Retirement: employers, don't play with fire!

Not a week goes by without an employee temporarily unable to work, or the spouse of a former employee now deceased, calling us to find out how to recover what they are owed from the pension insurance theoretically taken out by the employer...

And that is where things often go wrong... Indeed, many employers, unaware of the risks they face under the law or simply negligent, do not take out in due time pension insurance for their employees, or do so at a rate lower than the actual salary .

It should be recalled that since 2008, it is compulsory for a business owner to pay each month 18.5% of the gross salary of each of their employees (of which 6% is borne by the employee) into a pension account taken out with a private Israeli insurance company. It should be noted that it is not entirely accurate to call this insurance "pension" because in reality this insurance is particularly comprehensive, since it covers four components :

retirement of course , but also insurance for Temporary Inability to Work , life insurance for beneficiaries , and finally severance pay , whether in the event of dismissal or resignation.

This insurance is therefore much more than a simple savings scheme generating interest to guarantee our old age, but accompanies employees throughout their career in the event of a difficult situation.

Israeli law requires employers to pay pension contributions to their employees after six months of activity if the employee has not had an active account in the months preceding their hiring, or, after three months, paid retroactively from the 1st day of employment, if there has been no interruption between their previous employer and their current job.

The problem is that many business owners are breaking the law because they do not pay any pension contributions for their employees...

Worse, in many cases their accounting firms responsible for producing payslips, eager to comply with the legislation, withhold 6% of the salary. In fact, without their knowledge, employees are thus disadvantaged twice: once because they have no pension insurance and therefore benefit from no protection , and a second time because, in addition, 6% of their salary is deducted without any counterpart!!!

But there are also employers who try to circumvent the law by paying the 18.5% only based on the basic salary, without including the bonuses linked to sales achieved by their salespeople, even though the law is very clear on this point and that these bonuses form an integral part of their employees' remuneration...

Whatever the situation, i.e., non-payment of mandatory pension contributions, or payment of incomplete contributions, these business owners expose themselves to risks that can plunge them, along with their family, into a devastating bankruptcy!

Indeed, imagine a person whose spouse, an employee of a company, has just died. Now deprived of that income, this person will seek by all means to compensate for it and will very legitimately approach the deceased's former employer to receive the life insurance guaranteed in the pension account. In the case where that employer had not opened an account during the employee's lifetime, they will be compelled by the courts to pay the surviving spouse a salary until the originally planned retirement age of the deceased person (64 for women, 67 for men)...

Imagine also the much more frequent case of a person temporarily unable to work following an accident or health problem. If they have a pension account known as "Pensia ", from the 91st day of absence, they can receive 70% of their gross salary, or if they have a pension account known as " Bitoua'h Ménahalim ", still from the 91st day, they will receive retroactively from the 31st day of absence, 75% of their gross salary. How many people call us every month because, following an operation or an accident, they discover that their employer only contributed based on their basic salary whereas in reality their pay is much higher and they then take legal action?

And finally, when a person leaves a company and wishes to receive the severance pay owed to them, imagine their reaction when they discover that their employer never made contributions, as personally happened to me three years ago. I had to initiate legal proceedings against my former employer to be able, FINALLY, several months later, to receive what was owed to me with, fortunately, additional compensation for late penalty fees.

It is to avoid these situations, which can quickly lead a business owner to bankruptcy, that it is important to remind all employers how imperative it is to open a pension account for their employees within the timeframes set by law, without cutting corners on the actual salary of their employees.

Finally, last but not least, whether it is employers or employees, it is equally important to ensure that the services of a SERIOUS and responsible insurance broker are engaged, to be certain that pension accounts are opened with the best possible terms for the employees and that the amounts paid are properly credited to their account, failing which, once again, this can cause serious problems for the employer...

For any additional information, do not hesitate to call me at 054-3070916.

For any additional information, please contact me directly at 054 307 0916 or by filling in the form below.

life insurance mandatory contributions employers Temporary Inability to Work severance pay retirement employees pension savings Mortgage insurance in Israel Back to articles Do not wait to take out private health insurance, protect your family!