Dear Clients and Friends,

We have decided to establish a quarterly update, which will be devoted to subjects that are unique to Israeli employment law or which raise special interest for foreign employers.

 These updates will be kept short and informative, and will be sent on a quarterly basis (in addition to our regular client updates, which are circulated from time to time).

First Update: Vacation Entitlement: Did you know?

As 2022 is drawing to a close, we have decided to open this new initiative by sharing with you, in brief, basic material information about vacation entitlement under Israeli law, including several important practical tips, which could be helpful when tackling this issue.

• Social Benefit: Entitlement to vacation is perceived as a social benefit and not as a monetary compensation, aiming to enable every employee to rest, recuperate and return to work feeling refreshed and re-energized. Therefore, the default according to law is that an employee is not entitled to redeem unused vacation days during the employment period. Redemption of unused vacation is generally only possible upon termination of employment.

• Minimum Statutory Quotas: Israeli law determines minimum quotas of vacation days to which employees are entitled. These quotas increase over time, depending on seniority in the same workplace or with the same employer.

Did you know? Higher quotas may be obligated by other binding sources, such as extension orders. Each employer should ensure that the quotas provided are not lower than the legal requirement.

• Accrual: There is no automatic accrual right. However, an employer may agree on accumulation of unused vacation from one year to the next, provided that the employee has used at least 7 (calendar) days during the year and that the remaining quota is used during the following 2 years.

Did you know? An employer’s passiveness to enforce any accrual caps / non-accrual policy has been interpreted in case law as an agreement for accrual.

• High Accruals in Recent Times: The Covid pandemic and the rise in working remotely or in hybrid mode have taken their toll when it comes to utilizing vacation. Employees have used less vacation days and, as a result, have accumulated a large number of such days. This may impact the wellbeing of employees, as well as the financial obligation rising from the accumulated days.

Did you know? We therefore recommend evaluating your current policy and its enforcement, and assessing if changes are required.

• Unlimited Vacation Policy: Several companies have chosen to adopt this US concept.

Did you know? This is possible, but such a policy cannot be adopted “as is” in Israel and must be adapted to local law, including the obligation to grant minimum vacation quotas.

As 2002 has just ended and a new (vacation) year begins, this is just the right time for reviewing your vacation policy, as well as making sure that it is indeed enforced. If changes are planned, make sure to consult regarding the lawful process that needs to be adopted.

We will be happy to answer any questions you may have and provide you with any further advice.

Wishing you and yours a happy , healthy and successful 2023!

The Labour & Employment Department

Herzog Fox & Neeman