Salary components: what makes up your gross pay?
The salary shown on your payslip is not made up only of the amount you agreed with your employer. It includes base pay, overtime, expense reimbursements, bonuses, and various benefits. On this page, we will understand which components affect your net pay, pension, and social rights, and what you should check to make sure you receive all the salary and conditions you are entitled to.
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When we talk about salary, most of us think about the figure agreed in the employment contract. On the payslip, however, that figure is divided 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 enter your bank account but still "cost" you tax.
Base salary: the engine of the payslip
Base salary is the basic amount you receive for your work. It is the most important component on the payslip because it forms the "determining salary" used to calculate your social rights:
- Contributions to pension and severance pay.
- The value of vacation and sick days.
- Dmei Havra'a (דמי הבראה; recuperation pay).
Hourly pay versus monthly salary
There are two main salary-payment models:
- Monthly salary: A fixed salary each month, regardless of the actual number of hours, assuming a full-time position.
- Hourly pay: Salary calculated according to the number of hours actually 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, assuming you worked a full-time position. | Make sure you receive at least the minimum wage and that your position is defined correctly. |
| Hourly pay | Salary calculated according to the number of hours actually worked in a particular month. | Compare your attendance report with the number of hours shown on the payslip. |
Working hours and overtime
Under the law, a regular working day is generally approximately 8.6 hours for someone who works 5 days a week, or 8 hours for someone who works 6 days a week, averaging approximately 42 hours per week. Every hour beyond that is considered overtime and entitles you to increased pay:
- The first 2 hours: An additional 25%, meaning 125% of the hourly wage.
- From the third hour onward: An additional 50%, meaning 150% of the hourly wage.
The payslip shows:
- The number of overtime hours
- The rate of pay
- The total amount
Global overtime
In many roles, particularly in high tech and management, a fixed component called "global overtime" is paid. This is a fixed monthly payment covering a certain number of overtime hours, regardless of the hours actually worked.
Travel expenses, bonuses, and additions
In addition to salary, your payslip will show other components:
- Travel reimbursement: Reimbursement for the cost of getting to work, up to a ceiling set by law.
- Bonuses: Compensation for meeting targets, usually not included in the pension calculation.
- Dmei Havra'a: Employees who have completed at least one year — 12 months — at their workplace are entitled to Dmei Havra'a, usually paid in the summer according to their seniority, based on NIS 418 (418 ש"ח) per day in the private sector and NIS 471.4 (471.4 ש"ח) per day in the public sector. More information about calculating Dmei Havra'a is available on Kol Zchut (כל זכות).
Some components are fixed, while others change from month to month.
Imputed benefits: the benefit that "costs" you money
This is one of the most confusing parts of the payslip. An imputed benefit is a benefit you receive from your employer that is not cash, but which the state treats as income for tax purposes.
Common examples include:
- Company-car benefit: If you have a company car, a notional amount representing the value of using the car is added to the payslip.
- Meal benefit: Subsidized meals, such as Cibus (סיבוס) or Ten Bis (תן ביס).
- Telephone benefit: A subsidized mobile phone.
How does this affect you?
The amount is added to your gross pay only for calculating tax. At the end of the calculation, your net pay is lower because you paid tax on a higher income.
Frequently asked questions
Must my employer reimburse travel expenses if I arrive by bicycle or on foot?
Yes. Entitlement to travel reimbursement comes from an extension order and is not conditional on how you get to work. It depends on whether you need transportation to reach the workplace, above a certain distance.
I received a large bonus this month. Why didn't my net pay rise by the same amount?
A bonus increases your gross pay, which may move you into a higher tax bracket for that month. As a result, a large part of the bonus goes to income tax.
In summary
Your gross pay is a complex puzzle. It includes base salary, variable additions, and "invisible" benefits through imputed amounts. The better you understand these components, the better you can tell whether the salary agreed in your contract is actually reflected in the rights and pension you receive.