The Treasury, employers and employees have signed a compensation deal for damages caused to businesses by hostilities in the North, which is estimated to cost the government at least NIS 800 million.
"This is the first time ever in the history of the State of Israel that a compensation deal for war damages has been signed during the time of war rather than after," said Finance Minister Avraham Hirchson.
Under terms of the agreement, all businesses affected by the conflict in the North will be compensated by 180 percent for the absence of workers. The rate of compensation includes payment of workers' salaries at a 100% rate plus 80% compensation for indirect damages caused to businesses as a result of revenue and profit losses.
The government, employers and employees will share the cost of the compensation package.
The government has committed to finance 52.5% of the workers' salaries, employers will be bound to pay 27.5%, while it was agreed that employees would finance 20% through the subtraction of vacation days. In addition to the full compensation for wages, the government has committed to finance the additional 80% compensation of workers' wages for lost revenues and profits of employers. The package initially only will apply for the month of July, thus providing compensation for the two weeks of the conflict.
"Workers in the North including Haifa, Tiberias, Afula and also those who, for example, live in Tel Aviv but work in the North and did not come to work because of the conflict, will be compensated," said Jacky Matza, Israel Tax Authority Director. "Every employer and employee can be assured that they will get July salaries in August."
Salaries will be paid up to the upper limit of NIS 20,000.
Finance Ministry Budget Supervisor Kobi Haber, who headed the compensation taskforce, added that, according to first estimates, the cost of financing the compensation package would be between NIS 700m. and NIS 800m.
"I know that the compensation package will not cover the cost of all indirect damages, which will have to be borne by employers," said Shraga Brosh, President of the Manufacturers Association of Israel.
Brosh added that the main aim of the agreement was to try and bring people back to work so that the economy could continue to grow.
"The compensation agreement negotiated with the Manufacturers Association and the Histadrut labor union provides a solution for the needs of every sector, whether it is a shop owner or large businesses," said Hirchson, who added that, on Monday, compensation agreements with the agriculture and tourism sector would be finalized as well as special conditions for small businesses, which were on the brink of collapse.
The Federation of Israeli Chambers of Commerce, however, rejected the compensation agreement as "inappropriate" for the commerce and services sector.
"The FICC cannot be part of this agreement, as damages caused to employers in the commerce and services sector are not a function of a drop in the number of workers due to absence from work," said Uriel Lynn, president of the FICC. "The compensation agreement is incapable of accurately reflecting the commerce and services sector losses since turnover volumes can drop sharply even if the work force is present in full."
In response to the rejection, Brosh said he was convinced the FICC would very quickly understand that this represented the best agreement for them.
Separately, Prime Minister Ehud Olmert and Hirchson announced on Thursday the decision of the government to postpone budget discussions for 2007 until the beginning of September. The final cabinet meeting on the budget proposals originally was scheduled to take place at the beginning of August.
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