Foreign workers’ deposit (legal information)
Israeli law stipulates that a monthly deposit be made for foreign workers in the construction, specialized technology and nursing industries. This deposit is made available to the workers when they leave Israel permanently and is intended to ensure that their rights are protected. The amount of deposit varies among the different employment sectors. Employers who fail to make the deposit may face various sanctions, including revocation of their permit to employ foreign workers. This article about foreign workers’ deposit in Israel presents an explanation by attorney Joshua Pex, a partner in our firm and an expert in labor law.
Are you employing workers in the nursing, construction or specialized technology industries? It is important that you know the obligation to make deposits for them
According to the Interior Ministry’s Population and Immigration Authority, as of the end of 2021, there were over 100,000 legal foreign workers in Israel. Over 40% of them work in the nursing sector. Approximately 2,000 foreign workers are defined as experts, with many of them working in the various technological fields. The employees in the above industries all have one thing in common; in 2016, regulations came into effect requiring that a monthly deposit be made for them. The law also requires a deposit for asylum seekers, a requirement which is more widely known than the obligation to make a deposit for foreign workers. The deposit for a foreign worker serves two purposes: guaranteeing the foreign workers’ rights by law (including the right to a pension and severance pay), as well as encouraging foreign workers to leave the country legally at the end of their employment period, in order to receive their accumulated deposit. Below we will explain in detail the legal obligations regarding the deposits, how to fulfill them, and the sanctions for failing to do so.
What are the regulations regarding foreign workers’ deposits?
The law stipulates that a monthly deposit be made for all foreign workers in the nursing, construction and specialized technology sectors, starting from their first month of employment. This obligation came into effect as of August 1, 2016, except for nursing companies employing foreign workers, who were required to begin making deposits for their employees as of November 1, 2016. In January 2021, the obligation was extended to nursing institutions that employ foreign workers. The deposits must be made to a designated bank account for the worker at Bank Mizrahi-Tefahot. The deposits constitute an alternative to paying the social benefits that all Israeli workers are entitled to, or alternatively paying into a provident fund (kupat gemel).
What is the size of the deposit?
The deposit’s amount varies among the different employment sectors. In the nursing industry, the deposit is defined as the larger of the following two: (1) the severance pay that the nursing company is required to pay for foreign workers (amounting to 6% of their salary) and an additional 6.5% from the worker’s salary, which constitutes the employer’s benefits component; or (2) the severance pay and benefits component agreed upon between the nursing company and the entity ordering the nursing services (usually, the National Insurance Institute). In the second case, the severance pay component will usually amount to 8.33% of a nursing worker’s monthly salary.
In the construction and specialized technology sectors, the deposit consists of the severance and benefits component that employers are obligated to allocate for employees, according to the expansion order or the collective agreements that apply to the workers’ employment in each specific case. In the construction industry specifically, this is, at the time of writing, 7.1% towards foreign workers’ benefits, in addition to 6% for severance pay. That is, in total, employers are required to deposit 13.1% of the foreign workers’ monthly salary into their cumulative deposit.
In what cases is a partial deposit made?
If an employee did not start working at the beginning of a month, or finished working before the end of it, as well as if an employee temporarily left Israel or went on unpaid sick leave, the law states that a partial deposit be made for the employee that month. Alternatively, the deposit can be calculated in proportion to the number of days the employee worked in that month, while taking into account their rest days according to law (weekly rest days, holidays, vacation days, sick days, etc.).
Employers must beware of sanctions and restrictions for failing to make deposits as required by law
Regulations regarding the obligation to make deposits for foreign workers in the aforementioned industries apply to everyone in these industries. It is important that employers and foreign workers alike know these obligations and adhere to them. Employers who fail to make the legally required deposits risk facing sanctions by the Population and Immigration Authority, including a ban on hiring new employees, and in exceptional cases even legal prosecution. It is also important to clarify that the act of making the deposit does not exempt the employers from fulfilling the other legal rights of foreign workers, including paying the rest of the benefits that they are entitled to. In any case of doubt, it is important to consult with an attorney specializing in labor law who deals with the subject of foreign workers.
Contact our experts in labor law and the subject of foreign workers
In this article we explained in detail the obligation to make a monthly deposit for foreign workers employed in the construction, nursing and specialized technology industries. If you have questions or need assistance on the matter, you can contact us and we will be happy to help. Our law firm, with offices in Jerusalem and Tel Aviv, specializes in the field of labor law, and assists both foreign workers and their employers in a variety of legal issues, including employment contracts, exercising employees’ rights, severance pay and providing alternative solutions to labor disputes, such as mediation between employees and employers.