Provident Funds – Mandatory Standardized Clearing and Employer Interface Update (Version 5)
Starting in February 2025, two key changes will be introduced to the standardized reporting process:
- Mandatory standardized reporting for employers with up to 3 employees – Effective February 1, 2025, for salaries paid for January 2025, except for specific exemptions that meet the outlined conditions (detailed below).
- Update to Version 5 (Section 14 Employee Considerations) – Effective February 23, 2025, for salaries paid for February 2024.
Mandatory Standardized Reporting for Employers with up to 3 Employees
Until 2024, the obligation to report through the standardized interface applied only to employers with more than 4 employees, while employers with up to 3 employees were exempt from this requirement.
Starting from February 1, 2025, all employers who have employees must submit reports in a standardized format for provident funds, except for specific exemptions.
What is Mandatory Standardized Reporting?
The regulations set by the Capital Market Authority require employers to submit digital reports in a standardized file format, dictated by the regulator and known as the “Employer Interface”.
This interface is generated from various payroll systems after updating the employee records with fund details and treasury numbers, based on each employee’s selected provident fund. The file must be transmitted via an operating agent or the pension clearinghouse, and any errors must be addressed (feedback mechanism).
Exemptions from Mandatory Standardized Reporting
Employers with fewer than 5 employees are exempt only if they meet all the following conditions:
- The employer has submitted employee and fund details to the fund management company once, and these details have not changed.
- The contribution amount remains identical each month and does not differ from the initial amount submitted.
- The employer has set up a standing order for payments via credit card or bank account.
- The fund management company has approved the employer’s exemption from reporting at the time of deposit.
We recommend contacting benefits administrators and operating agents to ensure compliance with the clearing process.
Version 5 Update – Section 14 Compliance
Starting February 23, 2025 (for February 2025 salary reporting), Version 5 of the Employer Interface will come into effect.
Employers will be required to include Section 14 details in the standardized payroll file generated each month.
The file must indicate one of the following statuses for each reported employee regarding Section 14 agreement signing date:
- Signed from the start of employment.
- Signed from a date different from the start of employment – applicable if the employee signed the Section 14 agreement during their employment rather than at the beginning.
- Not signed under Section 14.
- No longer covered under Section 14, effective from a different date – applicable if the employee was initially covered but the agreement was later revoked.
For cases 2 and 4, if a change occurred during employment, the date of change must be specified in the adjacent column.
We recommend preparing for this update, ensuring the required data is available and properly updated in payroll systems.
Postponement of Public Transportation Fare Increase
As part of the 2025 budget, the government initially planned to implement the second phase of the “Transportation Justice” reform at the beginning of the year. This phase included a fare increase of approximately 2 ILS, while certain population groups would receive free rides or higher discounts.
However, following media reports, it has been decided that fare adjustments will not take effect at this stage. The fare increase has been postponed and is not expected to occur before April 2025.
Employee Transportation Reimbursement
According to the law, employees are entitled to transportation reimbursement for each workday they physically attend work, even in cases where the employer provides organized transportation.
- The daily transportation reimbursement will be determined based on the lowest available discounted public transportation fare, up to a maximum of 22.6 ILS per workday, or
- The cost of a national/regional monthly pass (“Hofshi Hodshi”), whichever is lower.
We recommend staying updated on public transportation fare changes and checking their effective date.
Once the fare adjustments take effect, employers must ensure that the transportation reimbursement reflected in employee payslips is updated accordingly.
Deduction of One Recuperation Day – 2025
On March 18, 2024, the Knesset’s Labor and Welfare Committee enacted the Recuperation Pay Freeze and Reduction Law for 2024 (See the article published by Tami Guberman in July 2023 here.
Key Provisions of the Law:
- The recuperation pay rate for employees was frozen at the 2023 level.
- One recuperation day (equivalent to one day’s recuperation pay) will be deducted from every salaried employee in Israel. The amount that would have been paid by the employer will instead be transferred to the state treasury to help fund the grant program for reservist soldiers.
The law is valid until December 31, 2024. However, as part of the 2025 budget approval, the government has decided to extend the one-day recuperation deduction for another year.
As of the date of this publication, the recuperation pay freeze law has not yet been officially extended.
It is expected to be extended retroactively from the beginning of 2025, like the 2024 implementation.
We recommend staying updated on this matter and ensuring that payroll systems are adjusted accordingly when processing employee recuperation pay.
This information is provided as a public service and does not constitute legal, accounting, or financial advice. For official updates and professional guidance, please refer to official sources or seek professional consultation as needed.
For any questions or clarifications, we are happy to assist.
Contact Information:
Ala Lamberg, Payroll Department Manager: alal@guberman.co.il