Pension Insurance for EmployeesThe complete guide to rights, pension contributions and Section 14

Pension insurance is one of the most important assets a salaried employee builds over the course of their career · savings for retirement age, and a safety net for loss of working capacity and for survivors. Here you'll find who is eligible, how much is contributed, what Section 14 means, and how to check that everything is correct on your payslip.

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AI summary · Pension Insurance for EmployeesClick to read the page summary

Pension insurance is a mandatory contribution for salaried employees in Israel since 2008. The rate is 18.5% of the determining salary, split between employee and employer contributions. The guide explains eligibility and when the obligation starts, how to check the contributions on your payslip, and what Section 14 means for severance. NETO manages pension contributions for the employees it employs.

Ministry of Labor Kol Zchut · pension rights

Smart summary: pension insurance for salaried employees in Israel

Since 2008, Israel has had a mandatory pension insurance requirement for every salaried employee, regardless of employment scope. The minimum contribution rate is 18.5% of the determining salary · the employee contributes 6% and the employer 12.5% (of which 6.5% is a savings contribution and 6% is a severance contribution). The date contributions start depends on whether the employee already had active pension insurance beforehand, the employee has the right to choose the fund, and this right cannot be waived even in exchange for higher pay. Section 14 allows the severance obligation to be replaced with ongoing contributions. NETO manages the full contributions in an orderly and transparent way for the employees it employs · the employer's share is funded from the invoice the client pays, not from the employee's pocket.

Sources: Kol-Zchut · mandatory pension insurance · Israel Capital Market, Insurance and Savings Authority · NETO's pension contribution guide

Since 2008 · mandatory pension insurance for every salaried employee.
Minimum rate · 18.5% of the determining salary.
When contributions start depends on prior active pension insurance.
The employee has the full right to choose where the funds are deposited.
Section 14 replaces the severance obligation with ongoing contributions.
The right cannot be waived · not even for higher pay.

What is pension insurance Who's eligible and when it starts How much is contributed Checking your payslip Section 14 and severance Special questions How NETO manages it Frequently asked questions

What is pension insurance, and why is it critical to your future?

Pension insurance is a combination of savings and insurance deposited every month from the employee's salary. It includes three main components: savings toward a retirement pension, insurance for loss of working capacity, and life insurance that provides a pension to survivors. Unlike ordinary savings, pension insurance benefits from significant tax advantages and from employer contributions that multiply the savings.

The importance of pension insurance stems from the fact that the old-age pension from the National Insurance Institute is not enough to live on with dignity. An employee who has not accumulated pension savings over their working years may find themselves at retirement age with a very low income. Despite its great importance, many employees are unfamiliar with their rights or don't know how to check whether their employer is actually depositing on their behalf as required.

What you accumulate

A monthly retirement pension for life, alongside insurance coverage for loss of working capacity and for survivors · all under one framework.

Why it pays off

Employer contributions and tax benefits make pension one of the most worthwhile long-term savings channels available.

Who is eligible for contributions, and when does the obligation start?

The short answer is yes · every salaried employee is eligible. Since 2008, Israel has had a mandatory pension insurance requirement for every salaried employee, regardless of employment scope or type of work. The obligation applies to the employer and does not depend on the employee's consent · even a part-time employee, a temporary employee or an hourly employee is eligible. That said, when contributions start depends on whether the employee already had active pension insurance before starting the job. This is explained in detail on the Kol-Zchut website.

Employee with active pension insurance

Eligibility begins from the first day of work. In practice, the first deposit is made after three months of work, but it retroactively includes the first three months as well · in the fourth month, the payslip will show a larger deposit covering the entire period.

Employee without prior pension insurance

An employee starting their first job, or who has no active pension insurance, will only begin accruing eligibility after six months of work. Once six months have passed, contributions are made regularly every month.

Common mistake · I left after 3 months and didn't receive contributions: An employee who leaves before completing three months of work may still be entitled to retroactive contributions, if they had active pension insurance when hired · in that case the employer must deposit the funds even if the employee has left. Many employers are unaware of this rule · it's worth demanding the deposits or contacting the authorities responsible for enforcing the right.

What percentage is contributed to pension in Israel?

The minimum contribution rate set by law is 18.5% of the determining salary. The amount is split between the employee and the employer: the employee contributes 6% of their salary, and the employer contributes 12.5% · of which 6.5% goes to savings and 6% to severance pay.

Component	Employee share	Employer share	Total
Savings contribution (pension savings)	6%	6.5%	12.5%
Severance	— No employee deduction	6%	6%
Total contribution	6%	12.5%	18.5%

It's important to note these are minimum rates · in certain industries or workplaces with more favorable collective agreements, the rates may be higher.

The savings component

Savings toward a retirement pension · includes both the employee's and the employer's deposits, aimed at building a fund that will provide monthly income after retirement.

The severance component

A deposit that covers the employer's severance-pay obligation · instead of paying at the end of employment, the employer deposits monthly. Under Section 14, the deposit replaces the severance obligation.

Which salary is it calculated on? Not all salary components are included. The term insured salary (or determining salary) refers to the base on which contributions are calculated · usually base salary and fixed additions, but not necessarily overtime, one-time bonuses or expense reimbursements. An employee may receive a high gross salary while contributions are calculated on a lower amount · it's worth checking what the determining salary is on your payslip.

How do you check on your payslip whether the contributions are correct?

