In September 2023, the Minister of Labor signed an extension order increasing recuperation pay in the private sector, with retroactive effect from the beginning of the year. The wording of the order, and in particular its retroactive application, gave rise to an interpretive dispute among lawyers and payroll accountants: does the difference apply only to the month in which the order was published, or to the entire preceding recuperation year? The Ministry of Labor published a position paper adopting the broader interpretation, according to which employers are required to pay the difference for each recuperation day paid to an employee during the year, regardless of the manner of payment – whether in a single payment, in several payments, or as part of the monthly salary. This is a position paper and not a binding ruling of the Labor Court, but it is expected to serve as a central interpretive tool if the issue reaches judicial determination.
During September 2023, the Minister of Labor signed an extension order increasing the rate of recuperation pay in the private sector from NIS 378 to NIS 418 per recuperation day. The order states that it will apply retroactively from July 2023.
The wording of the order, and in particular its retroactive application, gave rise to considerable debate among practitioners in the field (lawyers, payroll accountants, and the like) regarding the proper interpretation of the order, and two possible interpretations emerged:
According to the first interpretation, the full recuperation pay for 2023 (that is, for this purpose, the recuperation pay paid in July 2023 for the period from July 2022 through June 2023) should be calculated according to the new rate. In that case, following the order, a difference of NIS 40 (between NIS 378 and NIS 418) should be paid for each recuperation day paid to the employee in July 2023 (and thereafter);
According to the second interpretation, only the recuperation pay for July 2023 should be calculated according to the new rate, such that the recuperation pay for the period from July 2022 through June 2023 would be calculated according to the rate of NIS 378, and a proportional difference would be paid only for July 2023 (and thereafter, in cases where the recuperation pay for the previous year was paid in the following months).
Following inquiries received by the Ministry of Labor, on 29 October 2023 a position paper was published, the purpose of which was to clarify the position of the Chief Labor Relations Officer, which also reflects the position of the parties to the collective agreement (the Presidium of the Business Sector and the New General Federation of Labor), with respect to the implementation of the provisions of the extension order concerning the employer’s participation in recuperation and vacation expenses.
The position of the Ministry of Labor, as set out in the position paper, adopts the first interpretation. This is based primarily on the view that recuperation pay is paid in respect of the “preceding recuperation year,” namely, the 12 consecutive months preceding the date on which the price per recuperation day is updated. According to the position paper, the date of the update to recuperation pay (since 1998) takes effect from 1 July of the relevant update year, in proximity to the update of the rate per recuperation day, on the basis of the Consumer Price Index published in May of that year.
Accordingly, the Ministry of Labor’s position is that an employer that paid recuperation pay for 2023 according to the previous rate is required to pay its employees a difference of NIS 40 per recuperation day, multiplied by the number of recuperation days to which the employee is entitled. This is so regardless of whether the recuperation pay was made in a single payment, in several payments, or as part of the monthly payment.
As noted, this is a “position paper,” and not a binding judgment. The position paper expressly states that no ruling has yet been issued by the Labor Court on this matter.
Nevertheless, it may be assumed that the position of the Chief Labor Relations Officer, as regulator, will serve as a tool for interpreting the extension order if the issue comes before the Labor Court, particularly since, according to the position paper, its contents also reflect the position of the parties to the collective agreement.
