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Congrats, you’re considering starting your own full time business. Or maybe you’re just looking for a little money on the side. Sooner or later, someone is going to want a cheshbonit mas (tax receipt) and its time to stop working under the table; it’s time to register as a freelancer.
In Israel, you register as a freelancer or Over Atzmai (hereinafter OA) as either an osek patur or osek murshe. An osek patur earns less than NIS 76,884 and does not charge VAT for his services. If an OA makes more than NIS 76,884, he or she registers as an osek murshe. An osek murshe does charge VAT, but can reclaim VAT on business expenses. You can change from an osek patur to an osek murshe mid-year (when you come close to the 76,884 line you have to change your status) and once you are an osek murshe, you cannot be an osek patur again for at least two years. Finally, some professions such as accountants, lawyers and doctors may only register as an osek murshe. Regardless of what you choose, the process is the same: register at the tax authority, then mas hachnasah, and then bituach leumi Once you are registered, you have to file regular reports, prepay VAT every so often (for an osek murshe) and file an annual report.
Sounds difficult. Is there an easier way?
I know, the reason you became a freelancer was so you wouldn’t have to leave the couch and put on pants; going to so many government offices seems out of the question. Fear not, there is an alternative; you can register with a billing company. A billing company is a company that hires you as a worker. You work as a freelancer, the company does your billing and the company takes a small cut of your revenue and pays you as a worker. Since you are working under the guise of another company, you pay both the employer and employee side of all taxes and investments. Billing company freelancers (hereinafter BF) do not issue personal receipts, but send the money to the billing company and then ask their billing company to issue a receipt. All that the billing companies ask for in return is a small percentage of your revenue.
So which is right for your?
This is a very complicated question that gets to the heart of a very important matter – tax planning, or more honestly, tax avoidance. With tax rates as high as they are in Israel, saving money on your taxes can mean a world (or at least a paycheck) of difference.
1) Tax deductible expenses: Expenses are deductible for both OAs and BFs. The only difference is that OAs can also deduct some living expenses (a portion of arnona, electricity, water and va’ad bayit). In addition, OAs who are registered as an osek murshe and BFs can also receive back VAT on most expenses (for some such as a car and cell phone, you only get back 2/3 VAT. Car rental expenses receive no VAT at all). Click here for a full list of deductible expenses for an OA including VAT reimbursement rates.
2) Charging VAT: Despite popular belief, VAT is more of a tax on the seller than on the buyer. Like all taxes, it leaves a tax incidence, but in a world of many suppliers, VAT is really less of a 16% sales tax on the consumer and more of a ~14% tax on the supplier. An OA is allowed to not pay this tax as long as he is an osek patur. One he is an osek murshe, then he is in the same boat as the BF, who always charges VAT.
3) Bituach Leumi. OAs pay 9.82% on all salary below 60% of the average wage (meaning on the first 5,000 of revenue) and 16.23% on all revenue after that. BFs pay 3.95 on the first portion of revenue and 17.9% afterwards. This means that until ~ NIS 14,200 revenue BF’s pay less, but after 14,200 revenue, OAs pay less. All in all, the difference is not that significant until an OA starts making a lot of money. Another difference is that OAs pay a minimal amount of Bituach Leumi (NIS 212) every month, whether they receive income or not. BFs only pay bituach leumi during months they receive income.
4) Pension: Both BFs and OAs can put aside money for pensions. BFs can put aside up to 7.5% from the employee side (which means after tax money, but 35% of the deposit is a tax credit, 7.5% from the employer side (tax and bituach leumi exempt money), and up to 8.33% for pitzuyim (also, tax and bituach leumi exempt money). Note that the percentages from the employer side turn out to always be a bit less than listed above because these are percentages of your declared salary after you remove the deductible and refundable expenses, including the hishtalmut and pension (there is some complicated math in this). OAs can also put aside money for a pension, 5% from the employee side and 11% from the employer side (both have the same tax deductible policies mentioned for a BF).
