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National Insurance Institute for the Self-Employed

Who is a Self-Employed Person?

A self-employed person is defined as one who is not employed by someone else and for whom one of the following applies:

A person who is engaged in his occupation for at least an average of 20 hours a week
A person whose average monthly income from his occupation is more than NIS 3,964 (as of 01.01.2009) - 50% of the average wage.
A person who is engaged in his/her occupation for at least an average of 12 hours a week, and his average income is more than NIS 1,189 (as of 01.01.2009) - 15% of the average wage.

A self-employed worker who is registered at the NII and who pays his insurance contributions regularly is covered in all insurance branches except unemployment and bankruptcy.

Supplemental Income

A self-employed person with additional income from a source other than work must pay insurance contributions from this income as well, while it is equal to or higher than his/her income as a self-employed person, up to the maximum income liable for the payment of insurance contributions

Registration with National Insurance Institute

A self-employed person must register at the National Insurance Institute immediately upon opening his business. A self-employed person who was injured at work is entitled to work injury benefit only if he/she was registered at the National Insurance Institute as a self-employed person at the time of the injury and paid insurance contributions.

Who Must Register?

A married woman who works as a self-employed person at her husband’s business must register herself at the National Insurance Institute and pay insurance contributions.
A married couple working together in a joint business can divide up the income from their business between themselves and pay insurance contributions according to each one`s share, on condition that the division is between 1/3 and 2/3 of the overall income. If one of the spouses has income that does not originate from their joint business, this spouse can be credited with only 1/3 of their income from the joint business.
A self-employed person who also has an income from work as an employee must pay health insurance at both workplaces, up to the maximum income on which insurance is payable.
A self-employed person with additional income from a source other than work must pay insurance contributions from this income as well, while it is equal to or higher than his/her income as a self-employed person, up to the maximum income liable for the payment of insurance contributions.
The maximum income on which contributions are paid. No payments are made on income above this amount. The amount is five times the average wage, as published in December 2005, and updated each January by the change in the consumer price index.
A person who does not meet the definition of a self-employed person as specified above is not considered a self-employed person and therefore regulations applicable to employees or for non-work related income apply.
A farmer who meets the definition of a self-employed person is required to register at the National Insurance Institute and pay insurance contributions on his/her income.
The wife of a farmer in a cooperative settlement (moshav) is also considered a self-employed person and is required to register and pay insurance contributions for herself.
If the farmer or his wife do not work in their farm, for example, if they work as employees outside the farm and only reside at the farm they must contact the National Insurance Institute and submit ratifying documents

The Rates of Self-Employed Insurance Contributions

A self-employed person aged between 18 and retirement age pays:

For the share of the income that is up to 60% of the average wage NIS 4,757 (as of 01.01.2009):
6.72% (as of 07.01.2002) national insurance
+ 3.10% (as of 01.01.1995) health insurance contributions
For the share of the income that is over 60% of the average wage and up to the maximum income liable for insurance contributions:
11.23% (as of 01.01.2006) national insurance
+ 5.00% (as of 01.01.2006) health insurance contributions

For example, if a self-employed person earns 10,000 NIS per month the premiums would be as follows:
National Insurance:
6.72% of 4757 NIS = 319.74 NIS
+ 11.23% of 5243 NIS (i.e., 10,000 - 4757) = 588.79 NIS
For a total of 908.46 NIS payable for National Insurance

Health Insurance:
3.10% of 4757 = 147.47 NIS
+ 5.00% of 5243 NIS = 252.15
For a total of 409.62 NIS payable for Health Insurance

Differences between Employee and Self-Employed

Reporting

Employee: the employer must report on his/her wages and pay insurance contributions for him/her.
Self-employed: must register at the National Insurance Institute and pay insurance contributions himself.

Unemployment and Bankruptcy

Employee: is insured both under unemployment insurance and under insurance for employees’ rights in cases of bankruptcy or corporate liquidation.
Self-employed: is not insured under unemployment insurance or under insurance for employees’ rights in cases of bankruptcy or corporate liquidation.

Delinquent Insurance Payments

Employee: rights are not affected due to delayed payment of insurance contributions by his/her employer.
Self-employed: rights may be affected if he/she does not register himself or is late in payment of insurance contributions.

If you need more information or clarification on any subject concerning the NII, please feel completely comfortable to contact me.

Sincerely,

Tzvi Szajnbrum, Attorney at Law

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