Dear Clients and Friends,

In the midst of the third week of the war, we continue to update you regarding the impact and effects the situation is having on workplaces.

Outline for Compensation of Businesses and Its Effect on Workplaces

• At the end of last week, the Finance Ministry outlined a plan designed to provide a targeted response to the economic damage resulting from the ongoing fighting. Parts of this outline require backing legislation, and is expected to undergo changes, including some made in response to criticism that it does not provide adequate remedies for both the damage already caused and that which is still expected to be caused to the economy, businesses, and the public.

• The outlined plan describes, among other matters, the country’s participation in payment of a portion of the costs of employee wages (for businesses with an annual turnover of up to NIS 400 million, and which in October 2023 experienced a decline in turnover of over 25% in a one-month report, or 12.5% ​​in a bi-monthly report). At the moment, it is expected that participation in said salary payments will be only very partial.

• We will continue to monitor all updates and changes to this outline and will update you on the topic. In any event, it is recommended that employers ensure full and accurate documentation of the payment of wages to employees during this period, as well as full and accurate documentation of employee absences and the reason for those absences, whether due to Home Front Command instructions, closure of educational institutions, vacation, and the like. This should be done so that it is later possible to check eligibility for participation in the various employer payments.

• Our firm has set up a joint taskforce that includes experts in various fields (including tax, labor law, and others), that will work hand-in-hand with companies, organizations, and business owners as they navigate the procedures required in order to exercise their rights to payment of this compensation, upon the completion of the outlined plan and its implementation into practice. Employers that wish to act to receive this compensation are invited to contact us so they may receive assistance in examining their eligibility under the plan and exercising their rights.

Options to Place Employees on Unpaid Leave

• Considering the expectation that the country’s participation in the payment of employee wages for the period of the war will be quite partial, and in view of a decrease in economic activity and other difficulties, many employers are considering the possibility of placing employees on unpaid leave, as an alternative to the option of weighing the termination of their employment.

• You may recall that during the covid crisis, there were specific and simple arrangements available to employers to place employees on unpaid leave and for those employees to receive unemployment benefits. As the country is currently trying to incentivize employers to maintain their employment relations, there is currently no such “special path” to enable placement of employees on unpaid leave.

• As of today, in accordance with guidelines of the National Insurance Institute (NII), employees may be entitled to unemployment benefits in the event that they were placed on unpaid leave at the employer’s initiative, subject to various conditions and stipulations, including the age of the employee (from 21 through 67 years old), the period of unpaid leave continuing for at least thirty days, utilization of all accrued vacation days available to the employee before exercising the right to unemployment benefits, and a qualifying period of work (usually 12 out of the past 18 months).

• Employers that wish to examine their ability to place employees on unpaid leave are invited to contact us to receive individualized advice, including relating to the requirement to receive employee consent to be placed on unpaid leave under these circumstances and relating to implementation of this procedure both with the employee and with the NII.

• Bear in mind that an employer that wishes to place employees on proactive leave with pay on account of their quota of accumulated vacation days may generally do so if the leave extends up to seven days. Placement on leave for a longer period requires fourteen days advance notice. Employees who do not have any accumulated balance of leave days require a separate examination as to whether the employer may place them on leave.

Payment to Employees Serving on Military Reserve Duty

• At this time, many employees have been called up for special reserve duty. In general, employers must continue to pay the salary of an employee serving on reserve duty; subsequently, after the reserve service ends, the employer is entitled to a refund from the NII, but only after producing certification from the military regarding the term of reserve service.

• Due to the scope of the reserves callup and the continued fighting, and in accordance with the instructions of the NII, employers that are required to continue to pay the wages of their employees who have been called up for reserve service can request the refund for such reserve period from the NII without submitting certification from the military regarding the callup and duration of service. This even applies to employees whose reserve service is still in effect (in the case of employees whose reserve service will continue into November, it should be noted that at this stage, the reserve service runs through October 31, 2023).

• The mass callup of employees to reserve service under “Order 8” raises many different questions that do not arise in normal times, including payment of wages to employees who have been called up who do not receive a set monthly salary, payment of wages to new employees who have been called up to reserve service, the question of working and receiving payment at the same time as performing reserve duty, and more. We are available to provide answers to specific questions that may arise in connection with these matters.

Can Employees Work from Abroad?

• In light of the necessity of maintaining functional business and continuity, and the difficulty of maintaining a work routine in some circumstances, at this time some employers are attempting to have their employees work abroad. At the same time, in view of the concerns about the combat situation, there are employees who have left Israel and wish to continue to fulfill their duties from their location abroad.

• Employment of employees from abroad raises various complex issues, which will be affected by, among other things, the country where the employee is located and the period of time in question. This includes questions concerning the need for a work visa, insurance and taxation aspects, the supervision of work performed abroad, and the options available to an employer who is not prepared to approve an employee’s request to carry out their work abroad.

• Employers that wish to explore the existing possibilities in this context are welcome to contact us to receive individualized advice.

The ongoing fighting is causing the legal situation to change regularly. We are monitoring all these changes and will continue to update you on an ongoing basis, regarding the enduring affects of the fighting on the workplace.

Praying for quieter and peaceful days,
The Labour & Employment Law Department 
Herzog Fox & Neeman