Knesset panel advances measure lowering bar to compensate workers furloughed by Iran war

Following pressure from business groups, government set to agree to shorten qualifying period for entitlement to unpaid leave compensation from 10 days to 5

Bowing to pressure from business organizations, the government is set to agree to shorten the minimum qualifying period for employees to receive benefits for unpaid leave during the war with Iran.

According to the revised compensation framework, the government will agree to reduce the minimum leave period that entitles furloughed private sector workers to receive 75% of their full salary. The period will now be five consecutive days, down from 10 days.

The amendment will cost the government about NIS 500 million ($168 million), the source of which has yet to be determined, according to the Finance Ministry.

The government backed down after the Finance Ministry came under fierce criticism from employees and employer associations, lamenting that the previous unpaid leave framework did not go far enough. It left out earners who did not work during the first five days of the Iran war and were furloughed due to security restrictions that shut down the economy, but returned after the Home Front guidelines were eased.

The amendment to the unpaid leave outline and a framework to compensate businesses whose revenues were hurt during the war with Iran were approved by the Knesset Finance Committee late on Wednesday and are expected to be submitted for final passage in the Knesset plenum early next week.

“There is an agreement that the first five days of the war, in which workers could not work because the economy was closed, will be recognized for unpaid leave benefits,” said Knesset Finance Committee chairman MK Hanoch Milwidsky (Likud). “This is a dramatic development, which was a result of the prime minister and the finance minister’s understanding of the situation, and was done with their encouragement and agreement and in cooperation with us.”

For the first five days after Israel and the US jointly launched the war against Iran on February 28, most of the economy, except for essential businesses, was shut down. While Home Front Command restrictions for workplaces were eased on March 5 to allow the economy to get back on its feet, some businesses remained shut, particularly in the retail sector, and many workers were unable to fully return to the workforce because schools in most places remained closed under continuing missile fire.

As in previous rounds of war, the government has formulated a plan to compensate employees put on unpaid leave, as well as a compensation framework to provide partial financial relief to businesses whose revenues have been hurt by the recent war with Iran.

The current framework will compensate businesses with an annual turnover of up to NIS 400 million ($134.5 million), which suffered a decline of at least 25 percent, similar to the model applied during previous wars. Those businesses can apply for reimbursement of between 22% to 44% of fixed expenses, depending on their revenue decline, and for up to 75% of salary costs of employees.

Business owners located in northern front communities, including the Golan Heights, the Upper Galilee, Safed, Karmiel and Rosh Pina, will be entitled to claim full compensation depending on revenue decline.

While the government agreed to the demand to shorten the qualifying period for entitlement to unpaid leave payments, the Finance Ministry decided to tighten conditions for businesses’ eligibility for reimbursement for salary expenses.

Employers who furloughed employees will only be entitled to claim compensation for salary costs if an employee was put on unpaid leave for a maximum of 10 days during the month of March.

In practice, that means that an employer who put an employee on unpaid leave for 11 days or more during the Iran war will not be entitled to receive compensation for salary expenses after the employee returns to work, even though business revenue was impacted.