What Do You Know About Israeli Employment Law? Recuperation Pay (Dmei Havra’ah)
23 July 2026
Dear Clients and Friends,
It is that time of year again when many Israeli employees become entitled to a somewhat unusual employment benefit known as “Recuperation Pay” (Dmei Havra’ah).
For many foreign employers, this benefit raises immediate questions: What is it? Why does it exist? Is it vacation pay? How is it calculated?
While the concept of paying employees a separate “recuperation” allowance may seem unusual to employers outside Israel, this benefit is a longstanding and mandatory feature of Israeli employment law.
Although recuperation pay rarely involves large monetary amounts, it is one of the most frequently overlooked statutory employment benefits in Israel, particularly by foreign employers unfamiliar with local employment law requirements.
This client update provides a practical overview of one of Israel’s most unique employment entitlements.
A Uniquely Israeli Benefit
Recuperation Pay is a mandatory employment benefit generally applicable to all employees in Israel who have completed one year of service. The principal source for this entitlement is the General Extension Order regarding recuperation pay, originally issued in September 1998 and updated periodically, which extended the provisions of a general collective agreement to employees throughout the Israeli labour market.
Recuperation pay is a statutory employment entitlement that forms part of an employee’s overall compensation package.
Did you know? In Israel, an Extension Order is a source of employment rights. It extends the provisions of a collective bargaining agreement to a broader group of employees, either across the entire economy or within a specific industry. In this case, the Extension Order applies to the economy as a whole.
Did you know? The entitlement is not necessarily limited to the benefit prescribed under the Extension Order. While the Extension Order establishes the minimum entitlement, the general principle in Israeli labour law is that the more favourable arrangement prevails. Accordingly, some employers provide benefits that are more generous than those required under the Extension Order.
In addition, different arrangements may apply in the public sector, where entitlement rates and conditions are often governed by collective bargaining agreements, sector-specific arrangements, or other binding instruments. In such cases, employees’ rights derive from those specific arrangements rather than solely from the general Extension Order.
What Is It?
Originally, and hence the name of the benefit, recuperation pay was intended to assist employees in financing a stay at a convalescent or recuperation facility in order to rest and recover from work. In its early years, employees were generally required to provide receipts or other proof of their stay at such a facility in order to receive the benefit. Over time, however, the benefit evolved into a purely financial entitlement. Today, employees who satisfy the applicable eligibility requirements are entitled to receive the payment regardless of whether they actually take a vacation or incur any recuperation expenses.
Did you know? Despite its connection to leisure and rest, recuperation pay is not vacation pay and is separate from annual leave entitlements.
Did you know? While recuperation pay is an important mandatory employment entitlement, the monetary amounts involved are generally modest. Nevertheless, employers should ensure compliance, as unpaid recuperation pay is frequently raised in employment termination discussions and labour disputes.
How It Works: Entitlement After One Year
As a general rule, employees become entitled to recuperation pay after completing one full year of employment with the same employer (or at the same workplace). Once the first year has been completed, the employee becomes entitled to payment for that year, which is then paid retroactively.
Part-time employees are also entitled to recuperation pay on a pro-rata basis according to their scope of employment.
After completing each year of service, the number of recuperation days increases as follows:
- 1st year: 5 days
- 2nd-3rd years: 6 days
- 4th-10th years: 7 days
- 11th-15th years: 8 days
- 16th-19th years: 9 days
- 20th year and thereafter: 10 days
The current private-sector rate remains NIS 418 per recuperation day. Although a collective agreement was signed in June 2026 providing for an increase to NIS 451.5 per day, the increase is subject to the issuance of an Extension Order which is pending but is expected soon.
Recuperation pay is typically paid once a year, usually during the summer months, although some employers spread the entitlement across monthly payroll payments. The payment constitutes taxable employment income and is generally subject to ordinary payroll deductions.
Did you know? Public-sector employees and those covered by industry-specific collective agreements are generally entitled to higher recuperation pay rates than the private-sector minimum. Employers should verify the applicable rate for their workforce.
Did you know? Outstanding recuperation pay should be reviewed and settled as part of the employee’s final account upon termination of employment.
Can Recuperation Pay Be Included in Salary?
Recuperation pay may be included as part of an employee’s monthly salary. However, to ensure that the payment is valid and can be clearly identified, it is important that the arrangement be stated expressly and unambiguously in the employment agreement.
In addition, the recuperation pay component should be reflected as a separate line item on the employee’s payslip. This enables the employee to identify the amount being paid in respect of recuperation pay and to verify that it meets or exceeds the minimum entitlement required by law.
Historical Note: Temporary Reductions in Recuperation Pay During the War Period (2024-2025)
In 2024 and 2025, temporary legislation required employers to deduct specified amounts from employees’ recuperation pay and transfer them to the State to assist in financing war-related expenditures. As a result, employees received reduced recuperation pay during those years. These temporary measures have since expired, and the regular recuperation pay rules now apply. Employers reviewing historical payroll records should be mindful that different rules applied during that period.
What Is Recommended for Employers?
Employers should take the following practical steps in relation to recuperation pay:
- Ensure compliance with applicable legal requirements by paying recuperation pay in accordance with the relevant Extension Order, collective agreement, employment contract or other applicable arrangement.
- Review entitlements upon termination of employment and ensure that any outstanding recuperation pay is paid as part of the employee’s final settlement, where required.
- Understand the unique nature of the benefit. Recuperation pay is a distinctive feature of Israeli employment law and does not have a direct equivalent in many other jurisdictions. As a result, it is often overlooked by employers unfamiliar with local employment requirements.
- Maintain clear payroll records, particularly where recuperation pay is paid as part of the employee’s monthly salary package, and ensure that it is identified separately on payslips.
We Are Here to Support You
Our Labour & Employment team regularly advises multinational and local employers on all aspects of Israeli employment law, including statutory benefits, payroll compliance, workforce management, and employee entitlements. We are available to assist with questions relating to recuperation pay, employee compensation structures, sector-specific obligations, and the implementation of compliant employment practices in Israel.
As always, we remain available to discuss how these requirements may apply to your workforce and to help ensure ongoing compliance with Israel’s evolving employment law framework.
For any questions, please do not hesitate to reach out to us at [email protected].
The Labour & Employment Department
Herzog, Fox & Neeman