5) Hishtalmut: One of the best ways to get some money past the tax man is by paying to a keren hsihtalmut. Typically, a keren hishtalmut, allows a worker to pay in 2.5% of his or her income, which the employer matches with 7.5%. Since BFs are paying both the employer and employee side, this means that they get to pass the 7.5% through tax free and bituach leumi free (Note: like pensions, percentages are a bit less than 2.5% and 7.5% because these are percentages of your declared salary after you remove the deductible and refundable expenses, including the hishtalmut and pension). Similarly, an OA may deposit 2.5% from the employee side, but only 4.5% from the employer side.
6) Social Security: This is where the OA’s have it rough. If you’re an American and registered as an OA. you’ll have to pay 15.3% of your revenue (before taxes, but after deductibles and bituach leumi) to the US government for social security. This is sometimes a good thing, because if you’re close to having 40 quarters, being an OA can push you over the edge, but it also means you’re going to be paying a lot of extra taxes. (For those interested, I plan to have a post discussing the social security issue at length in the near future). Again, this tax does not apply to BFs at all.
7) Billing company fees and accounting fees. Billing companies charge a certain percentage of your initial revenue as a fee for its services (the fess is paid on revenue after removing VAT, but before removing expenses.) This fee covers not only billing, but all Israeli accounting expenses you’ll need throughout the year including deductions, refunds and tax planning (fees range from 4% – 7% with a maximum fee per month). Similarly, an OA requires the services of an accountant. I know there are many OAs out there who choose to do it alone, this is often a huge mistake. The major perk in being an atzmai is the ability to utilize tax exemptions and if a worker is not using an accountant he or she risks either not taking advantages of all the tax advantages at his or her disposal or, conversely, committing fraud. The cost of an accountant is usually between NIS 1000 and 3,000 a year for preparing an annual report. Obviously this price varies depending on the extent of the time and service you need from your accountant.
Some final thoughts:
There are a variety of billing companies that can offer you their services (Yeul Sachir, Atzmai Sachir, Autotax, Cheshbonit Sachir, Sveram & Taxpay to name a few.) When choosing a billing company, it is important not only to look at the fee, but the level of customer service offered. I have heard good reviews from customers from Yeul Sachir. If you have worked with any of these companies, please share your experience in the comments below.
Many choose to be an OA because issuing a receipt from one’s own company looks more professional.
Despite what many say, and what I have been told in the past, it is not a big deal to close a tik. Just speak to your accountant and he or she will probably do the paperwork for you for a small fee.
This is the first time I am posting about this topic and I anticipate feedback and corrections. I’m going to be on vacation next week, so if there is any problem, please e-mail me and I’ll correct it when I come back. In the meantime, please enter any comments relevant to this topic below.
I recently found a great site for job searching. http://www.rapidjob.info allows users to search for the local industrial zone, find the companies that work there and then apply directly on the website of the individual company.
For example, if you are looking for work in Netanya, you’d click on שרון and then נתניה to see a list of al the companies that are located in the Netanya area. Afterwards, you’d look for the places with a דף משרות דרושים, click on the little page icon for the web site of the company and apply for the job. I am not sure how often the list of companies is updated, but the content I saw looks current.
Note: The companies listed are high-tech and bio tech companies, but such companies also have all sorts of non-scientific departments (finance, marketing etc) so its still work a look.
you click the picture below for clear instructions on how to use the site
A while ago, I spoke with an olah chadasha in her mid 50’s about her stalling job search. She expressed her disgust at various firms that did not call her back once they saw how old she was, as she did not include her age on her CV. When I asked her why she did not simply just tell the potential employer her age in advance by including it on her CV, as it would save her the trip to the discriminatory employer for an interview, she replied that she believes that if she were honest on her CV, no one would call her at all.
Towing the line of discrimination is not easy. While it would be ideal for all employers to act within the confines of the law, or even act economically rational (workers in their 50’s tend to stay at their jobs longer and take less sick days than their younger counterparts), the sad truth is that the front line in HR is usually filled with discrimination.
