How is Social security configured ?
Social Security and Health tax are mandatory deductions from gross pay. In addition to the employee’s contribution there is also an employer’s contribution. They are configured at two rates: a lower rate for gross pay up to 60% of the average salary (currently 5,171 sh – July 2012). The lower Rate is 0.4 %, while the higher rate is a whopping 7% !
So, if your gross income is less than 5,171 sh (current for July 2012), it is in your best interest to do a Social Security reconciliation.
What is a Social Security reconciliation ?
This is basically a way to notify your secondary employer of the non-utilized balance of the lower rate ceiling and therefore enable you to utilize this with the secondary employer and therefore pay less.
In the past, the secondary employer would send employees who stated on their 101 tax form that this is a secondary place of employment, to the local Social Security office to do a reconciliation. starting in Jan 2012, Social Security approved secondary employers to use a signed statement on a BL/644 form.
Who is eligible for a Social Security reconciliation ?
- A salaried employee who works for 2 or more employers
- A recipient of a pension who also works for at least one employer
- A recipient of a pension from 2 or more sources
And under the condition that the income from the main employer or main pension is lower than 60% of the average wage (5,171 sh – July 2012)
Note: Employees or recipients of pension whose income from their main employer or pension whose gross pay is higher than 60% of the average wage, have already utilized in full the lower rate and therefore do not need to do a Social Security reconciliation.
Note 2: You need to apply to Social Security for written authorization:
- If you have gross income at the Social security ceiling (41,850 sh) or more
- You receive a pension or salary from 3 or more sources.
So, what do I need to do ?
- Fill out a bl/644 form and give it to your secondary employer, at the start of employment and each new tax year along with your 101 tax form. or
- You can fill out the form on-line on Social Security’s website http://www.btl.gov.il/Insurance/Teum/HafakatHishur/Pages/default.aspx and procure a letter for your secondary employer.
If you didn’t do a reconciliation in previous years, this can be done retroactively along with a rebate request via the internet site only.
If a salaried employee works simultaneously at more than one place of employment, as a default, the secondary employers will configure the Social Security and Health tax from the higher rate.