Histadrut and Treasury reach agreement on public sector pay

The Israeli Ministry of Finance and the Histadrut trade union movement have reached a final agreement on a package of economic measures that will be part of the 2025 state budget. The most important part of the agreement concerns public sector salaries for hundreds of thousands of employees. Instead of postponing the scheduled wage increase, a mechanism was agreed upon to reduce wages temporarily, in exchange for the increase taking effect as planned.

Under the agreement, the wage increases specified in last year’s framework agreement will be 2% in December 2024, 1.5% in April 2025, and 1.5% in April 2026. At the same time, a temporary reduction of 2.29% of wages will take place. It will be implemented between December 2024 and December 2025, which will decrease to 1.2% in 2026 and will be canceled after that.

According to estimates by the Ministry of Finance, this step is expected to save NIS 5 billion in 2025 and NIS 2.5 billion in 2026.

In December 2024, there will be a slight decrease in net wages of 0.29%, due to the gap between the December increase and the reduction that will be implemented at the same time. In April 2025, with a 1.5% increase, wages will rise to a higher level of about 1.2% of the starting wage, despite the ongoing reduction of 2.29%.

The positive trend will be strengthened in 2026, when the reduction will decrease to 1.2%, with a further 1.5% increase added to the wage in April. At the end of 2026, with the reduction fully rescinded, workers will benefit from all cumulative increases – 2% as of December 2024, 1.5% as of April 2025, and 1.5% as of April 2026 – for a total increase of 5% compared to pay. the beginning.

The bottom line is that workers will see a gradual increase in their wages over this period, and except for a slight decline in the first few months, they will eventually receive guaranteed, immediate wage increases of 5% cumulatively. This contrasts with the alternative of freezing bonuses, which would postpone pay increases for several years.

Also in the agreements: tax exemption for pensions

It was also agreed that the temporary reduction will not affect the employees’ retirement rights – it will not reduce the insured’s salary for cumulative and budget pensions, and will not affect the final account payments. Besides the agreements on the issue of wages, it was also agreed to continue the plan that began in 2024, whereby each employee contributes one day of entertainment wages to the state treasury (worth 418-471 shekels per person), instead of two days, as discussed in the negotiations.

In addition, it was agreed that the tax exemption for pension taxes and stopping the increase in the tax subsidy for pension withdrawal will only apply to the year 2025 and not permanently, and proposals to reduce the ceiling for exempt pension deposits and increase pension allocations in the budget for owners will also be implemented. As expected, the reduction in tax benefits on advanced training funds and the freeze on the minimum wage were also removed from the budget, at the request of the Histadrut.

The Histadrut conditioned its approval of the wage reduction on completing legislative measures to freeze the wages of government employees and local authorities in 2025, as well as on making amendments to the retirement law, in accordance with previous agreements. Most of the agreements have already been expressed in a government decision and legal notes distributed by the Ministry of Finance this week.

Published by Globes, Israel Business News – en.globes.co.il – on November 19, 2024.

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