Employer Fined Nearly $250,000 for Pension Deposit Failure

An Israeli labor court has ordered a finance and chemical services company to pay a former employee 889,301 shekels (approximately $248,000) after failing to deposit his pension contributions for two months of work in May and June 2016. The employee worked for the company for only two months, and while pension deductions were made from his salary on his June payslip, the funds were never transferred to his pension fund at Menora Mivtachim. Four years later, this lapse in contributions resulted in the employee being denied disability benefits. The court found a direct causal link between the company's actions and the employee's loss of insurance coverage, stating the company was responsible for the damage. The company had argued the employee delayed pension arrangements, provided incomplete information, and had made a false health declaration upon hiring. While the court criticized the employee's conduct regarding the health declaration, it did not absolve the company of its obligation to transfer the funds. The company had committed in the contract to insure the employee from his first month of employment, and had deducted the money, making the failure to deposit it a breach of contract. The employee had sought over one million shekels plus damages for emotional distress, but the court adopted the company's actuary's calculation for the final sum, excluding the emotional distress claim and legal costs due to the employee's misrepresentation of his health.

The ruling highlights the importance of ensuring pension contributions are correctly deposited. Israeli law mandates comprehensive pension insurance for most employees, with specific contribution rates and timelines for employers to transfer funds. Failure to deposit contributions within the stipulated period can be considered wage delay, and not transferring deducted funds within approximately 40 days constitutes a criminal offense under the Protection of Wages Law. Employees are advised to regularly check their pension fund accounts against their payslips and to contact their fund, employer, or the Ministry of Labor if contributions are missing.