Perhaps the answer is simply to avoid anyone that practices any discrimination; after all, no one wants to work for a bigoted boss. But while this solution may seem right at first glance, it may actually lead to a more frustrating and prolonged job search while not actually avoiding a workplace that practices discrimination. In many cases, the first person who sees a potential CV, the one who wrongly rejects a CV when he or she sees that the candidate is married and of child bearing age or is in his or her 50’s, is not the person who would be supervising this women were she to have gotten the job. Certainly this is the case of manpower agencies and companies with large distinct HR departments, but surprisingly, this is the case for many smaller companies as well. Alternatively, the person who looks at the CV first may not be the type to discriminate, but the potential supervisor may do so once you meet him or her in the second round of interviews.
So how can a potential candidate minimize the effects of discrimination? I would not sugest withholding information, since is usually comes back to bite the candidate, nor to simply suck it up and play the victim. I believe that the solution is to call out the elephant in the room and sell it. If you’re in you’re 50’s, sell your CV on your experience. List specific goals that you reached in your lifetime, the type that some 25 year old pisher could only dream of accomplishing. If you’re a married woman, you should mention that you’re looking for a long term job and use the term stability more than once. Let the person reading your CV come to the conclusion that losing you for 3 months of maternity leave is worth it in order to have a stable worker for 7 years. If you’re single and afraid that the company wants someone more stable, mention your flexibility.
Once you get your foot in the door, past the first person reading your CV and finally to the level of the interview when you meet your supervisor, then you can see if he or she indeed discriminates. At this point, it’s okay to not get hired; you don’t want to work for a bigot anyway. But at least you know that you’re avoiding a job with a terrible boss and not missing out on a really good job with a great boss because of a bigot in HR.
Below are updated versions of two financial tools I try to update every once in a while. The files below are updated using the new tax information for the new year.
1 – The Israeli tax calculator – This tool allows you to check your paycheck and see that the correct taxes were deducted correctly. If too much money is being taken out for taxes or insurance, then you should demand back your money through a tax alignment (תאום מס) or an insurance alignment (תאום ביטוח לאומי). If you need to get money back through an alignment see this post for more details.
New in this version: In addition to updating the tax brackets and the average wage, I also enterd a line on the bottom for deductions from your paycheck (for example, if you pay for lunch or insurance and the money comes out of your paycheck).
Note: While the amount for insurance should match your paycheck perfectly, the amount you pay for taxes may not. There are other factors besides the ones mentioned in this spreadsheet that can affect the amount of taxes you pay (how much you got paid over the past 6 years, how often you get paid.)
Use the guide as follows:
If you are paying less in taxes than what is calculated on the sheet: Find out what kind of benefits you are receiving and how to continue receiving them
If you are paying more in taxes than what is calculated on the sheet: Odds are you need to do a tax alignment. Speak to your HR person and fix up your tax record and then file the appropriate paperwork at מס הכנסה.
2 – The Job Payoff Index – This tool allows you to see the net payoff of any job including social benefits. If you are offered a high-tech job with great pay and no benefits or a low paying job with government with benefits up the wazoo, you can check and see which is really paying you more (in after tax shekels).
I want to thank those who gave suggestions for improving these sheets, including those who found some bugs and those who sent me e-mails thanking me. Your support is greatly appreciated.
As always, if you find any flaws in these excel sheets or have any ideas for improving them, please feel free to contact me.
Are there any financial tools you would like to see? Please feel free to either leave some ideas in the comments below or e-mail me at firstname.lastname@example.org
During each of my last two job searches, I was in contact with two different organizations aimed at helping people learn how to find a job. In addition to the networking and resume writing workshops that were offered, I took part in a job interview session, where different people in the group performed mock interviews in front of the class to be critiqued and analyzed. The analysis was always the same: advising whoever was just interviewed to imitate the interviewer’s body language, appear unanimated and professional, have a good handshake and develop the interview and build it up as it goes along. At the same time, an old myth, really a mantra generally inconsistent with what we were learning, was often repeated: you only have half a second to make an impression that will determine everything.
Recently, a post on Pop Economics discussed this issue from an economic perspective, basing it’s guidance on research and numbers, instead of an HR guru’s gut feeling.
You really do only have a tenth of a second to make a good impression.
