Israel's Ministry of Finance is considering imposing a significant salary cut on doctors, teachers and employees on personal contracts in the civil service, amounting to roughly 3.3% per month between April and December 2025. The increased cut is intended to offset December 2024 to March 2025, in which these employees were not included in the salary cut imposed on other public sector employees.
The plan, which would come into effect after approval of the 2025 state budget, is an expansion of the cuts outline agreed upon between the Ministry of Finance and the Histadrut General Federation of Labor last November. The move is intended to ensure that the budget savings target of NIS 5 billion shekels in 2025 is achieved, as part of efforts to reduce the state budget deficit.
Unlike public sector employees directly represented by the Histadrut, who were handed a 2.29% pay cut in December 2024, doctors, teachers, and employees on personal contracts have not yet been affected by the cut. This is because the agreement with the Histadrut does not apply to them directly, and only after it is finally approved as part of the Economic Arrangements Law that the Ministry of Finance is enacting alongside the state budget, will it be possible to expand the legislation to all public sector employees - roughly 700,000 people.
The temporary cut has been canceled
The entire outline of the cuts, including the cuts that have already taken effect for Histadrut employees, is conditional on final approval of the state budget. If the budget is not approved, the cuts will be canceled retroactively and the funds will be returned to employees. The deadline for approving the budget in three readings in the Knesset is March 31, 2025. If the budget fails, for political reasons such as disputes over the conscription law or the continuation of the war in Gaza, the Knesset will dissolve and the country will go to elections.
The outline that was formulated between the Ministry of Finance and the Histadrut due the rise in defense spending, came a year after the parties reached an agreement on wage cuts for public sector employees as part of the agreement. Instead of freezing wage hikes, which was originally planned, the Ministry of Finance and the Histadrut finally agreed on a formula for temporary wage cuts, while receiving the wage hikes on time.
The framework agreement set graduated steps for wage increases. The last of these was a 2% increase in December 2024, and the next ones will be increases of 1.5% in April 2025 and 1.5% in April 2026. At the same time, according to the November agreement, a temporary cut of 2.29% in wages was made between December 2024 and December 2025, which will decrease to 1.2% in 2026 canceled at the end of next year.
The bottom line is that, according to the planned outline, while public sector workers represented by the Histadrut are already seeing a slight decrease of about 0.29% in their paychecks, due to the gap between the December increase and cut, the rest of the public sector workers who did not sign a collective agreement are expected to suffer a sharper cut, but for a shorter period.
Published by Globes, Israel business news - en.globes.co.il - on February 25, 2025.
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