Israeli Employers Get Off Cheaply in Social Benefit Payments

The costs of maintaining a worker in Israel, which employers must pay in addition to gross salaries, are significantly lower in Israel than in many other countries around the globe.

Hila Weissberg
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Hila Weissberg

Maintaining a worker costs an Israeli employer less than the global average, according to data compiled by the international business consulting firm UHY, which collected and compared numbers from 24 UHY branches across the globe. Here in Israel, the local survey was carried out by UHY affiliate Certified Public Accountant (CPA) firm Shtainmetz Aminoach.

Results showed that on top of gross salaries, Israeli employers pay, on average, an additional 7% to the National Insurance and to pension plans, as prescribed by law. The average amount in other countries was 18.8% on top of gross salaries, with 22.7% paid on average in the G7 countries. The average cost of employment in the BRIC bloc (Brazil, Russia India and China) was 23%. The survey did not measure other costs incurred in Israel, such as participation in travel or vacation expenses.

Low employment costs should make Israel more competitive on the global market. But there is a flip side, as overseas employees usually receive better benefit packages.

The survey also showed that Israeli law protects the weak. The amount that employers dole up decreases proportionally to the size of an employee's salary, meaning that those with the lowest salaries (up to NIS 9,000 a month) employers pay up to the tune of 14%, whereas with the highest sector (up to NIS 93,000) that percentage shrinks to 3.6%. Lower salaries, therefore, mean a higher percentage of benefits.

The nations with the highest costs to employers were Brazil, France, and Italy, where business must pay between 41% and 57%. According to attorney and CPA Ariel Dreyfus from Shtainmetz Aminoach, “growing economies like Brazil, China and Russia place the burden on employers, with higher employment costs offset by lower salaries. Cheap labor makes these countries attractive to businesses, but higher employment costs can act as a deterrent. States now have to find the balance between employee benefits and staying competitive. The question is who bears the brunt of the burden. Israel favors the employer, which encourages hiring and opening of new businesses. This may have contributed to Israel’s stability during the recent global crisis.”

Israeli workers.Credit: Reuters

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