Pension contributions in Israel are a legal right, yet many employees only discover years later that money was never paid, was paid late or was calculated on the wrong salary. The good news is that you can check this yourself, and you should. Here’s how pensions are supposed to work and how to verify that yours is actually being paid.
Who is entitled to pension contributions
Every employee is entitled to pension contributions once they reach the qualifying age. For men this is age 21, and for women age 20. Since January 2017, the total mandatory contribution rate is 18.5% of the gross salary. 6% is deducted from your salary and the remainder is paid by the employer.
Employer contributions are 6.5% towards pension and 6/8.33% towards severance (“Pizuyim”).
You can’t agree not to have pension contributions paid, and you can’t prevent the employer from deducting your portion from your salary.
When contributions start
Pension coverage is supposed to be provided automatically by the employer, and you shouldn’t have to do anything to get it started.
If you did not have an existing pension arrangement before starting the job, contributions must begin after six months of employment. If you did have pension coverage before starting the job, you’re entitled to pension contributions from your first day of work. In practice, the employer may begin transferring the funds after three months, or by the end of the tax year, whichever comes first, but the payments must include retroactive contributions from the start of employment.
How contributions are calculated
Mandatory pension contributions are calculated based on the employee’s base salary, excluding overtime, or based on the average wage in the economy, whichever is lower. This applies unless the employment agreement explicitly states that contributions will be calculated on a higher amount, such as the full salary.
This matters because some employers reduce their pension obligation by artificially lowering the base salary on the payslip and shifting pay into other components. If a large portion of your monthly pay appears as a fixed “bonus” or similar item that is paid every month without any special performance requirement, this may indicate an improper salary split that results in underpayment to your pension.
A similar issue can arise with sales commissions. Monthly commissions are generally considered part of your salary, even though they are sometimes incorrectly treated like discretionary bonuses.
When employers must transfer the money
The employer must transfer pension contributions to the managing pension body within seven business days of paying your salary, or within fifteen days from the end of the month for which the salary is paid, whichever comes first.
If the employer misses the fifteenth of the month, they may be required to pay late payment interest to the pension body. This interest can compound until the full debt is settled.
If the funds are not transferred within thirty one days from the date the salary should have been paid, the failure may be considered wage withholding, even if your salary itself was paid on time.
What your payslip should show
Your payslip includes a section for mandatory deductions. This normally includes income tax, Bituach Leumi (National Insurance), health insurance and pension contributions. In some cases, it also includes professional union handling fees.
Your pension deduction should be clearly listed. If it is missing, unusually low or inconsistent with your actual pay, this is cause for concern and a reason to investigate further.
How to check your pension
The most effective way to verify your pension status is through the pension clearinghouse. This is a government supervised online service that allows any Israeli resident to see a complete and up to date picture of their pension savings.
Through the clearinghouse, you can view all pension products held in your name across all institutions, see information for a specific pension body or a specific product and review the balance of severance pay funds deposited on your behalf.
Comparing this information with your payslips allows you to confirm whether contributions are being paid on time and in the correct amounts.
What to do if contributions were not paid
If your employer failed to pay pension contributions, or paid only part of what was required, it is important to act. You should consult an attorney, who will initiate a detailed legal review of your salary components and the amounts that should have been deposited.
In some cases, a claim may also be brought against the pension fund itself if it failed to pursue the employer for unpaid contributions. In addition to civil claims, you can file a complaint with the labor enforcement unit at the Ministry of Economy. This can expose the employer to significant fines.
If pension contributions were deducted from your salary but never transferred to the pension fund, this may constitute a criminal offense, punishable by fines or imprisonment.
In situations where your employer has become insolvent, such as bankruptcy or corporate liquidation, you may submit a claim to Bituach Leumi for unpaid pension contributions, up to a statutory cap.
A few minutes of review of your pension situation can prevent years of lost savings later. If something looks wrong, don’t ignore it. Pension rights are strict, enforceable and worth defending.
Hebrew sources for this article:
- Kol Zchut on pension contributions
- How to read your payslip
- Government website on how to use the pension clearinghouse
- Information on what to do if your pension wasn’t paid properly
Thank you to Motty Handler, registered insurance agent, hmotty@gmail.com, for his help in writing this article.