And if that wasn’t tough enough…
- Matching tone and body posture does not help
- You can’t fake a firm handshake
- You can’t train for most of the things that will determine your good first impression
- Attractive people have a better shot at making a first good impression
Sounds pretty pessimistic. In fact, this post paints a pretty bleak picture for balding overweight men like yours truly. But there are some things you can do to help yourself:
- Show emotion – any emotion, good or bad, builds rapport
- Finding something in common, or more precisely, anything in common, helps leave a good impression
Finally, the author leaves with some sound advice: Next time you’re in an interview, take it easy: You can’t control most of what will happen anyways, so just act naturally and throw the dice.
What has your experience taught you about job interviews?
Happy choref! If you’re a job hunter, this is your time.
Last year I spoke at length about finding a job in Israel in the posts below:
Part 1: Cold and Warm Job Searches
In the first post listed above, I discussed the cold and warm approaches to a job. In summary, the cold search entails applying for jobs en masse, with no cover letter (or just one standard one). You will typically respond to about 2,000 of ads every week, knowing that hundreds of these jobs are either not available or that many are for the same jobs.
In contrast, the warm job search, is the one where you decide what you want to do, where you want to work, and then network yourself into a job. I hope to discuss more on this topic in some of my upcoming posts.
In this post, I’d like to discuss the different websites available for your cold job search:
1) Job City (http://www.jobcity.co.il): This past year Walla jobs and yad 2 joined forces (are they the same company?) to bring a first class job search site to Israel. It’s a lot of stuff to fill out, but the site does a good job ranking how well each job matches your profile. The site is a bit heavy on the browser, but it has a lot of quality jobs and, in my opinion, should be part of your job search
User friendly: site is easy to use, but takes too much time to load between pages
Overall rating: 6
2) Job Master (http://www.jobmaster.co.il/): Probably the easiest to use, most popular site for finding a job in Israel. Most of the jobs I see posted seem to be for headhunters, but I guess that is common for many sites.
User friendly: very
Overall rating: 8
3) Israemploy (http://www.israemploy.net/): The little yahoo group that could, Israemploy evolved from a long e-mail list to a fully searchable site. The site costs ₪ 30 a month with discounts for buying subscriptions for longer time periods. If you’re an Anglo who cannot speak Hebrew and use this site as your basic job search site, it is well worth it. If you are looking for a job where you will work in Hebrew, you may want to use one of the other sites as well.
Cost: ₪ 30 for one month, ₪ 70 for 3, ₪ 120 for 6 and ₪ 180 for a year
User friendly: more than any other site on this list
Overall rating: 8
4) Jobnet (www.jobnet.co.il): The AACI’s jobsearch website is a place where you’ll find a plethora of jobs. Unlike Israemploy, businesses have to pay money to post on jobnet, so you’re not going to find many smaller businesses positing jobs on this site the way you’ll find on more American sites.
Language: Hebrew. Yes I know it says it is in English, but the overwhelming majority of the job descriptions are in Hebrew, so if you don’t know Hebrew, you’ll probably have to skip this site.
User friendly: mostly. The technology is not as good as jobmaster and jobcity where the site matches jobs to your profile. In this site you have to do a search.
Overall rating: 6
5) Alljobs (www.alljobs.co.il ): Once upon a time, I would have sung the praises of alljobs, what used to be Israel #1 site for finding a job. Now the site has turned into a labarynth of traps and links trying to get you to buy a subscription that costs more than any other site. If you’re going to pay, great, but if not, don’t waste your time
Cost: ₪ 44 a month
User friendly: if you pay, great. If not, no
Overall rating: 2
6) Portal Drushim (http://www.drushim.co.il/): A decent job search site. The site doesn’t match jobs to your profile, but it is very easy to use and moves very quickly.
User friendly: not as great as some others, but still very good
Overall rating: 5
7) Janglo (http://www.janglo.net/): While Janglo is not typically a job hunting site, it is a great place to find a job. The jobs listed here are from Olim posing a job for their company or small business, not large companies or manpower groups. Unlike the other sites, you should probably send a cover letter of personal e-mail when applying for a job via Janglo. In short, Janglo is a great resource, but should be complemented by at least one of the sites above:
User friendly: more like a message board than a typical job hunting site
Overall rating: 5
What sites do you use for job hunting? What do you suggest?
