The government reached agreements Tuesday on a major expansion of compensation for workers and businesses hit economically by the war with Iran, including partial pay for employees placed on unpaid leave during the first five working days of the fighting.
Under the revised plan, workers furloughed from March 1-5 will be entitled to 75% of their full salary for those days. The change is expected to cost the state billions of shekels, though officials have not yet completed a precise estimate.
The agreement marks a reversal for the Finance Ministry, which had insisted until now that unemployment benefits for furloughed workers would apply only to those kept away from work for at least 10 consecutive days.
The dispute centered on the first five days of the war, when the Home Front Command ordered all businesses nationwide to close. Finance Minister Bezalel Smotrich and ministry officials had refused to compensate workers for that period, prompting Business Sector President Dubi Amitai and Federation of Chambers of Commerce President Shahar Turgeman to appeal directly to Prime Minister Benjamin Netanyahu.
Netanyahu backed their demand, clearing the way for the revised compensation framework.
In addition to furlough payments, the committee decided to increase aid to businesses in the north, with the state covering municipal property taxes during the war period.
The committee has not yet voted on the amendments. Even after approval, the measures must pass second and third readings in the Knesset plenum before claims for enhanced compensation can be submitted. Payments will then be issued by the National Insurance Institute and the Tax Authority. The Finance Ministry still opposes some of the agreements.
“We reached an agreement that the first five days of the war, when the entire economy was shut down, will be recognized as furlough,” said Finance Committee Chairman Knesset Member Hanoch Milwidsky. “This is a dramatic development, stemming from the understanding of the prime minister and finance minister of the situation.”
Outstanding issues include assistance for reservists’ spouses and reimbursement for parents of children in private daycare, both of which have yet to be finalized. It was also decided that property tax payments in frontline communities will be transferred directly from the Compensation Fund to local authorities. Additionally, a single day off will not disqualify an employee from furlough eligibility, and businesses that reinstated employees only to furlough them again will be compensated accordingly.
The committee intends to enshrine a clause in law under which the current framework would be automatically activated in any future war or military operation for a period of five years.
Milwidsky also noted that, for the hotel sector, the baseline comparison year will be 2023, which was largely free of conflict and saw relatively strong tourism. The sharp decline in inbound tourism will be addressed separately by the Tourism Ministry, as it cannot be fully covered under the broad legislation.
“This is a significant step that provides a clear horizon and real certainty for business owners,” said Rami Bezeh, chairman of the Histadrut’s forum for self-employed and freelancers. “Anchoring the framework as a standing mechanism for the next five years is a dramatic achievement that allows the self-employed to plan ahead.”
“For the first time, a clear, stable and orderly mechanism will be established to ensure economic certainty and a rapid response for businesses in any emergency,” added attorney Roi Cohen, president of the Lahav organization of the self-employed. “No more abandonment, no more improvisation, and no more fighting anew in every crisis.”
Amitai also welcomed the decision. “In the most difficult days, the business sector did not wait for instructions but stepped up,” he said. “Now comes the balancing stage: the state is responding in kind with the same level of commitment—and rightly so. Some sectors still require tailored solutions, including airlines and the events and production industry. The government must take responsibility and make dedicated decisions for them.”