Regulator wants cash back from IEC workers

Despite concerns that the IEC reform may be derailed, the Director of Wages says employees must repay irregular supplements.

Just when the reform at Israel Electric Corporation (IEC) (TASE: ELEC.B22) seems closer than ever, Ministry of Finance Director of Wages Kobi Amsalem has opened a new front against IEC's employees. On Thursday, he announced that he will demand that its employees and pensioners should repay the government up to thousands of shekels per person for irregular pay supplements received over the past three years. He made the statement in a letter to IEC executives and its workers committee.

Amsalem's demand comes just as a historic agreement for reform at IEC seemed at hand. The government committee appointed by the minister of finance and the minister of national infrastructures and chaired by Ori Yogev has held a series of intensive meetings in recent weeks to draw up a proposed agreement. In early October, the committee heard the IEC workers committee's position on the reform. Amsalem is a committee member.

Ministry of Finance sources told "Globes" that Amsalem's demand was separate and unrelated to the government's steps to reach an agreement with IEC workers on the utility's reform. A source said, "The decision was made following clarifications which took a long time." The ministry declined to comment to a question from "Globes" whether the decision was coordinated with the Yogev Committee or other ministry officials.

IEC said in response, "IEC has received the Director of Wages' letter and is studying it. To the best of the company's understanding, employee wages will be included in the Yogev Committee's discussions on the reform of the electricity market. From our perspective, unilateral steps during the negotiations are mistaken and astonishing acts."

For two years, Amsalem has been examining the legality of the prevailing pay supplements at IEC. Under the Basic Law: Budget, all pay hikes since 1980 require the Director of Wages' approval. IEC claims that most of the prevailing pay supplements at the company are historical and therefore do not require the Director of Wages' permission.

In early 2012, Deputy Director of Wages Shmuel Nachmani announced that a series of pay supplements for IEC employees over the years were apparently irregular. The letter infuriated IEC's employees, and the workers committee froze negotiations on the IEC reform. Ministry of Finance sources admitted that Nachmani's statement had not been coordinated with the reform process, and caused great damage.

In his decision last week, Amsalem rejected most of the IEC workers committee's explanations, and decided to void the pay supplements from this point forward. But he was not satisfied with this, and announced that he will demand the IEC employees should repay some of the irregular supplements received since October 1, 2010. He will also demand that IEC pensioners should repay irregular payments received since October 1, 2011.

At the heart of Amsalem's decision is the extra pay known as the "supervisory supplement": a supplement originally intended to compensate IEC managers, and which is now paid to 9,000 of IEC's 13,000 employees and to 4,000 pensioners.

Amselem concluded that the supervisory supplement was an irregular pay hike, except for the raises paid to division heads and their deputies, in the amount of 5.5-6.5% of the their salaries. His decision means that, from now on, the supplement will be limited to IEC employees in managerial posts. In addition, the supplement received by top IEC executives has been reduced. These employees, who receive a supervisory supplement of 18-26% of their salaries, will from now receive a supplement of 12.5%. But, as mentioned, Amsalem is not satisfied with this, and is demanding that IEC employees should repay the supplements illegally received since October 2010 (employees) and October 2011 (pensioners).

Nachmani listed other irregular pay supplements in his letter: automatic recognition of overtime for employees outside IEC facilities, and increased meals and lodging and other expenses.

Published by Globes [online], Israel business news - - on October 13, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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