August, 2009

Changes in the payroll system following a new law: "economic streamlining law"

(Implementation of the law for 2009 and 2010)

As part of the economic streamlining law, several changes will be executed within the payroll system in Israel. Changes in paragraphs 1 and 2 will be valid beginning from August 2009 payroll. Changes in paragraph 3 will be valid only in September 2009:

1. 1. The National insurance ceiling for the taxable income will be doubled.
       The new ceiling: 70,830 NIS.
       The change validation period: 1/8/09 - 31/12/10.
   
   
2. 2. Employer's national insurance contribution will be increased in the rate of: 0.4% of the
       decreased ceiling (note that deductions for national insurance are done according to 2
       levels of income. This change refers only to the first level).
       The meaning of this change: an increase of 20 NIS per employee in employer's
       contribution.
       The change validation period: 1/8/09 - 31/03/11.
   
   
3. 3. One time payment to National insurance in the sum of:
       Half of the taxable income divided by thirty. Note that: half of this payment is to be
       deducted from the employee's salary and half is the employer's contribution.
   
• - The change will be valid only in September's payroll.
• - The meaning of this change: The Net payment for employees will decrease and
    the employer's costs will increase in September.