Freeze and Reduction of Recreation Pay in 2025 Law, 5785-2025

In this Law –

"recreation pay" – recreation pay, recreation allowance or any other payment that is similar in substance, even if differently named, paid to an employee pursuant to law, agreement or custom, or the financing of a vacation or another benefit in kind given in place of such payments;

"agreement" – a collective agreement, an extension order as defined in the Collective Agreements Law, 5717-1957, a collective arrangement including a unilateral arrangement, administrative instructions, or an individual employment contract including a special contract pursuant to section 40 of the State Service (Appointments) Law, 5719-1959;

"collective agreement" – a general collective agreement or a special collective agreement as defined in the Collective Agreements Law, 5717-1957;

"updating obligation" – an obligation, pursuant to a commitment in an agreement or pursuant to custom, to update in 2025 the amount of one recreation day by reference to which recreation pay is calculated for an employee in 2025, which would have applied but for the provisions of section 2;

"National Insurance Law" – the National Insurance Law [Consolidated Version], 5755-1995;

"Head of Authority Pensions Law" – the Local Authorities (Pensions for Head of Authority and Deputies) Law, 5737-1977;

"Collective Agreements Law" – the Collective Agreements Law, 5717-1957;

"Budget Foundations Law" – the Budget Foundations Law, 5745-1985;

"Provident Funds Supervision Law" – the Financial Services Supervision Law (Provident Funds), 5765-2005;

"Jewish Religious Services Law" – the Jewish Religious Services Law [Consolidated Version], 5731-1971;

"recreation day price" – as detailed below, as the case may be:

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"public employer" – any of the following:

"salary" – employment income as defined in section 2(2) of the Income Tax Ordinance [New Version];

"office holder" – any of the following:

"participation amount" – the total amount of all of the following:

"employee" – an employee who is entitled pursuant to an agreement or custom to recreation pay in 2025, excluding an employee employed by an individual otherwise than in the course of a business or vocation;

"employee subject to partial reduction" – an employee whose average monthly salary in the period of the three months October 2024 to December 2024 does not exceed NIS 6,150, and if the employee is employed on a part-time basis – does not exceed the said amount multiplied by the employee's part-time fraction; however, if the employee was not entitled to a salary in respect of any month of the said months, the three last months preceding January 2025 in respect of which the employee was entitled to a salary shall be taken into account instead of the said three months; for this purpose, the part-time fraction in respect of an employee whose salary is paid on an hourly basis shall be calculated as the quotient obtained by the following formula, and not more than 1:

"budgetary pension" – payments paid monthly, on a continuous basis, pursuant to law or agreement, from the State Treasury or from the employer's fund, to an employee who has retired from employment, throughout the employee's lifetime, and after the employee's death – to the employee's survivors;

"assessing officer" – as defined in the Income Tax Ordinance [New Version];

"pension provident fund" and "training fund" – as defined in the Financial Services Supervision Law (Provident Funds), 5765-2005.

in respect of an employee as stated in this paragraph, the participation amount shall be the total of the amounts deducted pursuant to this paragraph plus the mandatory payments as defined in paragraph (2) of the definition of "participation amount" in respect of those amounts.

For the purpose of calculating any of those listed below, the reduction of recreation pay or the reduction of salary pursuant to this Law shall not be taken into account:

An employer is obligated to pay the participation amount to the assessing officer, and for this purpose the provisions of section 247 of the Income Tax Ordinance [New Version] shall apply.

Without derogating from the provisions of section 5, the participation amount paid to the assessing officer shall not be regarded as income in the hands of the employee for the purposes of the Income Tax Ordinance [New Version].

The portion of recreation pay or the portion of salary, as the case may be, that was not paid to an employee pursuant to this Law, shall not be paid to the employee after the end of 2025 either.

The provisions of this Law applying in respect of an employee and the employee's employer shall apply in respect of an office holder and the person paying the office holder's salary, even where an employment relationship does not exist between them, with the necessary modifications, and in respect of an office holder to whom recreation pay is not paid in 2025 – also with these modifications:

The provisions of this Law applying to an employee and the employee's employer shall apply to a soldier serving in the Israel Defence Forces pursuant to a commitment for regular service and to the Israel Defence Forces, even where an employment relationship does not exist between them, with the necessary modifications.

The provisions of sections 29a, 29b, 33a(b1) and (d) to (f), 34(a)(1) and (b), 35, 35a, 36, 37(d) to (f) and 39 of the Budget Foundations Law, concerning changes in salary or the granting of other financial benefits related to employment, including the powers conferred therein, shall apply, with the necessary modifications, in respect of the payment of salary or any other payment from the fund of a public employer, made by a public employer contrary to the provisions pursuant to this Law.

During the period from the date of commencement of this Law until the 5th of Tevet 5791 (31 December 2030), the Income Tax Ordinance [New Version] shall be read as if after section 246 the following were inserted:

"The participation amount to be paid to the assessing officer pursuant to the Freeze and Reduction of Recreation Pay in 2025 Law – Temporary Provision

The participation amount to be paid to the assessing officer pursuant to section 5 of the Freeze and Reduction of Recreation Pay in 2025 Law, 5785-2025, shall be deemed, for the purposes of the provisions under this Ordinance, as tax withheld at source pursuant to section 164 at the time at which recreation pay is paid to the employee in 2025, and in respect of an employee to whom the full recreation pay was paid as referred to in section 3(a)(2) of that Law, and in respect of an office holder to whom recreation pay is not paid in 2025 – at the time of payment of the office holder's salary in July 2025, and which is to be paid to the assessing officer pursuant to section 166; for this purpose, "office holder", "participation amount" and "employee" – as defined in that Law.".

14. In the Budget Law for the Financial Year 2025, an amount equal to the estimated revenues expected to accrue to the State Treasury pursuant to this Law shall be set, as part of the amounts included in that budget for the purpose of granting benefits to reserve service soldiers.

15. In the Freeze and Reduction of Recreation Pay in 2024 for the Purpose of Budgeting Benefits for Reserve Service Soldiers Law, 5784-2024, in section 2(b), instead of "2025" there shall come "2026".

16. The Minister of Finance is responsible for the implementation of this Law, and may, with the approval of the Labour and Welfare Committee of the Knesset, make Regulations for its implementation; in such Regulations the Minister of Finance may, in consultation with the Minister of Labour, prescribe provisions with respect to the manner of reducing recreation pay pursuant to section 3 in respect of an employee to whom recreation pay is paid otherwise than as a separate component.

17. The Minister of Finance shall report to the Labour and Welfare Committee of the Knesset, from the 5th of Tammuz 5785 (1 July 2025) until the end of 2027, once every three months, on the matters detailed below, with respect to the period preceding the date of the report: