Israeli Workers to See Increased Vacation Pay in Upcoming Paychecks

Private sector employees in Israel are set to receive a positive change in their upcoming paychecks due to an increase in vacation pay (dmei havra'ah) rates. A directive signed by Labor Minister Yariv Levin two weeks ago officially raises the value of a vacation day. Employees receiving their August salaries will see the new rate reflected immediately. Those who already received their vacation pay for June or July at the previous rate will be compensated retroactively for the difference.

The directive extends the agreement reached in June between the Histadrut labor federation and the business sector's presidency to the entire economy. This change is expected to benefit between 2 and 3 million private sector employees, increasing their annual vacation pay. The value of a single vacation day will rise from NIS 418 to NIS 451.50. For an employee entitled to 10 vacation days annually, this amounts to a gross increase of approximately NIS 335.

In the public sector, the rate was already updated to NIS 511.6 per day. Certain sectors, such as security and cleaning, have unique arrangements with higher vacation pay rates. This update follows a two-year period without any increase in vacation pay. Furthermore, during this time, employees had to forgo one vacation day as part of a government arrangement to fund the war effort and provide grants to reservists, a measure enacted in 2024 and extended to 2025.

Eligibility for vacation pay requires 12 months of employment with the same employer. The amount is determined by the vacation day rate and the number of days accrued based on seniority. In the private sector, employees receive five days in their first year, increasing with tenure up to ten days for those with 20 or more years of service. Part-time employment also affects the payout proportionally. Employers can offer private vacations instead of direct payment, provided the value is equivalent, or spread the payment throughout the year with mutual written consent. Unpaid leave, including certain periods during the war, does not accrue vacation pay, while paid leave and maternity leave (up to the period covered by National Insurance payments) are counted towards seniority for this benefit.