Dear Clients and Friends,

We are pleased to present you with our fourth and last quarterly update for 2023. This time, we present you with our End of Year Employer ‘To-Do’ Check List.

Vacation Accrual and Carry Over of Days:

According to law, in general, employers are not obligated to allow employees to carry over accrued vacation days from one year to the next. However, if there is no explicit policy that limits or prohibits such carry-over, or if there is but it is not enforced in practice, then the lack thereof/ employer passiveness may be considered as a de-facto consent for the accumulation and carry over of vacation days. Therefore, it is recommended to adopt a clear policy and enforce it in practice (even if it is a “non-accrual policy”).

As the vacation year runs from January to December, the ‘To Do’ List includes:

• Enforce the existing policy, including sending reminders to utilize all remaining vacation days before the end of the year or conduct internal meetings with employees who have high accruals, to decide on action plans for using up the accrued vacation. If the Company wishes to change its accrual policy, for example – to limit its vacation accruals and carry-over, this is the time to consult as to how to lawfully implement such changes for 2024.
• Plan – According to the law, in general, employers can schedule compulsory vacations over “shutdown” periods, for their employees. If such compulsory vacation is seven days or longer, then the employer must provide two weeks of advance notice. Furthermore, to enforce such compulsory vacation, employees must have a sufficient accumulation of days. If companies wish to schedule such vacations in 2024, we recommend informing the employees in advance, to allow them to prepare their schedules accordingly.
• Special cases – Bearing in mind the current situation in Israel, there may be circumstances in which employees cannot use their vacation days. We recommend examining any special requests in good faith and seeking legal advice in this regard.

Did you know? It is not uncommon that employers do not enforce their vacation accrual and carry-over policies. Therefore, when analyzing the situation, the actual practice should be examined and not only any written policy or contractual agreement.

Recuperation Pay:

Recuperation is a historical entitlement that aims to allow employees “to recuperate”. The benefit entitles employees to an annual sum comprised of a daily rate, calculated by a number of days which is determined according to length of service. Recently, the rate of payment for each day of recuperation (in the private sector), was increased from NIS 378 to NIS 418. The applicable extension order states that it applies as of July 2023. While there is no doubt that the updated tariff applies as of July 2023, there was a debate whether it applies retroactively as of July 2022. The Ministry of Labor recently published its opinion pointing to a retroactive application from July 1, 2022, but the debate on this is still on.

The ‘To Do’ List includes:

• Examine whether the Company has updated the rate of recuperation pay paid to its employees.
• Stay Updated on the open issue highlighted above.

Did you know? Some employers make this payment in a lump sum, once a year (usually in July before the summer vacations), while others divide the payment into 12 equal monthly installments.

Annual /Periodical Trainings:

The end of the year is always a good time to plan required trainings for the coming year.

The ‘To Do’ List includes:

• Prevention of sexual harassment: The issue of prevention of sexual harassment is highly regulated in Israel. Furthermore, although in general, there is no obligation to conduct trainings, there is a growing tendency in court rulings to take this training into account when examining the extent to which an employer fulfilled its legal obligations. We therefore highly recommend scheduling a prevention of sexual harassment training for the employees. We also suggest conducting separate trainings for managers and for employees, due to the greater responsibilities applicable to managers.
• Examine whether other trainings are recommended, depending on each company’s characteristics, for example, trainings on workplace harassment or employment of contractors.

Updates to Policies:

The year end is a good time to check that the Company has all the necessary policies for the next year. The decision regarding the relevance of certain policies depends on the characteristics of each employer

The ‘To Do’ List includes:

• Check which policies are advisable for your specific operations.
• Prevention of sexual harassment: This is a statutory policy for almost all employers. It is therefore recommended to confirm the existence of a local policy and that it is duly updated.
• IT & Monitoring Policy: This is not a statutory policy. However, based on court rulings, a broad and clear policy is required to lawfully enable monitoring. It is insufficient to merely state that employees should not expect privacy.
• Employees’ Use of Social-Media: In current times, when employees are active on social-media, it is always recommended to have a “use of social media” policy, as such use may have implications on the employer. The current time of war in Israel has specifically highlighted the importance of such policy and its advantages.

Provident Funds:

In general, all employees in Israel are entitled to mandatory pension and severance contributions financed by both their employer and themselves. Furthermore, many employees are contractually entitled to the generally non-statutory benefit of a provident fund, also known as an education fund. If lawful contributions have not been made, this can be amended, in general, only within the same tax year (without derogating from any legal implication in case of delayed payments).

The ‘To Do’ List includes:

• Ensure that the company has lawfully contributed.
• Correct – if your examination reveals that not all contributions have been made – correct this within the 2023 tax year.
• Special cases: Consult with local counsel on special cases. For example, what to do if the employee fails to choose his/her preferred funds.

Did you know? In general, under law, pension contributions must be made following completion of 6 months of employment. However, if the employee joined the company when he/she were already insured by a pension arrangement, then contributions must start as of the earlier of (a) completion of 3 months of employment; or (b) the end of the tax year. Furthermore, it is quite common to have a contractual obligation that requires payment as of the start day of employment.

We would be happy to answer any questions you may have and offer our assistance in drafting new policies or updating existing ones, conducting training for the prevention of sexual harassment and  providing any general, ongoing or ad hoc advice you may need.   

Labour Law Department
Herzog Fox & Neeman