Treasury presents retroactive unpaid leave, grants plan

Israel’s Ministry of Finance, which only a day and a half ago, presented a plan to compensate employers and employees for the closing of the economy during the war with Iran, was taken by surprise by the rapid end of the operation against Iran. The Ministry of Finance has been working on several changes to the plan to adjust it to the swift military developments.

The first change by the Ministry of Finance is necessarily more generous and helps employers and employees even more. In the original aid outline that was presented, the state allowed workers to go on unpaid leave under lenient conditions, while shortening the minimum unpaid leave period stipulated by law from 30 days to 14 days. However, during the 12-day war, employees did not reach the 14-day threshold required to receive unemployment benefits from the state.

After talks with the Histadrut and employer representatives, the Ministry of Finance agreed to lower the requirement to 12 days. This allows for compensation for everyone who has been absent from work since June 13. Initially, all those workers who temporarily returned for one working day, last Thursday, were still excluded from the safety net. Many Israelis did this following the momentary easing of Home Front Command restrictions on the economy, which were tightened again shortly afterwards following the US attack on Iranian nuclear facilities. However, later, the Histadrut reached understandings with the Ministry of Finance that would prevent these employees from losing their entitlement to unpaid leave.

According to the understandings, “The period of absence qualifying for unpaid leave will be 12 calendar days, with the employee required to be absent for at least 11 days of the period, not necessarily consecutively, in order to be eligible for unemployment benefits.”

Retroactive unpaid leave model

The unpaid leave model for the brief war against Iran will operate retroactively. A person who did not work throughout the operation will be entitled to unemployment benefits from the National Insurance Institute, even if registering for unpaid leave after the operation ended.

How will the Ministry of Finance prevent abuse of the scheme? First, an employee who has actually worked will not agree to receive only unemployment benefits, which are tens of percent lower than the regular salary, instead of their full salary. In addition, the National Insurance Institute can check based on the data who worked and who did not.

Yet, the Ministry of Finance remembers well from aid schemes in previous years improper attempts to manipulate the law, in order to obtain entitlements for unpaid leave even by those who did work and by those going on unpaid leave unnecessarily, in order to benefit from government assistance without working. The aid scheme, including the unpaid leave model, remains in effect until the end of the month. Therefore, the Ministry of Finance intends to make amendments to the law that will close loopholes that encourage non-employment.

In contrast, in the past, there have even been cases of partial cash payments “in the black” by the employer, plus a payment from the National Insurance Institute, for false registration of unpaid leave. The Ministry of Finance will have to prepare, as much as possible, to deal with the possibility of such an improper conduct.

Rethinking compensation for big businesses

The timing of publishing the aid outline, hours before US President Donald Trump’s announcement of a ceasefire, is not problematic from the perspective of the Ministry of Finance. From the outset, it decided to issue details of the plan if the severe restrictions on the economy lasted more than a week. But it would have preferred to publish a retroactive plan, after the event was already over and the costs were covered.

Therefore, most employers need not fear the cancellation or dilution of the grant program for those whose income was affected. The Ministry of Finance has no such intentions. The benefits announced in the plan will be implemented despite the cessation of fighting. With one possible exception.

In the Ministry of Finance’s plan published earlier this week, eligibility for grants was proposed for businesses with annual revenue of up to NIS 400 million. This is similar to the plan provided by the state in the months after October 7, 2023. The difference is that this time it was agreed, somewhat vaguely, that even the largest businesses in the economy would be able to receive assistance, from a special fund of NIS 60 million, which would be managed by the president of the Business Sector and supervised by the Ministry of Finance.

Ministry of Finance officials were never enthusiastic about this idea. Today, with the rapid end of the military campaign, it is no longer certain that the Ministry of Finance intends to transfer money to such a mechanism. This is based on an interpretation of the agreements with the business sector, in which tens of millions of shekels were supposed to be put aside in the event of an extreme scenario in the economy, which ultimately did not materialize. However, a final decision on the matter has not yet been made within the Ministry of Finance.

Published by Globes, Israel business news – en.globes.co.il – on June 25, 2025.