Israel Approves Increased Leave Pay for Millions of Workers

Israel's Minister of Labor, Yariv Levin, has signed a directive to increase "dmei havra'a" (leave pay) for salaried employees, a move that will result in a raise of up to several hundred shekels for millions of workers. The directive, which was signed last week, retroactively applies to salaries for July and August. Employees who have already received their leave pay for June and July based on the old rate will receive the difference.

The new agreement expands the previously signed deal between the Histadrut labor union and the business sector presidency to all employees in the economy. This agreement raises the rate per leave day from 418 shekels to 451.50 shekels for private sector employees. An employee entitled to 10 leave days annually will see a gross increase of approximately 335 shekels. In the public sector, the rate has already been updated to 511.6 shekels per day.

This update comes after a two-year period where the leave pay rate remained stagnant, and employees were even required to forgo a leave day to fund war efforts and reserve soldier grants in 2024 and 2025. While the new agreement accounts for accumulated price increases over three years, it does not compensate workers for the leave days they lost during those two years.

Leave pay is an annual payment separate from salary, not factored into pension or severance calculations. It originated as funding for employee vacations and is now paid directly. All employees are eligible after completing 12 months of employment, regardless of position. The amount is calculated based on the number of leave days, which increases with seniority, and the employee's work hours. Employers can offer a funded vacation instead of direct payment, provided it's agreed upon in writing. Leave pay is not granted for unpaid leave, but periods of paid leave, reserve duty, and maternity leave (for the duration of National Insurance payments) are counted towards eligibility and seniority.