Israel's Defense Ministry Replaces 62-Year-Old Bonus System with Stable Salary

Israel's Ministry of Defense is retiring a 62-year-old bonus system, replacing it with a more stable salary structure that will impact thousands of employees. The new collective agreement, signed by the Histadrut labor union, the Ministry of Finance, the Ministry of Defense, and employee representatives, will be in effect until August 31, 2030.

The core change involves the "shachar idud" system, which provided performance-based bonuses. A significant portion of these funds will now be converted into a permanent percentage increase to base salaries, which will be factored into pension and social benefits calculations. Administrative staff, MAHАР category workers, engineers, and technicians will receive a 14.3% permanent increase, while social workers will see increases ranging from 10.73% to 15%.

While the old system is largely being phased out, performance-based incentives are not entirely eliminated. The top 25% of employees in professional categories will still be eligible for annual bonuses amounting to several thousand shekels. Additional financial incentives are also designated for workers in ranks 42-44 and above, as well as students working for the ministry, who will receive bonuses for meeting goals. A novel element of the agreement includes a monthly payment for employees who do not take sick leave during a specified period, aiming to increase workplace presence.

Officials stated the previous bonus system was criticized for its complexity, poor alignment with modern work practices, and difficulty in objectively linking bonuses to actual performance. The reform aims to simplify the payment structure and make it more transparent. For employees, the shift means a larger portion of their income will be a stable, predictable component, positively affecting pension calculations. "This is a historic correction of an injustice," said Histadrut Chairman Arnon Bar-David, emphasizing improved financial stability and pension prospects. Defense Ministry Director-General Maj. Gen. (res.) Amir Baram linked the reform to a revamped HR strategy, stating the new model better reflects employee contributions, management tasks, innovation, and professional achievements. Defense Ministry Workers Committee Chairman Sasson Peretz called it a turning point, resolving long-standing issues with the old payment mechanism.