As employers in Israel, it is crucial to understand the laws regarding commission-based salaries, especially for the purpose of pension and social security contributions.
A recent court case has raised questions about how to properly calculate pension contributions and social rights for commission-based employees in Israel. The case involved an employee who received both a fixed hourly rate and bonuses for meeting appointments and closing deals. The employee argued that these bonuses should be included in their fixed salary for pension contributions and social rights calculations.
The court’s ruling relied on the distinction between a supplement and regular wages and determined that sales commissions that are not subject to any conditions, including meeting targets, should be considered part of the regular salary for calculating severance pay and pension provisions. In this case, the court concluded that the employee’s bonuses were actually sales commissions and not supplements, and therefore, should have been included in their determining wage for pension provisions.
As a result, the employer was required to include the commissions in the employee’s determining wage for pension provisions and pay the full amount of severance pay owed to the employee.
This ruling has important implications for employers who hire commission-based employees in Israel. Understanding how to properly calculate pension contributions and social rights is essential to avoid costly legal disputes and ensure fair treatment of employees.