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Study Fund Benefit for Employees in Israel

If you are hiring employees in Israel, you will find that there is a wide array of benefits that are available.  Many benefits like pensions, annual leave or severance are mandatory, while others are optional.  Some of these may be new to you, such as the study fund benefit in Israel.

Employers who are new to Israel will want to learn what benefits are customary and expected by Israeli employees and incorporate those into the overall compensation plan and employment contract.

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What is the Study Fund Benefit (‘Keren Hishtalmut’) in Israel?

The study fund is a benefit for your employees for continuing professional education or conferences.  It can also be used as a general, medium-term savings plan with some restrictions on the time of withdrawal.

Any type of fund can be selected and is usually set up through an insurance agent.  The way it works is the employer will place in the fund an ‘extra’ amount equal to 7.5% of the employee’s salary, and the employee contributes 2.5% directly from their salary.

All contributions are tax-free up to a certain employee salary level (around US$5000), and employees may not access the fund for the first three years for educational purposes, and for six years for any purpose.  The amounts in the fund are also tax free when withdrawn, so it is a very attractive benefit for employees due to the tax-free capital gains and tax-free extra income.

Who is Eligible for the Study Fund Benefit in Israel?

Typically, the study fund benefit is offered to management or senior level employees, and it is up to the employer for eligibility.  It is a benefit that is usually included in the employment contract for eligible employees.

Do you need more information about Israel?

If the system of employee benefits in Israel is new to you, you might have more questions such as:

Can the employer use their contribution to the fund as a tax deduction?

Does the employee or employer select and manage the fund?

Can amounts greater than 7.5% be contributed by the employer?

Hiring employees in Israel will mean finding answers to questions like these, and this is how we support our clients in the areas of immigration, payroll and taxation.  We make international employment simple.

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