A long time ago, I discussed the need for a singular method to measure how much one receives from a job, including all tannaim (benefits).
Such a unit of measurement would allow the public to understand the true payoff of a particular job in order to compare possible job offers, serve as a basis for contract negotiations and even, if you look at the bigger picture, serve as a more reliable unit of measurement for a progressive tax system.
I have released a first draft of this creation, which I call the Job Payoff Index, at jobmob for their summer guest blogging contest.
Many workers in Israel receive no rights whatsoever. Employers take advantage of payroll law in order to sneak in the payments to cover legal rights that an employer should pay and then consider it part of the overall pay. This system is often used to deprive workers of pension payments, vacation days, sick days, and even transportation to and from work.
How is this done? There are a couple of ways to do this. It can be done by writing long contracts that stipulate a lower wage amount than the amount originally presented. Then afterwards the legal amount for each right is added. For example, let’s say I advertise that I am looking for someone to work for 60 shekels per hour. I can write a contract that states that the worker will get 30 shekels + transportation, which I value at 15 shekels. + pension substitute + vacation substitute + sick day substitute = 60 shekels (note: I am making up the numbers here). Alternatively, a contract can be written only paying for the hour worked, by the hour, even if it is a part or even full time job.
So what’s wrong with this? Doesn’t the worker get his money anyways? Yes and no. When one sees a job that pays 45 shekels per hour for 10 hours a week, he or she expects 450 shekels plus the legally required minimal benefits. But in this case, the worker expects one wage, then gradually understands all the different items that the wage covers, effectively lowering the wage that the worker gets paid. The worker, usually lower level, thinks he or she is finally getting a break and not earning the minimum wage, just to find out that they actually are. Most people do not do the math, so it is really the corrupt taking advantage of the complicated legal jargon in order to drown the average worker.
What is the real danger of this system? Economically speaking this system moves the burden of all of these programs and payments that should be covered legally onto the shoulders of the worker. In English, this system is a form of deception abused in order to steal from the poor. Also, these “by the hour” contracts are also used to fire sick workers, pregnant women, and pretty much anyone at anytime without any recourse.
So why is this legal? This system is legal because it allows small businesses to hire people for occasional services without the worker being an independent business by himself. Imagine what a pain in the neck it would be for me to have to open a tik or register as a worker, even if I am just working one time for a couple of hours. The problem is that this system is taken advantage of by clever lawyers and corrupt businessmen who have no regard for their workers.
If you’ve been following this blog, you’re probably looking at me now saying “okay mr. smarty pants, what’s the solution” Well, I’m glad I asked.
As always, knowledge is the key. But in our case a tool is needed in order to provide this knowledge. This brings me to my current pet project, the job payoff index. The job payoff index is an index whereby any job can be evaluated for what it really pays, including all benefits, in order to give a worker one solid number that he or she can use to compare jobs and measure what each one really pays, looking past all the legal mumbo jumbo. Dishonest employers would no longer be able to tout large deceitful hourly wages once the truth is opened wide and set for all to see.
Additionally, the index would also help job seekers looking for a subjective way to compare the payoff of several offers. For example, this system would allow me to compare one job that offers a car with another that has a better pension plan and more vacation days.
The job payoff index would use the following formula: The salary and benefits paid by a job minus the minimal salaries and benefits that must be paid by law. Obviously, I just listed a very hard bunch of variables that need to be defined. For example, what is the real price of having sick days? What is the cash equivalent of not getting a pension? What is the price or stability and being warned before being fired? I have to work this out.
If anyone out these is a numbers nerd, an economic nerd, or a current employer who knows the laws, I’d greatly appreciate your help. You can e-mail me at email@example.com and I’ll tell you where I am holding, what I think I need, and ask for your opinion on the matter.
I thank everyone in advance for considering helping. I think we could work together to really make a difference. Thanks and Kol Tuv.
Women do not have it easy in Israel. Women are openly discriminated against, and suffer greatly when it comes to getting a job and advancing in the workplace. Supposedly, the issue is simple. Employers do not want to take the risk having a worker gone for 3 months of maternity leave. While even this prejudice is deplorable, but maybe somewhat understandable, it is certainly not the case. A more true statement is that women suffer tremendous prejudice in Israel and even more so if they are married and of childbearing age.