Checking your payslip is the simplest way to make sure your employer is meeting its obligations. Look for the following items on the payslip: employee pension deduction, employer savings contribution and employer severance contribution. Here are the four steps:

Check	What to look for on the payslip	Correct value
1 · Employee deduction	Line "Pension deduction" or "employee savings"	6% of the determining salary
2 · Employer savings contribution	Line "Employer savings contribution"	6.5% of the determining salary
3 · Employer severance contribution	Line "Employer severance contribution"	6% of the determining salary
4 · Fund name	Pension fund or provident fund details	The fund you chose

If one of the components is missing or the amounts are lower than expected · contact your employer for clarification. Want to dig deeper into reading your payslip? See the guide How to read a payslip. A system like NETO lets employers manage contributions in an orderly and transparent way, so employees can see exactly what was deposited on their behalf.

Employers? Manage employee pensions without the headache

NETO calculates and deposits the contributions automatically, issues a transparent payslip and handles reporting to the authorities · all under manpower contractor license 1565.

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What is Section 14, and what does it mean for you?

Section 14 of the Severance Pay Law allows an employer to determine that deposits to the severance component of the pension fund will replace its obligation to pay severance pay at the end of employment. In simple terms, instead of calculating severance based on the last salary multiplied by years of seniority, the employee receives what has accumulated in the fund.

The advantage for the employee

The funds accrue returns over the years and belong to the employee · even if they resign, not only if they are dismissed.

The possible drawback

If the salary rose significantly over the years, the accumulated severance may be lower than severance calculated on the last salary.

When does Section 14 apply automatically?

Section 14 does not apply automatically to every employee · it requires explicit agreement, usually as part of an individual employment contract or a collective agreement. Since 2008, most new employees are employed under Section 14 as part of the mandatory pension expansion order. Further information is available on NETO's employee clarification page.

Severance completion · when it's relevant: When an employer deposits 6% toward severance under Section 14, this is only partial coverage. Full severance pay amounts to 8.33% of monthly salary for each year of employment (one month's salary per year). The 2.33% difference is called severance completion · in many cases, when an employee is dismissed, the employer is required to make up the difference. If Section 14 was applied in full, the employee may not be entitled to completion.

An employee reviewing pension contributions on their payslip during their first year of work

Practical scenario · first year of employment

Suppose Danny started working on January 1st with a salary of ILS 10,000 and has active pension insurance from a previous job. In the first three months he won't see contributions on his payslip, but in April he'll see a double or triple deposit that retroactively covers January through April.

His regular monthly deposit: ILS 600 from the employee deduction, ILS 650 employer savings contribution, and ILS 600 employer severance contribution · a total of ILS 1,850 per month will be deposited into his pension fund. This example is general and illustrative only · actual amounts depend on the determining salary and the fund's terms.

How NETO manages the contributions

Managing pension contributions can be complex, especially for employers with multiple employees under different terms. NETO employs workers and manages their full contributions on their behalf · the system automatically calculates the required contributions, produces a transparent payslip and clear reports, and ensures compliance with legal requirements vis-à-vis the authorities and the funds.

For employees, working through an orderly system ensures full transparency regarding the deposits · instead of guessing or calculating manually, the employee sees exactly what was deposited on their behalf and where. The employer's share is funded from the invoice the client pays · not from the employee's pocket. This saves headaches and prevents unnecessary disputes.

How it works · in three steps

1Sign up to NETO

An employer who wants to employ a worker or freelancer signs up in minutes · without setting up an internal payroll system and without unnecessary bureaucracy.

2NETO calculates and deposits

The system calculates the contributions (18.5% of the determining salary), deposits them into the fund the employee chose, and handles deductions and reporting.

3A transparent payslip for the employee

The employee receives an orderly payslip that clearly shows the employee deduction, the employer's savings contribution and the employer's severance contribution · full transparency.

Frequently asked questions

Is a part-time employee entitled to pension?

Yes, a part-time employee is entitled to pension contributions exactly like a full-time employee. Contributions are calculated as a percentage of actual salary, so an employee earning less will receive lower deposits in absolute terms, but at the same percentages.

What happens to my pension funds if I resign?

Your savings funds remain in the fund and are entirely yours. As for the severance funds, the answer depends on whether Section 14 was applied and on the terms of the employment contract. In many cases the severance funds will also remain in the fund for your benefit.

How long can an employer delay contributions?

By law, the employer must transfer the deposits to the fund by the 15th of the month following the month for which the salary is paid. A significant delay constitutes a violation that can be reported.

Can pension funds be withdrawn before retirement age?

Withdrawing pension funds before retirement age involves high tax and loss of benefits, and is generally not recommended. In special cases such as a serious medical condition or high medical expenses, it may be possible to receive approval for early withdrawal.

What's the difference between a pension fund and managers' insurance?

A pension fund is a collective savings fund where returns and risks are shared among all savers. Managers' insurance is a personal insurance policy where the savings are linked to a chosen investment track. Each channel has advantages and disadvantages worth examining before choosing.

Does the employer have to contribute on overtime too?

The answer depends on the definition of the determining salary in the employment contract or collective agreement. Overtime is usually not included in the insured salary, unless otherwise explicitly agreed.

Summary

Since 2008, mandatory pension insurance applies to every salaried employee in Israel, regardless of employment scope.
Minimum contribution rate · 18.5% of the determining salary: employee 6%, employer 12.5% (6.5% savings, 6% severance).
Section 14 replaces the severance obligation with ongoing contributions · and the employee has the right to choose the fund and to check the contributions on their payslip.
NETO employs workers and manages their full contributions transparently · under manpower contractor license 1565 supervised by the Ministry of Labor.

Disclaimer: The information on this page is general and for explanatory purposes only · it does not constitute pension, tax or legal advice. The binding text is the wording of the law, the expansion orders and the pension regulations as published in the official record · for a specific case it's advisable to consult a professional. For questions · phone support at 08-976-1874.

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NETO employs workers and manages pension contributions, deductions and a transparent payslip for them · all under manpower contractor license 1565. Start a quick signup, or talk to us on WhatsApp.

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