishtalmut (employees’ professional training fund) and shorter hours for some parents.

Public-sector employees with individual contracts are in a delicate position, between private-sector employees with no job security and state employees under collective bargaining agreements enjoying near-total job security. Which option is best? It depends, of course, on the available alternatives.

Emil Salman