Accountant general and Bank Yahav tussle over civil servants' payslips
By Tal Levy
"If I buy a car from Ford and work for the state, can I charge the monthly payments to my salary?"
This is how Meretz MK Haim Oron summed up the Knesset Finance Committee's most irksome issue.
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Some 90,000 state employees who have their personal bank accounts at Bank Yahav are eligible for a little-known and rather strange benefit: They can buy goods and pay via their payslips, without using a credit card or automatic installment plan. If a civil servant nets NIS 10,000 a month and buys a refrigerator for NIS 2,000, a line on his payslip will read, "deduction for refrigerator," and his bank account will be credited with just NIS 8,000.
Yahav has a list of about 1,500 suppliers that sell insurance, clothing and electrical appliances and have direct access to state employees' wage transfers. Sound strange? Indeed, this mechanism serves suppliers very well, but just how good it is for the employees is uncertain. It means that the suppliers have priority over all other payments owed by state employees. From the suppliers' perspective, the worker's employee number on a purchase order is as good as cash. As long as the worker is employed, his payslip is a guarantee that the supplier gets first dibs on his money.
Why is this not so good?
"These are people who do not always keep good household expense records, so if I sell state employees goods on installment, there is a good chance that on payday they will have no money in their accounts. If they pay via their payslip, I am the first in line for their money," explained one of the suppliers eloquently.
Even the supplier himself contends that using the payslip as a form of payment encourages civil servants to live beyond their means. This is a very strange "benefit" and certainly does not educate toward good consumerism, as it encourages workers to buy goods and be left with less money in hand with which to pay for the rest of their needs. The crunch always comes, and the workers end up taking loans from their employer, albeit at lower interest than available to the rest of the public (3.2%, unlinked to the cost-of-living index), but with repayment also via their payslips.
The suppliers' insistence on payment only via the payslip is so absolute that some suppliers who cannot charge state employees via their salaries simply refuse to sell to them. This shows how little faith some suppliers have in state employees' ability to manage their finances. Interestingly, no suppliers insist on payment via payslips of non-state employees who come to their stores, so why this mechanism exist at all? Why don't state employees use credit cards, checks or cash like the rest of the population? There seems to be no clear answer to this conundrum.
This arrangement enables state employees to buy goods at group discounts, say sources at Yahav, and not all the workers have a credit card. Statistics indicate, however, that 76% of Israel's adult Jewish population has at least one credit card and the remaining 24% are mainly the ultra-Orthodox, who tend to steer clear of credit cards, or low income earners who are ineligible.
The most plausible answer seems to be "because that's how it's always been."
Treasury sources say the "payment via payslip" arrangement is a remnant from the 1960s, when there were no credit cards. Even today there are many state employees whose incomes are too low for them to be eligible for a credit card.
Strikes and lobbies
The debate over supplier access to payslips was serious enough to spark a strike by the Histadrut labor federation at some government offices two weeks ago, leaving the public locked out of the Interior Ministry and the vehicle licensing bureau, among others.
Yahav has thus far allowed all suppliers with prior arrangements continuous access to state employees payslips, but that situation may be about to change. The reason: After decades of providing services to state employees, Yahav last year lost the accountant general's tender to Israel Discount Bank, which jingled a billion-shekel deposit into state coffers for the privilege of handling the employees' accounts. The money will be used by the state to extend loans to its workers and will save the state around NIS 400 million over the next seven years. For 50 years Yahav has had the exclusive right to serve state employees - without any tender and without paying a deposit - a situation that was criticized by the state comptroller. Just what tender was it and what were its terms? Yahav claims that Discount won only the right to grant low-interest loans to state employees - to be an economic mediator between the state and its workers. Discount, on the other hand, argues that it won the right to grant loans and provide all other banking services - in other words, to be the official civil servants' bank.
Discount is in effect claiming the exclusive right (among banks) to access state employees' payslips, via which the bank can grant loans and charge commissions. State employees who wish to maintain their accounts at Yahav can do so, but will be eligible for low-interest loans only from Discount. Even so, Yahav retains the right, like any other bank, to offer preferential loan terms to its account holders.
Although the High Court of Justice will ultimately rule on Discount's rights, this issue is troubling the Knesset Finance Committee, which has held several meetings on the subject, including one yesterday. A perusal of the minutes of the committee meetings reveals the crux of the whole dispute: one line on page 19 of the 73-page tender, that the accountant general will have the exclusive discretion to allow other bodies to deduct sums from state employees payslips. If the accountant general grants all suppliers this right, Yahav, as a banking service provider, will be able to continue working with civil servants via their payslips, as it has done until now. This would effectively neutralize Discount's tender win, and is the main bone of contention. The tender's terms were determined by the accountant general, and if Yahav had won, it would have to notify suppliers itself that they could no longer do business until each one received approval from the accountant general.
Yahav claims the tender allows the accountant general to grant any bank (and not only the winner) the right to deduct sums from state employees payslips, and is demanding to know why he is refusing to approve this practice for other banking-service suppliers (including Yahav), to preserve competition in the banking sector.
Approval for only some suppliers
Treasury sources say the accountant general has not ruled out access for other suppliers to workers' payslips, as long as they meet certain criteria. H&O, for example, won a tender to supply clothing to police personnel and now has access to their payslips.
Even though Yahav styles itself as "the civil servants' bank," from a legal standpoint Yahav is no different from any other bank. It has no obligations toward the state and can alter its arrangements with clients at any time.
Discount differentiates between banking-service suppliers and suppliers of goods such as clothing or electrical appliances. "Discount paid the state about NIS 1 billion for the right to access state employees' payslips," says a Discount official, "and to be the exclusive supplier of banking services, unlike Yahav, which is trying to obtain this right without paying even one shekel."
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