JERUSALEM — The Israel Aerospace Industries workers’ union has reached an agreement with the government’s Finance Ministry where so-called salary anomalies previously provided to company employees will be recognized as special retroactive grants, according to the union.

IAI’s labor dispute came to light in early May after the ministry demanded the return of funds received by the company’s employees over multiple years without governmental approval, contrary to what is customary in state-owned firms. The disagreement put the supply of the Arrow 3 air defense system to Germany under threat.

IAI is expected to distribute about a third of its $320 million profits from 2023 as bonuses to its approximately 15,000 employees. Half of IAI’s profits are to go to the state as a dividend.

“The apparent outline described will allow a time frame to try and regulate the alleged salary anomalies, while at the same time allowing salary promotions of employees,” Yair Katz, chairman of the workers’ union, told Defense News. “The new agreement should be signed in about three weeks. And with the signing of it, it will be possible to definitively state that the labor dispute threat has been removed from the table.”

Despite the previous threat of business disruption, IAI’s management supported its employees and form a united front with the union in its discussions with the ministry, claiming the funds were intended to retain its workers.

IAI declined to comment for this story. The ministry would also not go into details about the agreement, noting that “the final approval for the outline has not yet been given.”

Tzally Greenberg is the Israel correspondent for Defense News. He has experience reporting on economic affairs as well as defense and cyber companies.

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