While researching my thesis for my MBA (it was about HR in Israel) I came across several papers dealing with different reasons as to why women receive lower salaries and fewer benefits in Israel. Some claimed that the Olim who came from more Eastern countries were sexist themselves, and therefore as the country progressed, they made it more sexist. Other claim that the country is trying to focus on not discriminating against Olim, and has not had time to deal with women’s rights. Another group blames the army, claiming that women do not advance in Israeli society significantly because they cannot advance significantly in the army. Finally, some blame the women themselves for being too old fashioned. I personally believe that while there may be some truth in some of these statements, it is certainly not as simple as these statements make it out to be.
So now the question is what to do practically. And as always, the answer is to educate yourself and call discrimination for what it is. I know one women who recently went through a very difficult job search. At the end, she found a nice job, but the contract was written in such a way that they will never pay her for sick day, nor maternity leave (yes, it can be done.) Is it immoral? Yes. But she took it. She needed the money and a job with poor benefits is better than no job at all. But at least she knows what she is in. Lawyers get paid a lot of money to make discrimination sound very fancy; by calling it what it is, the woman knows that when she finally finds a job that will not penalize her for being a woman, she will accept it.
I have heard a lot of other advice given to women in Israeli society, most of which I disagree with. One of the guest lecturers I heard during my MBA told the women to just tell a potential employer she is not having a baby in the near future. They are looking at her stomach anyways, and by addressing the problem, she can get the elephant out of the living room. Others have told women to just expect lower salaries.
My advice for women is to shop around until you get a regular stable, salaried job without one of those shady contracts that basically removes your rights. And like I always advise women and men alike, accept a lower salary if there is room for a future in the company. In the meantime, take what you can get, while still keeping you eyes open for something else. We are in a depression and some money, even without benefits, is better than no money at all. Perhaps try to take a bad job only part time, so that you’ll still have time to look for a job.
Also, ask other women what places are good to work for and then target them (see part one of this series for how to target a company.) Hopefully, as time goes on, Israel will make it into the 21st century. In the meantime, look for a few years, and once you find that job, give it all you have and in time the sexist employers of Israel will see that they are missing out.
And remember, living well is the best revenge.
So, you’re balancing he cold and warm job search and working on your skills at the same time. Now it’s time to turn up the heat.
Imagine you see a job posted online (let’s say through Janglo or LinkedIn). If you want that job, you’re going to have to get to know the person offering the job much more personally. Try to see if you know anyone in common. LinkedIn is a great tool to find the degrees of separation between you and someone else, and it can give you a map for how to climb through the mess. Forget about e-mailing your way through – call. The phone is much more personal. Ask each person for the number of the next person on the chain and get to the main person. Find some common ground, be conversational, but get to the point.
Hopefully, one of these trails will get you headed toward some type of interview. I will not go into too many details about how to interview, because it is really a matter of common sense. There is no one way to interview, and more than likely, your ability to go through an interview is about the same as it is any conversation with a stranger; for example, ask some questions to show the other person you’re interested, maintain eye contact, be polite etc. Some people who interview you are great and some are nuts, don’t take it too personally.
One thing though – Many Israeli companies use HR tests, psychologists, and lots of other tests to see if you match as a worker. Don’t be shocked if you show up to some crazy test for 3 hours and then a 30 second interview.
Just remember to be calm, or if you’re like me and you can’t, find a way, hide your nervousness (drink some water, write stuff down so you don’t move your hands too much etc).
When you’re asked a question about yourself, sometimes there is only one correct answer. For example, when I was interviewed for my current bookkeeping job, I was asked if I am an organized person, or more laid back. Now keep in mind – this is a financial job – they want a very organized person. So even if I were not (although I am) of course I would have to answer that I am organized.
Finally, try to have a bit of a sense of humor – it will make up for your nervousness. When I was interviewed and asked what are my greatest three flaws are (typical HR question) I said “I am 25, unemployed, and balding,” before answering the question seriously. Their laughing at my joke helped me calm down.