Salary payments in Israel through payment companies

An amendment to the Israeli Wage Protection Law was included in the secondary amendments to the Regulation of Payment Services and Payment Initiation Law.

This legislative amendment enables employees to request that their employers transfer their wages to a broader variety of entities.

Highlights of the amendment

Prior to this amendment, the law allowed employees to receive their salaries, inter alia, via a transfer to a banking institution, to a dedicated employment office, or to any corporation authorized for this purpose by the Minister of Labor with the consent of the largest labor organization and with the approval of the Knesset Labor Committee. 

The amendment enables employees to receive their salary payments through a wider variety of entities, including through payment accounts managed by payment companies. At issue are a variety of new companies (some of which have not yet entered the market), which are payment companies or licensed deposit and credit service-providers or licensed stable payment service-providers, including IsraCard, Max and CAL.

Employees benefitting from the amendment

The amendment adds a new channel for receiving salaries, primarily as a solution for the needs of employees who do not have a bank account in Israel. For example, this amendment provides an additional solution for foreign companies operating in Israel and needing a channel for transferring salaries to their foreign employees.

The amendment may also enable products to be offered to employees who have restricted bank accounts, such as via pre-paid cards in lieu of bank transfers.

Employers’ preparations

In order to enable employees to receive their salaries via the new channel, employers must be prepared to work with the new entities and companies expected to become operators of salary payment services.

The importance of the amendment

This amendment supplements additional reforms designed to make payment services more accessible to the public and to simplify engagements with payment service-providers.

For example, two major companies providing salary transfers abroad, primarily for foreign employees, received identification codes enabling the banking system to identify and recognize them. This expands the possibilities of automating work with them, making it easier to use these companies for salary payments.

***

The Employment and Regulation departments at Barnea Jaffa Lande & Co. are at your service to provide advice on this matter, as well as on any employment law and regulatory issues.