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(photo credit: Ariel Jerozolimski)
In what is being termed as an "historic moment" by industry and business leaders, Shraga Brosh, president of the Manufacturers Association of Israel, and Ofer Eini, chairman of the Histadrut Labor Federation, signed an agreement on Thursday guaranteeing that beginning next year all of the country's workers will have pension plans.
"An agreement like this has never before been signed in the history of the country," said Brosh. "At the end of the day, employers will have to pay more to the employees, but they will do so trusting that this is the best way to support all of the country's workers and to allow them to live properly even after retiring."
According to the agreement, beginning in January 2008 employees who have been working at the same company for at least nine months will be immediately eligible to start receiving payments into their pension plans, beginning with allocations of 2.5 percent of their monthly salary, with this number increasing to 5% in 2009, 7.5% in 2010, 10% in 2011, 12.5% in 2012 and 15% in 2013.
The agreement additionally stipulated that workers will be able to place the money either into a straight pension fund, a trust fund or a patient fund.
"We are talking about some of the lowest wage earners in the economy now being able to have money put into a pension plan - the first time that something like this has happened," said Eini.
However, both Brosh and Eini expressed disappointment that the government, for the moment, is not planning to subsidize the pensions of veteran laborers who, therefore, will not receive retirement benefits reflective of their entire employment history.
"If a worker is 50 years old and is planning on retiring at age 67, then his pension will only be worth 17 years, despite the fact that he had been consistently employed from age 25," Brosh said to The Jerusalem Post. "What we would like to see is the government subsidize the first 25 years of his working life."
Uriel Lynn, president of the Federation of Israeli Chambers of Commerce, explained that the gradual introduction and increasing of the percentages paid out each month will allow businesses to more easily adjust to shouldering the burden of the additional costs. "While manufacturers will have to raise prices, the pension plan will have a small overall impact on the economy and a small effect on consumers," said Lynn.
Lynn added that the 15% monthly payouts into employees' pension plans is below the 17.5- 20% of most employees today in Israel, however, despite its below average worth, it still represents a historic event. "We have been talking about this for some 30 years, and finally we have been able to achieve it," he said.
Under the country's collective agreement laws, the pension proposal must now go to Industry, Trade and Labor Minister Eli Yishai for final approval as well as to allow him to carry out an "extension order," or an expansion of the agreement, as he sees fit, something that is expected to take several months.
Following Yishai's approval and expansion of the agreement, those companies that fail to provide employees with the appropriate pension plan will be subject to prosecution in a court of law.
There are currently approximately 900,000 laborers working without pension plans, according to Lynn.