Hourly Workers: Why the Method is Problematic
Contracting workers and paying an hourly rate has become widespread in the Israeli job market, impacting entire sectors in the economy. For businesses, this is a legal means by which they can employ workers in permanent positions and pay them less than they would those earning set monthly salaries. Workers employed through this method face a sustained infringement on their rights.
Who Are Hourly Workers?
According to estimates, some 45% of workers in the Israeli market (more than one million men and women) are paid by the hour – based on the actual number of hours they worked, rather than a set monthly salary. This is only an estimate, as there is no official data regarding employees paid by the hour in Israel.
In many sectors, being paid by the hour is standard; however, in most cases these are permanent, full-time jobs in various sectors including: cleaning, security, agriculture, construction, retail services, hospitality, dining, nursing, domestic services, administration, restaurants, and sales sectors. The same is true in the education sector: assistants are paid according to the number of hours worked, as are thousands of teachers employed through contractors. In academia, administrative workers are paid by the hour, as are junior lecturers, research assistants, and teaching assistants. In these sectors some employees are paid set monthly salaries, while some holding similar jobs and working the same number of hours are paid by the hour, and therefore earn significantly different salaries.
It is estimated that women are more likely than men to earn hourly wages because this method of employment is particularly widespread among professions with high rates of female employment.
What are the Benefits of the Hourly Employment Method?
The original goal of employing people on an hourly basis was to ensure flexibility for part of the organization’s workforce by recognizing its changing needs. Contracted workers are needed to to implement various projects with constantly changing scopes, to fill positions during unconventional working hours, and allow employees whom the employer – for organizational reasons – cannot hire to a permanent position. Over time, many employers understood that paying an hourly wage reduces employment costs and grants workers fewer rights than those determined in protective laws for salaried workers. As such, many employers shifted to paying workers by the hour, even if they worked full time (or nearly full time), and even if the employment is long-term and permanent.
How are Workers’ Rights Violated?
Employees earning hourly wages are discriminated against. They do not enjoy the benefits allocated to those with personal contracts or collective agreements, and most are not privy to the basic rights ensured by protective laws. Paying employees by the hour is one of the primary mechanisms responsible for the phenomenon of poor employees.
Lower Wages, Sometimes Less Than Minimum Wage: According to estimates, the monthly wages of workers paid by the hour is - on average - 7 percent lower than employees earning a set monthly salary. For junior positions, the gap is wider: a study published in 2002 found that workers paid by the hour in junior positions earned - on average - 25-30% less than their counterparts (with the same employer) earning a set monthly salary, though the scope of their employment was similar. When calculating the minimum wage per hour, during “short” and medium months, the minimum wage for those paid by the hour for a full time job is less than the legal monthly minimum wage.
Lack of Clarity Regarding Rights: It is easy for an employee earning a monthly salary to calculate his or her wages, rights, vacation days, and estimated salary during the holidays. Workers whose wages are calculated hourly cannot be sure what their salary will be, even if they worked the entire month, and will find it challenging to calculate their salary if they take time off. During the holidays, the lack of clarity increases.
Financial Losses During the Holidays: During the holidays – when expenses are higher than usual due to preparations for various celebrations – hourly employees’ wages decrease by 30 percent, even if they were available to work the entire month. Employees earning set monthly salaries, however, earn their full salary. While hourly employees are eligible for nine paid vacation days during the holidays, this does not compensate for the lost income during this period. Hourly employees are eligible for paid vacation days only after they have worked at their place of employment for three months, while workers earning a set monthly salary are eligible for a full salary during the holidays from their first day on the job.
Financial Losses as a Result of Using Vacation Days: While an individual earning a set monthly salary may take fully paid leave, in accordance with the law, an employee earning an hourly wage will receive a lower “paid leave”; the monthly salaries of workers earning a minimum wage will go down by NIS 1,000. As such, many employees earning an hourly rate refrain from using their legally mandated vacation days.
Breaks: Breaks are deducted from most hourly workers’ total hours worked – whether stipulated by law or not.
Notice Prior to Dismissal: Workers paid by the hour are given a much shorter notice prior to dismissal than that given to employees earning a global monthly salary. An employee who has worked for eight months, earning a set monthly salary, is eligible for 24 days’ notice prior to being dismissed, while an employee who has worked for the same amount of time but is paid an hourly wage is only eligible for eight days’ notice. An employee who has worked for one year - earning a set monthly salary - is eligible for one month’s notice, while a person who has worked for a year but is paid by the hour is only eligible for 14-20 days’ notice. The gap exists through the fourth year of employment.
Severance and Pension Benefits: Because employees paid by the hour earn lower salaries, even if they worked at the same capacity as those earning set monthly salaries, the amount of severance and pension benefits they receive will be lower.
Infringement on Women’s Rights and Mothers’ Rights: The method of hourly employment prevents workers who have returned from maternity leave from utilizing the “breastfeeding hour,” to which monthly employees are eligible. Furthermore, every potential hour that is voluntarily not worked during pregnancy (for example, due to the need to rest during a high-risk pregnancy) will result in a lower salary and reduced maternity benefits.
What Needs to Be Done?
1. Resources should be allocated for a thorough review of the scope of hourly employment in Israel. This should be done through various means, including the Central Bureau for Statistics’ labor force surveys.
2. A significant portion of the violation of hourly employees’ rights stems from labor laws in Israel, which do not sufficiently protect workers employed through this mechanism. Therefore, urgent action should be taken to fundamentally change labor laws. People should be paid by the hour only if they work part time or for a limited amount of time. Permanent workers or those working full time should not be employed through an hourly mechanism. For those still considered hourly employees:
Raise the hourly minimum wage and set an hourly minimum wage that is 10% higher than the regular minimum wage.
Amend the extension order for holiday pay; cancel the condition to work the day before and the day after the holiday, and compel the employer to pay for a full day of work on a holiday eve (which is a shorter work day).
Ensure provision of paid breaks for all employees, not just for manual laborers, as currently determined in regulation, and determine that a break will only be deducted from the one’s salary if it exceeds half an hour.
Increase the amount of time given for a notice of dismissal to that given to employees with set monthly salaries.
Protect the rights of pregnant employees, and calculate the wages for high risk pregnancy benefits, maternity benefits, and eligibility for a nursing hour based on an average of the past twelve months of employment rather than on the months prior to giving birth, during which the hours worked are often reduced.