Israel: Growing Profits, Salary Gap Prompt Unionization of Insurance Sector

Bloomberg Law for HR Professionals is a complete, one-stop resource, continuously updated, providing HR professionals with fast answers to a wide range of domestic and international human resources...

By Jenny David

April 27—Employees in Israel's insurance sector continue to unionize. A third major insurance group—AIG Israel—recently signed a collective agreement, joining recently unionized Clal Insurance Enterprises and Migdal Insurance and Financial Holdings Ltd.

The trend toward unionization is gathering steam against the backdrop of studies showing that Israeli insurance companies have become a financial empire, growing far faster than the economy as a whole due to a legal provision requiring that all Israeli workers maintain a pension fund. Insurance companies currently manage about 1.1 trillion shekels ($279 billion) in pension savings, a figure expected to double by 2020, and the average family now spends 12 to 16 percent of its disposable income on insurance premiums, according to the Public Trust consumer organization.

‘Far Beyond' the Insurance Sector

The insurance sector has also been scrutinized for the large salary gap between its senior executives and the many thousands of clerks on the junior and intermediate levels who earn close to the average wage and significantly less than their peers in other financial sectors.

“The high cost of insurance and negative public opinion about high executive salaries in general is providing fertile ground for union organizers,” a Histadrut union official told Bloomberg BNA April 20, noting that the trend “includes but reaches far beyond” the insurance sector.

Salary Gap Narrowing, But Still Broad

The average annual salary cost of the 10 highest paid insurance executives in Israel totaled 6.2 million shekels ($1.6 million) in 2014, while the average salary cost of their employees totaled 225,000 shekels ($58,000), just 3.6 percent of the executives' average, according to the companies' year-end financial statements.

The gap is narrowing, however, under intense pressure and regulatory changes pursued by the Finance Ministry. In 2013, insurance company employees cost their employers an average of 229,000 shekels ($59,000), only 2.5 percent of the average annual salary cost of the sector's highest paid executives.

Still, the gap is larger than in other financial sectors. Many insurance executives earn more than their peers in the banking sector, while rank-and-file employees earn far less than their counterparts in the other major financial sectors.

The average salary cost among employees at Israel's five largest banks totaled 366,000 shekels ($94,000) in 2014, at Israel's five largest investment houses only 294,000 shekels ($76,000).

In response, the Finance Ministry has proposed that authority for overseeing bank salaries be shifted to it from the Bank of Israel in order to address the gaps.

To contact the reporter on this story: Jenny David in Jerusalem at

To contact the editor responsible for this story: Rick Vollmar at

For more information on Israeli HR law and regulation, see the Israel primer.


Request Bloomberg Law for HR Professionals