💼 Payroll Taxation: Why Do Employees with the Same Salary Take Home Different Net Pay?

Have you ever wondered why two employees with identical gross salaries receive different net paychecks?

The answer lies in Israel’s complex tax and benefits system, which varies from person to person.

🧮 Key Factors Affecting Net Salary

1. Tax Credit Points Each employee is entitled to credits based on their personal situation: marital status, children, residence area, academic degree, military service, etc. For example, a parent of two young children receives more tax credits - reducing their income tax.

2. National Insurance & Health Tax These deductions depend on income level and employment type (employee vs. self-employed). There’s also a maximum income threshold above which no further deductions are made.

3. Social Contributions Pension, severance, and study funds (Keren Hishtalmut) affect take-home pay. Employees saving in tax-advantaged funds enjoy additional tax benefits.

4. Employer Benefits Company cars, bonuses, or meal allowances may be taxed as taxable value (“Shovi Mas”), lowering the net amount.

5. Multiple Employers Without proper tax coordination ("Teum Mas"), the second employer may deduct tax at the maximum rate.

💬 In Summary

Your net salary isn’t just about your gross pay – it’s shaped by taxes, benefits, and personal circumstances