Holiday Allowance to Rise 8% in Private Sector

Israel’s Histadrut labor federation and the business sector employers’ umbrella group signed an agreement on Monday to raise the value of a vacation allowance day in the private sector from 418 shekels to 451.5 shekels, pending an extension order from the Labor Ministry. If approved, the change will apply to all workers and employers in the economy. For private-sector employees, the increase means an annual gain of between 168 and 335 shekels, depending on how many vacation allowance days they receive.

In the public sector, the allowance was updated separately in line with the consumer price index and will rise to 511.6 shekels per day from 471 shekels. That will add between 203 and 406 shekels a year for employees there. Vacation allowance, originally intended to fund rest and rejuvenation days, is now usually paid as a cash bonus once a year, typically in the summer.

The number of days is based on seniority, starting at five days in the first year and reaching ten days for employees with 20 years of tenure. In the private sector, the allowance is indexed to inflation, but any update requires both a collective agreement between the Histadrut and employer representatives and the labor minister’s signature on an extension order. In the public sector, the adjustment follows the index automatically and does not require such an order.

The allowance had been frozen several times in recent years, and in 2024 and 2025 the rates were also frozen as part of budget cuts tied to the war in Gaza. Under an agreement between the Histadrut and the Finance Ministry, one vacation allowance day was also deducted from each worker in both years, bringing the cumulative loss to more than 1,000 shekels over the past two years.