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In New Budget, Government Discards Law Incentivizing Workplace Safety

The law requiring "dangerous" employers to pay increased National Insurance fees was enacted in 2018 following the recommendations of the Adam Committee, but was not implemented in practice | National Insurance Institute of Israel: "We welcome the move"

פעולות לחילוץ עובד שנפל באתר בנייה (צילום: ארז סופר, מ"מ רמ"ד דוברות והסברה, כבאות מחוז דן)
Operations to rescue a worker who fell at a construction site. (Photo: Erez Sofer, Platoon Commander, Department Head of Public Relations and Advocacy at the Israel National Fire and Rescue Authority)
By Nizzan Zvi Cohen

As part of the state budget proposal recently passed by the government, the state is abandoning its intention to create an economic incentive for employers to maintain safety standards by collecting a differential component of National Insurance (Israel’s social security) premiums, which distinguishes between employers who are strict about the safety of their workers and those whose workplaces have had multiple accidents.

Instead, the government is expected to approve an increase in the work accident insurance component of National Insurance premiums, which will increase from 0.1% of a worker's salary to 0.2% for all employers, regardless of their safety record.

As early as 2014, the Adam Committee (The Public Committee for the Advancement of Work Safety and Occupational Health) examined how to improve the field of work safety in Israel, and recommended creating an economic incentive for employers to ensure safe employment conditions. In 2018, a law was passed in this spirit, which sought to establish as a temporary order stipulating a differential component of National Insurance premiums, whereby employers in the economy would be required to pay for their workers in addition to regular National Insurance premiums. The law, which is active till the end of 2023, specifies that this amount will be determined according to the level of risk and the extent of work injuries at the employer’s workplace in the past.

The State has never defined in practice the differentiation mechanism by which the increased cost will be determined for employers who have had multiple accidents at their workplace. Therefore, all employers were actually required to pay the minimum amount established by law: 0.1% of the worker's income. Now, in anticipation of the expiration of the temporary order, the government is seeking to permanently increase the rate paid by employers to 0.2% of the worker's salary, while completely neglecting the intention of differentiation on this amount.

"Attempts to reflect the costs of the injury through differential collection in accordance with the level of risk and the extent of the injury to the employer in the past were unsuccessful for various reasons, both material and operational," the explanatory notes to the decision read. "It is now proposed to abolish the differential payment mechanism in accordance with the level of risk on the one hand, and to increase accordingly the insurance premiums paid for each worker, so that the total collection will not change and become permanent. This is because there is still a justification for collecting national insurance premiums at the existing rate due to the need to internalize the economic costs for pension payments due to work accidents."

The explanatory notes remark that the increase in the amount is made in light of the rise in the volume of payments for disability benefits from work, which stood at 2.6 billion shekels a year in 2012, rising to 5.5 billion shekels a year by 2022, in addition to the payment of injury fees of 6.8 billion shekels per year. They also noted that this cost increases annually by about 7 percent.

A construction site. (Photo: Erez Sofer, Platoon Commander, Department Head of Public Relations and Advocacy at the Israel National Fire and Rescue Authority
A construction site. (Photo: Erez Sofer, Platoon Commander, Department Head of Public Relations and Advocacy at the Israel National Fire and Rescue Authority

The title of the proposed decision is "Examining Systemic Changes to Reduce Work Accidents in the Economy," but in practice, the proposal that increases National Insurance premiums for all employers does not create any unique incentive for employers to improve the level of safety in workplaces. Instead, the proposal includes only amendments to the manner in which work accidents are reported to be done through online forms, as well as organizing `a team meeting with the participation of officials from the National Insurance Institute and various government ministries.

The goal of this team will be to "examine various aspects resulting from the payment of a benefit due to work accidents, including the incentive system, changes in its scope, and more in order to promote measures to prevent and reduce work accidents, improve government work on the subject, and improve the interfaces of information transfer between the various bodies." The team will submit its recommendations to the Minister of Labor and the Minister of Finance within about a year.

The National Insurance Institute stated that they welcomed the cancellation of the intention to set differential insurance premiums and that they opposed this already during the legislative discussions, since it is difficult to assess the degree of risk for each and every employer (including complex employment configurations such as contract employment). The National Insurance Institute also argued that the differentiality would encourage employers to prevent workers from filing claims for work injury.

However, the National Insurance Institute has made it clear that they believe that action should be taken to reduce work accidents, and therefore, among other things, a committee was established in the decision-makers' proposal to examine ways to address the issue.

This article was translated from Hebrew by Benji Sharp. 

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