Ministry of Finance Unveils Compensation Plan for Workers Affected by Iran Conflict

After ten days of uncertainty for businesses and employees, the Israeli Ministry of Finance presented a compensation framework on Monday aimed at supporting those whose work has been impacted since the outbreak of hostilities with Iran. This plan, developed in consultation with the Presidency of the Business Sector and the Histadrut (Israeli Trade Union), combines familiar business aid grants with a streamlined version of the furlough model noted from the COVID-19 pandemic, along with several new features. The framework is retroactive to the beginning of the “Lion’s Roar” operation and will remain in effect until June 30.

Key Features of the Assistance Framework

The compensation package is designed for various businesses based on the degree of their income loss. Here are the main details:

Eligibility Criteria

• Enterprises Affected: Businesses demonstrating a drop in revenue of 25% month-on-month or 12.5% bi-monthly.
• Income Limits:

– For businesses with an annual turnover up to NIS 300,000, a business continuity grant will be provided based on the level of impact.
– For businesses earning between NIS 300,000 and NIS 400 million, a reimbursement of expenses ranging from 7% to 12% will be offered, alongside 75% reimbursement of payroll costs.
– Larger Businesses: A special fund of NIS 60 million will be allocated for businesses with annual revenues over NIS 400 million.

Furlough Provisions

In a notable change from earlier policies, the new plan allows businesses that do not pay their employees during the relevant period to still qualify for grants. Typically, employers are not legally required to compensate workers for non-working days, yet the recent economic shutdown has complicated employer-employee dynamics.

• Furlough Adjustments: The new plan shortens the minimum furlough period to 14 days, eliminating any waiting period and the previous requirement to utilize accumulated vacation days. The required servstart period before going on furlough has also been reduced from 12 months to just six months.

Additional Support for Larger Firms

Dubi Amitai, Chairman of the President of the Business Sector, successfully lobbied for the allocation of NIS 60 million from the Ministry of Finance to manage the fund designated for larger companies. Estimates suggest that only 20 to 30 large businesses will qualify for these compensation plans.

Employment Impact and Union Reactions

The framework has generated diverse responses, particularly among labor representatives. Histadrut Chairman Arnon Bar-David expressed reservations about the furlough solution, recognizing the challenging circumstances but emphasizing the need for operational flexibility for employers without risking workforce retention.

Amitai noted that additional compensation strategies may be implemented for businesses experiencing physical damage beyond the standard property damage claims.

Financial Implications and Predictions

The cost of the ongoing conflict with Iran is projected to exceed NIS 800 million per day, potentially resulting in a fiscal burden of tens of billions of shekels per month. Current estimates indicate that the new compensation framework could cost the government between NIS 3 to 5 billion, supplemented by about NIS 4.5 billion to be disbursed through property tax relief for direct damages incurred thus far.

As the Ministry of Finance prepares for the inevitable financial strain, this assistance plan represents critical support for the business community during these challenging times.

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