Compensation in addition to monthly wage
Is considered an additional compensation to a monthly wage, any salary provided to an employee in addition to his usual gross monthly wage, such as vacation pay and clothing allowance, including payments related to bonus and participation grant to the employer's profits, differentials excepted.
The calculation is made on a monthly or yearly basis, depending on which basis results in the lowest amount.
Monthly basis calculation - the gross monthly income that is paid to you and liable to insurance contributions compared to the income that you are allowed to earn in the same month.
Yearly basis calculation - the gross income that is paid to you and liable to insurance contributions over the tax year compared to the income that you are allowed to earn in the same tax year.
For instance: for a man whose retirement age (67) is on April 10, 2014,
His overall income from April 1, 2014, until December 31, 2014, is taken into account.
The following year, his overall income from January 1, 2015, until December 31, 2015, is taken into account.
The following year, his overall income from January 1, 2016, until December 31, 2016, is taken into account.
The following year, his overall income from January 1, 2017, until March 31, 2017, is taken into account.
Upon reaching 70 years of age, he will be entitled to a pension without passing an income test.
Additional compensation calculation method:
as of Jan 01, 2024
The additional payment amounting to less than 25% of the minimum wage (NIS 1,470 )- is added to the usual monthly wage for the month in which it was made.
The additional payment amounting to more than 25% of the minimum wage - is divided by 12, and the resulting amount is added to the usual monthly wage in which the additional payment was made as well as to the eleven months preceding it.
For those who worked less than 12 months: the sum will be divided by the number of working months during the last 12 months.
Wage differentials
Wage differentials as added to the monthly wage for the months in which they were paid. If there is no information regarding the period over which wage differentials were paid, they shall be added to the month in which their payment was actually made.
Please note, you must inform the National Insurance Institute about any change in your income until you reach the age of entitlement, as well as any change in your spouse's income until your spouse reaches the age he/she does not need to pass an income test (age 70 for a man, and 67 for a woman).