Employing in Israel

An employer of record, sometimes known as an international PEO can help you quickly hire and onboard workers in Israel – often with just two weeks’ notice. Establishing your own local entity without risk and saving costs, this type of service makes an EOR in Israel worth checking out!

Often known as the ‘Holy Land’ thanks to housing Jerusalem — the holiest city in the world for many religions — Israel is also home to a vast array of historic sites, diverse scenery, the Dead Sea and a vibrant coffee culture (it’s the only country where Starbucks failed to break into the local market!).

Despite its rich history, Israel is arguably one of the most westernised economies in the Middle East. As a result, the country’s job market is lucrative and booming, especially in the technology, economy and scientific advancement sectors. What’s more, Israel is also known as the ‘Start-up Nation’ of the world — excellent news for entrepreneurial spirits looking to take the next step in their global expansion journey.

Israeli business law is based mainly on the British system, and English is widely spoken, which is ideal for English-speaking companies looking to tap into the Middle East. An open and liberal FDI (foreign direct investment) regime, incentives such as tax breaks and a free trade relationship with the EU also make Israel an attractive move for many international businesses.

Israel Employer of record

Country guidelines

Salary

Salary currency

New Israeli Shekel (NIS/ILS)

Salary pay date

The salary can be paid in any frequency depending on profession, industry and level of seniority. However, for professionals, it’s standard practice to be paid monthly, no later than the 9th of the following month.

Bonus

There is no statutory requirement to offer a bonus.

Israel has a comprehensive social security system that provides benefits for all Israeli citizens including pension and healthcare.

Israel offers a universal healthcare system (NHI).

Employer costs

Severance pay 6–8.33%
Social security and health insurance Scaling system (see below)
Pension fund 6.50%

Employers’ costs vary in Israel depending on the role and associated perks, industry and collective agreements (amongst other factors), yet typically range between 22% and 28% over and above the salary package.

Employers and employee National Insurance rates

Employers are responsible for withholding employees’ National Insurance contributions from wages and salaries — and remitting these, together with the employers’ own contributions — to the National Insurance Institute. These obligations generally apply irrespective of the residency status of the employer and employees. The following rates apply to Israeli residents (2020):

Cost % of gross salary
Of the portion of the salary (up to 60% of the average wage — currently 6,331 NIS) Of the portion of the salary that is over and above 60% of the average wage, and up to the maximum income threshold requiring National Insurance payment (44,020 NIS)
Employer Employee Total Employer Employee Total
National (social) insurance 3.55% 0.40% 3.95% 7.60% 7.00% 14.60%
Health Insurance 3.10% 3.10% 5.00% 5.00%
Total 3.55% 3.50% 7.05% 7.60% 12.00% 19.60%

Employment contracts, related legislation and benefits

The contract of employment may be executed in written form or electronically.

Probationary period

The length of the probationary period should be stated in the contract of employment and can be between one to 24 months.

Working hours

A full work week in Israel consists of 42 hours. The working week runs from Sunday to Thursday, and a regular working day is typically 9.1 hours including a 30-minute break.

As of 1 April 2018, the Minister of Labour determined that in order to reduce weekly working hours, one working day of the week will be shorter — 8.1 hours including a 30-minute break.

The shortened day of the week will be selected by the company and may be changed according to business needs which will require advance notification.

PEO in Israel

Rest breaks

All employees are entitled to 36 continuous hours of rest per week, which must include the day of rest according to their religion (for Jewish employees — ‘Shabbat’). Employment on the rest day is prohibited unless authorised by the Ministry of Labor by a special permit, where working is deemed in the interest of the general public due to security, safety and economic considerations.

Overtime

In general, the first two hours of overtime are paid at a rate of 125% of the regular pay, and 150% after that.

It’s common practice in Israel to include a clause in the employment agreement that sets forth an arrangement with the employee by which the employee receives a predetermined overtime pay reflecting an estimated amount of overtime hours the employee is expected to work per month, on average (‘Global Overtime Payment’). The agreed estimated number of overtime hours should be specified in the employment agreement (‘Overtime Quota’).

Recreation payment

Following the first year of employment, all employees are entitled to a recreation payment. The payment is usually made between July and September. Amounts are determined by law, are updated annually and correspond to the number of years of employment.

PEO in Israel

Contractual leave

Sick leave is accrued at a rate of 1.5 days per month.

  • For the first day of sick leave, the employee is not entitled to pay.
  • On the second and third day, the employee is entitled to 50% of their regular pay.
  • From the fourth day onward, the employee is entitled to 100% of their regular pay.

Upon return, the employee must provide a medical certificate from a doctor. The company can decide to pay sick leave according to applicable law or pay the employee the full salary as of the first day of illness.

A female employee who has worked for less than one year is entitled to 15 weeks of paid maternity leave. Employees who have worked for more than one year are entitled to 26 weeks of maternity leave (15 paid and 11 unpaid).

Employees wishing to take paternity leave will be entitled to five days of paid leave on the five calendar days following the birth. The first three days will be taken as part of the employee’s annual vacation and the two subsequent days will be given as paid sick leave.

If an employee has been in employment for three months or more, they’re entitled to bereavement leave. This entitles them to receive full pay for seven consecutive calendar days.

All employees who have been in consecutive employment for one year are entitled to severance pay. As severance pay rates are high in Israel, it’s common for employers to make monthly contributions towards severance pay, which makes them exempt from payout at the end of employment.

Termination in Israel

Employers must give notice to an employee upon termination by providing a letter of invitation to a hearing. The invitation must state the grounds for dismissal.

Notice period

During the first six months, one day of notice is accumulated for each month of employment; in addition to the six days accumulated, 2.5 days of notice are accumulated for each month of employment from the sixth month to the end of the first year. Following the first year, termination requires a 30-day notice period.

Holiday entitlement

During the initial five years of employment, full-time employees who work five days per work week are entitled to 12 net vacation days (not including the weekly rest day). This then increases based on the period of employment. Employees are permitted to carry forward holiday upon agreement with the employer.

Length of employment Holiday entitlement
One to five years 12 days
Six years 14 days
Seven years 15 days
Eight years 16 days
12 years 20 days

Public holidays

2022
Passover Saturday 16 April
Seventh Day of Passover Friday 22 April
Independence Day Thursday 5 May
Feast of Shavuot Sunday 5 June
Rosh Hashanah Monday 26 to Tuesday 27 September
Yom Kippur Wednesday 5 October
First Day of Sukkot Monday 10 October
Simchat Torah Monday 17 October

Keen to engage an EOR in Israel? At TopSource Worldwide, we work with local experts to help you navigate the various admin and cost obstacles you may come across along your expansion journey

To find out how we can help your business with our employment solutions, contact us today.

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