Israeli Unemployment Benefits System Can Lead to 'Working for Free'

In Israel, individuals receiving unemployment benefits may find that taking on part-time work does not significantly increase their overall income due to the rules set by Bituah Leumi, the National Insurance Institute. When a person earns money while collecting unemployment, the daily earnings are deducted from their daily benefit for the days worked. If the daily wage is less than the daily benefit, the state reduces the benefit by the amount earned, rather than supplementing it. This can result in a situation where the financial gain from a few days of work is minimal, sometimes leading to what can be described as "working for free."

For example, someone entitled to 240 shekels per day in benefits who works six days a month for 200 shekels per day would earn 1200 shekels from that work. However, because these 200 shekels are deducted from their daily benefit for each of those six days, their total monthly income would remain largely unchanged, approximately 5995 shekels, the same amount they would receive without working. The logic behind this system is that unemployment benefits are intended to compensate for lost earnings, thus any income from work is factored into the benefit calculation.

The financial outcome changes significantly if the part-time work pays substantially more. If the same individual worked six days for 400 shekels each, earning 2400 shekels, their daily benefit would be eliminated for those working days. However, for the remaining 19 days of the month, they would receive their full benefit, resulting in a total monthly income of approximately 6956 shekels, nearly a thousand shekels more than without the part-time work. This highlights that the value of working while unemployed depends on the daily wage relative to the daily benefit.

Individuals can also opt to have short periods of work, where daily earnings are below the daily benefit, not counted as days of unemployment. In this scenario, they forgo the benefit for those specific days but retain their earnings, and crucially, do not deplete their total entitlement of unemployment days for future use. This strategy is recommended by Bituah Leumi for low-wage, short-term work, allowing individuals to choose between using a benefit day immediately or preserving it for later.

Furthermore, Israel has a supplementary grant for the unemployed who find work paying less than their unemployment benefit. To qualify, one must work at least 50% of a full-time position for a minimum of 25 days. This grant, payable for up to 100 days, does not reduce the overall unemployment benefit days. The grant amount is calculated based on the difference between the potential unemployment benefit and the income from the low-wage job.

Unemployment benefits are calculated based on earnings in the six months prior to registration. In 2026, the maximum daily benefit is 550.76 shekels for the first 125 days, then decreasing. The system accounts for work income because benefits aim to partially replace lost wages. Those considering part-time work should compare potential earnings with their daily benefit, report all income to Bituah Leumi, and explore options like not counting low-earning days or applying for the low-wage work grant.