Employer of Record in Israel

Businesses can only operate smoothly in Israel if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Israel below, to avoid any compliance issues.

Employment Contract Requirements

In Israel, providing a written employment contract is not a legal requirement, except when hiring a foreigner. However, employers are obligated to provide employees with a written statement in a language mutually understood by both parties. This statement functions as an employment notice, including details such as:

• Identification of both parties
• Starting date (and duration if possible)
• Job position and its description
• Terms of employment
• Information about the supervisor
• Basic salary, including compensation and benefits
• Daily and/or weekly working hours
• Weekly rest day
• Social benefits and payments
• Details and contributions to the pension fund
• Relevant collective agreements (if applicable)

Onboarding Process

We can help you get a new employee started in Israel quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations. For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Israel

In Israel, the standard workweek consists of 42 hours, with daily hours ranging from 7 to 9, depending on the number of workdays. The workweek runs from Sunday to Thursday, with Fridays and Saturdays as rest days. It is illegal to work more than 12 hours in a single day or accumulate over 16 hours of overtime in a week.

Overtime in Israel

Extra hours worked beyond the regular workweek are paid as overtime and are regulated by the employment contract or collective agreements, requiring mutual consent from both the employer and employee. Compensation for overtime is 125.00% of the regular salary for the first two extra hours and 150.00% of the regular salary for hours worked on weekly rest days. Certain companies choose to offer a fixed monthly amount as compensation for overtime.

Probation Period in Israel

Israeli law permits probationary periods where employees have the status of regular employees in all respects. Mandatory probation lasts one day per month for the initial six months and then increases to two and a half days for each subsequent month of employment, with details specified in the employment contract or collective agreement.

Fiscal Year in Israel

1 January - 31 December is the 12-month accounting period that businesses in Israel use for financial and tax reporting purposes.

Payroll Cycle in Israel

The payroll cycle in Israel is usually monthly, with employees being paid by the 9th of the following month.

Minimum Wage in Israel

The minimum wage for employees in Israel is typically 35.21 ILS per hour, amounting to ~5,880.02 ILS per month for a typical 42 hour work week.

Bonus Payments in Israel

It is not a legal obligation in Israel to provide 13th-month salary.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 21.78% on top of the employee salary in Israel.

Employee Payroll Tax Contributions

In Israel , the typical estimation for employee payroll contributions cost is around 21.1%.

Individual Income Tax Contributions

In Israel, individual income tax rates vary from 10% to 50% and is subject to annual adjustments. The calculation follows progressive rates, and factors like marital status and the number of children can impact the overall tax rates.

Pension in Israel

Employees aged 20 and above contribute 18.5% to pension insurance (6% from the employee, 12.5% from the employer). To qualify for the old-age retirement pension, individuals must reach retirement age (67 years for men; 62-65 years for women), pass an income test, and have had continuous employer insurance contributions.

In Israel, work permits and visas are essential for employers hiring foreign workers. The primary work visa is the B/1 Work Visa, designed for temporary employment. Employers may also apply for the Expert Work Visa for specialists with unique skills or the Working Holiday Visa for young adults from specific countries who wish to work and travel for up to one year. The process involves the employer submitting an application to the Ministry of Interior, followed by consular processing for the employee in their home country.

To ensure legal employment, employers must meet specific requirements, such as providing valid passports, employment contracts, proof of expertise, health insurance, and background checks. Fees and processing times vary, with applications generally taking up to 14 weeks. Employers should also be aware of renewal periods and compliance with labor regulations to avoid penalties.

Mandatory Leave Entitlement in Israel

The annual leave entitlement in Israel is 12 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Israel

Israel has nine public holidays each year, and these are separate from the minimum paid leave entitlement. They are taken in addition to the regular annual leave. The following are the national holidays in Israel:

Paid Time Off in Israel

Employees on a 6-day workweek receive 6 days off for every seven days of leave. Initially, imployees receive a minimum of 12 working days of annual leave for the first five years, with an additional day for each subsequent year, up to a maximum of 20 working days. Annual leave payment is based on the regular salary rate.

Maternity Leave In Israel

Employees with one year of service get 26 weeks of paid maternity leave, and those with less than a year receive 15 weeks. Extensions are available for complex births, and an unpaid leave for up to 60 days after the birth is possible if the child is lost. The NII offers a Maternity Allowance based on gross salary and paid national insurance taxes for the following periods:

Paternity Leave In Israel

An employee with a spouse in labor is granted paternity leave for the first five days after the child's birth. The first three days are paid from the employee's accrued annual vacation, and the remaining two days are covered by accrued sick leave. If the mother has returned to work, the employee is entitled to one month of paid paternity leave, receiving 100% of their salary through Social Security.

Sick Leave In Israel

Employees get 1.5 days of paid sick leave monthly, totaling 18 days per year, capped at 90 days over 5 years. Under the Sick Pay Law, those with malignant diseases or needing dialysis receive full sick pay (100%) from day one. Upon returning, a medical certificate is required. The sick leave pay rates are as follows:

Parental Leave In Israel

In Israel, there are no dedicated laws for parental leave, only for maternity and paternal leave. Fathers can take days off after the child's birth, deducted from the available maternity leave.

Bereavement Leave

For the death of an immediate family member, employees get up to 7 paid leave days, fully covered by the employer after three months of service. Even during reserve duty, payment from the employer is mandatory due to compulsory military service in Israel.

Termination Process in Israel

In Israel, ending an employee's contract requires a just process that considers valid reasons, legal obligations, the employment agreement, workplace standards, and any applicable collective agreements. Typically, a hearing is conducted to allow the employee to present their perspective before the employer makes a decision. Acceptable termination scenarios include:

• Voluntary termination by the employee
• Unilateral termination by the employer, excluding reasons related to discrimination, complaints against the employer or employee for workplace violations, absence due to a national emergency, or reasons specified in the collective agreement, employment contract, or case law
• Mutual agreement
• Expiration of the contract

Notice Period in Israel

The notice period duration in Israel depends on the employee's tenure. Upon termination, the employer must pay the salary for the notice period and other necessary amounts. The employee usually continues working during this period, unless directed otherwise. After the termination hearing, the employer may put the employee on garden leave, still compensating them for the notice period. The standard notice periods are as follows:

• For 0-6 months of service: 1 day notice per month employed
• After 6 months: 2.5 days notice per month employed
• For more than 1 year: 30 days' notice

Severance in Israel

After completing one year of service, employees become eligible for severance pay, calculated by multiplying one month's salary by the total number of years of employment. Severance pay amounts to 8.33% of the salary for each year of service. The employer contributes to a Severance Fund monthly, and this fund is then released to the employee upon termination.