Ministry of Finance director of wages Eli Cohen has written to the Israel Electric Corporation (IEC) ordering it to cancel forthwith all excessive salary payments to company employees and pensioners, especially those paid to senior executives. The decision will reportedly save NIS 80 million a year. The future actuarial saving to IEC, combined with the return of excess salary payments already made, could total more than NIS 500 million.
Cohen, who took up his post less than a month has taken an unprecedented decision that will also affect the pay dispute at the Bank of Israel, should the latter insist on a judicial ruling by the High Court of Justice. The State Comptroller’s report for 1999 found severe irregularities in pay at IEC. This led to a joint review by the then director of Wages and the Government Companies Authority director.
The review found that a substantial portion of the pay rises given to both senior executives and longtime employees with more than 25 years tenure, substantially exceeded the accepted public sector rate and were never approved by the director of wages or Government Companies Authority. Such pay rises therefore contravened the Foundations of the Budget Law (5745-1985). In his letter Cohen stated that in 2004, IEC was given notice of the excessive salary payments under article 29a of the law. IEC and its employees will be given the opportunity to answer the claims against them both in person and in writing.
The dispute over pay has remained deadlocked after two years of discussions between the two sides and the holding of grievance procedure hearings as prescribed by law. Cohen has therefore exercised his legal authority and has the backing of Minister of Finance Abraham Hirchson for the proposed cancellation of excessive salary payments at IEC. His ruling, which will become effective from August 2006, will also cover the return of money that has already been paid unlawfully to employees, back to January 2004.
IEC employees’ national secretariat has called an emergency meeting to discuss the decision of the director of wages. At present, there are no threats to shut down power supplies, although the employees are planning a series of far-reaching industrial sanctions. The director of wages’ letter did not address the issue of free electricity for IEC employees.
Published by Globes [online], Israel business news - www.globes.co.il - on August 27, 2006
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