Salary Components: What Makes Up Your “Gross Pay”?
The salary shown on your payslip is made up not only of the amount agreed upon with your employer, but also of base pay, overtime, expense reimbursements, bonuses, and various benefits. This page explains which components affect your net pay, Pension, and social benefits, and what to check to ensure you receive the full pay and conditions you are entitled to.
- Reading time
- 5 minutes
- Last updated
When we talk about salary, most of us think of the figure agreed upon in the contract. But on the payslip, that figure is broken down into different components: some increase your PensionA monthly payment made to a person after retirement from work in order to help maintain their standard of living., some are merely expense reimbursements, and some are benefits that do not go into your bank account but still “cost” you in taxes.
Base salary: the engine of the payslip
Base salary is the fundamental amount you receive for your work. It is the most critical component of the payslip because it constitutes the “determining salary” for calculating your social benefits:
- Contributions to Pension and Pitzuyim (פיצויים).
- Calculating the value of a vacation or sick day.
- Convalescence pay.
Hourly vs. monthly salary
There are two main salary payment models:
- Monthly salary A fixed salary each month, regardless of the actual number of hours worked (assuming full-time employment).
- Hourly wage The salary is calculated according to the actual number of hours worked.
Two main salary payment models
| Model | How does it work? | What should you check? |
|---|---|---|
| Monthly (global) salary | A fixed salary each month, regardless of the number of days or hours worked (assuming you worked full-time). | Make sure you receive at least minimum wage and that your position is properly defined. |
| Hourly wage | The salary is calculated according to the actual number of hours worked in a given month. | Compare your attendance report with the number of hours listed on the payslip. |
Working hours and overtime
Under the law, a regular workday is generally 8.6 hours for those who work 5 days a week, or 8 hours for those who work 6 days a week (and an average of approximately 42 hours per week). Every hour beyond that is considered overtime and entitles you to increased pay:
- First two hours: a supplement of 25% (i.e., 125% of the hourly wage).
- From the third hour onward: a supplement of 50% (i.e., 150% of the hourly wage).
The payslip shows:
- Number of overtime hours
- Payment rate
- Total amount
Global overtime
In many positions (mainly in high-tech and management), a fixed component called “global overtime” is paid. This is a fixed monthly payment that covers a certain number of overtime hours, regardless of the hours actually worked.
Travel, bonuses, and additions
In addition to salary, you will find other components on the payslip:
- Travel reimbursement: reimbursement for the cost of getting to work (up to a legal cap).
- Bonuses: compensation for meeting targets (usually not included in Pension calculations).
- Convalescence pay: Employees who have completed at least one year (12 months) at their workplace are entitled to convalescence pay, usually paid in the summer, according to their seniority at the workplace, based on 451.5 NIS per day in the private sector and 511.6 NIS per day in the public sector. Additional details on calculating convalescence pay can be found on the Kol Zchut website.
Some components are fixed, while others vary from month to month.
Taxable benefit value: the benefit that “costs” you money
This is one of the most confusing parts of the payslip. A taxable benefit value is a benefit you received from your employer that is not cash, but which the state considers income for all tax purposes.
Common examples:
- Car benefit value: If you have a company car, a notional amount representing the value of using the car is added to your payslip.
- Meal benefit value: subsidized meals (such as Cibus/Ten Bis).
- Phone benefit value: subsidized mobile phone.
How does this affect you?
This amount is added to your gross salary only for tax calculation purposes. At the end of the calculation, your net pay will decrease because you paid tax on a higher income.
Frequently asked questions
Is my employer required to pay travel reimbursement if I arrive by bicycle or on foot?
Yes. Eligibility for travel reimbursement is based on an extension order and does not depend on how you get to work, but rather on the fact that you need transportation to get there (beyond a certain distance).
I received a large bonus this month. Why did my net pay not increase by the same amount?
A bonus increases your gross salary, which may move you into a higher “tax bracket” that month. Therefore, a large portion of the bonus goes to income tax.
In summary,
Your gross salary is a complex puzzle. It includes base salary, variable additions, and “invisible” benefits (taxable benefit values). The better you understand these components, the better you will know whether the salary agreed upon in your contract actually translates into the benefits and Pension you are entitled to.