Employer audit under labour law
The Ministry of Labour operates administrative and criminal enforcement of provisions in the labour laws, and its powers include administrative warnings, monetary sanctions at three levels, and personal liability of the chief executive and of a service orderer. This guide explains what is examined in practice, how the sanctions mechanism works, and what to do when a warning arrives.
What is examined and by whom
The Labour Arm of the Ministry of Labour holds powers of administrative and criminal enforcement over various provisions in the labour laws. In the fields of equal employment opportunity and the employment of foreign workers there are civil enforcement powers as well. The provisions whose breach gives rise to administrative enforcement are listed in the Second Schedule to the Increased Enforcement of Labour Laws Law, 5772-2011.
An audit opens in one of two ways: on a complaint by an employee, or through proactive enforcement under a sectoral work plan. In both cases the examination is conducted against documents rather than against explanations, which is why the quality of routine record keeping determines the outcome more than any account given after the fact.
The core of what is examined recurs: payslips and their components, records of hours of work and rest, payment of the minimum wage and the overtime premium, pension contributions and their transfer on time, annual leave and convalescence pay quotas, the written notice to the employee of the terms of employment, and the display of the minimum wage notice at the workplace.
The administrative warning
A sanctions officer who finds a suspected breach may take one of two courses: notify the employer of an intention to impose a monetary sanction, or serve an administrative warning. The warning is a caution to stop the breach, failing which a sanction will be imposed for a continuing or repeat breach.
Its practical value is considerable: it allows the employer to correct the breach without any monetary sanction being imposed. An employer who considers that it did not commit the breach, or that what it did does not constitute a breach, may apply to the officer in writing within 30 days for the warning to be cancelled. The officer may cancel the warning or refuse the application.
Those thirty days are the most valuable resource in the process. Within that period a choice must be made between two quite different strategies, correction or challenge, and sometimes both must be pursued in parallel. A decision taken on the twenty-ninth day narrows both.
Monetary sanctions and the three levels
The monetary sanction is set at three levels according to the gravity of the provision breached, and at two rates: one for an employer, and a reduced one for an individual employing a worker otherwise than for a business or trade, for example a household employer. The amounts are updated from time to time. The table shows the rates as published by the Ministry of Labour for 2019, the most recent year in the official table.
| Type of employer | Level A | Level B | Level C |
|---|---|---|---|
| Employer | ILS 5,120 | ILS 20,460 | ILS 35,800 |
| Individual employing otherwise than in a business | ILS 2,560 | ILS 10,230 | ILS 17,900 |
The figures above carry a year. Before relying on them the rate in force at the date of the breach should be checked against Ministry of Labour publications, since the sanction is set by reference to the relevant date and not to the date of the examination.
Continuing and repeat breaches
Two mechanisms turn a discrete sanction into material exposure, and both are time-dependent:
- A continuing breach. The sanction increases by 2% for each day the breach continues. That interest on time is why the speed of the response matters more than its force.
- A repeat breach. A breach committed within two years of an earlier breach for which a sanction was imposed, or for which the employer was convicted of an offence, doubles the amount of the sanction.
The practical conclusion is the same in both cases: stopping the breach in fact, and recording when it stopped, is the first step rather than the last. Even where the employer intends to dispute the breach itself, stopping it in the meantime is not an admission, and it stops the day count.
A decision to impose a monetary sanction or to issue an administrative warning may be challenged by way of objection to the appeals committee, and thereafter by appeal. That process runs alongside the criminal aspect, where one exists: a monetary sanction and criminal liability are not mutually exclusive.
Personal liability of the chief executive
The law does not stop at the corporate entity. The chief executive of a corporate employer is under a duty to supervise and to take reasonable measures to prevent a breach of the provisions listed in the Second Schedule. Where the employer has breached such a provision, a personal monetary sanction may be imposed on the chief executive.
The process is staged rather than immediate: first a warning is served on the chief executive, stating that they must supervise the taking of measures to stop the breach or prevent its recurrence within a stated period. Only if, notwithstanding the warning, those measures were not taken is the sanction imposed. Its level is 50% of the amount that could have been imposed for that breach on an individual employing a worker otherwise than for a business, unless the chief executive shows that they did everything possible to discharge the duty.
The amount may be reduced: by 20% where the officer is satisfied that the chief executive took measures to stop the breach or prevent its recurrence, and by a further 25% in defined circumstances with the approval of the Ministry legal adviser. Documenting the measures taken is therefore not only a defence but a component of the calculation.
Liability of a service orderer
The Increased Enforcement Law was designed in large part to address employment chains in which the worker is employed by a contractor while the work is performed for another party. Accordingly a service orderer too may bear liability for a contractor breaches towards its workers, in the circumstances set out in the law.
There is a parallel in the Minimum Wage Law: in defined conditions, liability for payment of the minimum wage to workers employed by a manpower contractor rests also on the actual employer, and for workers employed by a service provider, also on the service orderer.
The operational meaning: due diligence on a services contractor is part of the service orderer risk management, not the contractor alone. The terms of engagement, the mechanism for monitoring payslips, and a contractual audit right are the tools by which this exposure is cut down in advance.
Preparing in advance
An audit is passed or failed on documents created long before it opened. Five areas account for most findings:
- Records of working hours. The duty to keep them exists, and their absence shifts the burden of proof in practice on the question of overtime.
- The payslip. Components presented in a way that does not reflect their substance, for instance a fixed supplement recorded as reimbursement of expenses.
- Transfers to a provident fund. A sum not transferred within 21 days is treated as a delayed wage, both the employer share and the share deducted from the employee.
- Written notice of the terms of employment. A document often forgotten in short engagements and with temporary staff.
- The minimum wage notice. A display duty at the workplace, and an easily corrected omission that is often missed.
A voluntary internal audit, run against the same checklist enforcement uses, is the only way to find the gaps while there is still time to correct them without a sanction and without a day count running.
In summary
Enforcement in labour law is built so that time works against whoever waits: a continuing breach accrues 2% a day, a repeat breach doubles, and an administrative warning carries a window of only thirty days. At the same time the law imposes personal liability on the chief executive and derived liability on a service orderer, so the exposure does not stop at the boundaries of the corporate entity.
The complexity of the process lies not in the amounts but in the intersection: the same conduct may give rise in parallel to administrative enforcement, criminal liability and a civil claim by the employee, each track with its own timetable and rules of evidence. Building a response that does not damage one track while addressing another calls for professional legal representation by a lawyer who specialises in labour law.
If you have received an administrative warning or notice of an intention to impose a sanction, or you want an internal audit before someone else conducts one, contact us and we will go through the documents and the options open to you.
Most asked
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Received a warning or notice of an intended sanction?
Send us the document you received and the payslips for the relevant months. That is enough to say whether there are grounds for cancellation, what should be corrected immediately, and how much time is left.