After Two Years of Cuts, Vacation Allowance Rises 8%

Israel's Histadrut labor federation and the Manufacturers Association signed an agreement on Monday to raise private-sector vacation allowance payments, after two years in which one vacation day was cut and the cash value of each day was frozen as part of budget austerity measures. The value of a vacation day will increase from 418 shekels to 451.5 shekels, but the deal still needs a labor ministry extension order to apply nationwide.

For private-sector workers, that translates into an annual increase of 168 to 335 shekels, depending on seniority. In the public sector, the allowance was also updated in line with inflation, rising to 511.6 shekels per day from 471 shekels, for an annual gain of 203 to 406 shekels per worker.

Vacation allowance, originally intended to fund rest and recuperation, is now typically paid as a summer bonus, usually with June salaries in the public sector and July salaries in the private sector. Workers receive 5 days in their first year and can reach 10 days after 20 years of service, making the total annual increase worth more than 2,000 shekels.

The payment is normally tied to the consumer price index, but the adjustment is not automatic. In the private sector, the employer side must sign a collective agreement with Histadrut, then the labor minister issues an extension order that makes it binding across the economy. That mechanism is meant to create uniform labor rules, including pension contributions, compensation for military-emergency absences and vacation allowance. In the public sector, the index-linked update applies yearly without such an order.

The article said private-sector allowances were frozen repeatedly over the past decade, including from 2014 to 2020 under an agreement that offset inflation rises against years of falling prices, and again from 2021 to 2023 because of an internal employers' dispute. They were updated again in 2023 after nearly a decade, then frozen in 2024 and 2025 due to government spending cuts after the October 7 Hamas attack and the outbreak of the Gaza war. As part of an agreement with the Treasury, each worker also lost one vacation day in 2024 and 2025, bringing the total hit to more than 1,000 shekels over two years.