Katz demands public sector pay cut

The state is hardening its position in negotiations over a package deal with the Histadrut (General Federation of Labor in Israel). As part of recent negotiations, the state presented the Histadrut with a list of wage cuts and benefits for 700,000 public sector workers. Minister of Finance Israel Katz has instructed the Ministry of Finance to reach an agreement by September 13, and announced he will recommend the government initiate unilateral legislative measures, should an agreement with the Histadrut not be reached by then.

As first reported by "Globes", negotiations between the parties had reached an advanced stage in July, but were essentially frozen due to uncertainties regarding early elections and the approval of the state budget. Now, after budget approval has been delayed until December 23, 2020, Katz has given the order to renew negotiations.

Katz addressed the issue at this week's Finance Committee meeting, saying that he very much wanted to initiate burden-sharing within the public sector as part of the 2020 budget framework, but that this move would have to postponed.

The government, through Director of Salary and Employment Agreements, Kobi Bar-Nathan, is demanding that public sector workers do their part by agreeing to temporary wage cuts, for a two-year period.

This plan is similar to the one outlined in 2003 by then-Minister of Finance Benjamin Netanyahu, in which the wages of those earning more than NIS 20,000 per month would be reduced by 10%. Those with a salary lower than NIS 20,000 shekels would be subject to graduated cuts, and their wages reduced by an average of 3%. According to Ministry of Finance data, these are about 105,000 public sector employees whose base salary is higher than NIS 20,000 per month (out of about 180,000 employees with gross salaries higher than NIS 20,000).

Katz's only concern is that salaries will not be reduced to below minimum wage as a result of the cuts. The Ministry of Finance notes that reductions can also be made by waiving provisions for advanced training funds.

Concurrent to salary cuts, the Ministry of Finance has initiated the process of equalizing conditions between employees with budgetary pension plans and employees with cumulative pension plans. At present, budgeted pension plan holders currently pay 2% per month, while in cumulative pension plans, employees contribute between 6% and 7% of their salary. The Ministry of Finance is demanding a gradual and permanent increase in employee contributions to budgetary pension plans, until conditions are equalized, although it is possible that low wage earners, such as teachers, will receive a discount.

Other measures the Ministry of Finance has put on the negotiating table are related to increased flexibility in managing public sector manpower, including employee mobility, and limiting the unions ability to take organizational actions against the introduction of new technologies. In addition, the Ministry of Finance has requested preliminary dispute arbitration, before the Histadrut turns to the labor courts; this would not be a mandatory arbitration but an alternative, mediation-based solution.