Employer of Record in Israel

Hiring independent contractors has boomed in popularity because of the cost savings and flexibility they offer. It can be a great option if you require niche skills or short-term project support. Contractors allow businesses to access specialized skills quickly, without the time and cost of setting up a local entity.

However, it’s important to know the limits of this model: contractors are not a substitute for full-time employees. Relying on them for ongoing, long-term roles can create serious compliance risks, including employee misclassification, which can lead to fines, back taxes, and reputational damage.

Playroll’s contractor management solutions make it simple to compliantly engage, onboard, and pay contractors around the world. We provide clear visibility into agreements, streamline payments, and reduce compliance risks – so you can focus on getting the work done. And when you’re ready to take the next step, we can help seamlessly convert contractors into full-time employees through our global Employer of Record service.

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.

Employment laws in Israel can be intricate, and even unintentional mistakes in contracts, benefits, or termination processes can carry legal and reputational consequences. With an Employer of Record, you gain a local partner that ensures every hire is compliant. The EOR takes care of drafting compliant contracts, processing accurate payroll, managing contributions to statutory benefits, and handling lawful terminations if needed, all according to local employment standards.

This level of protection is especially valuable when expanding into new or unfamiliar regions. Instead of using time and resources to build in-house legal knowledge, you gain immediate access to local expertise. The EOR keeps you ahead of regulatory updates and shields your company from potential compliance gaps, so you can confidently hire and manage employees while minimizing risk. For hiring managers and founders, it's the difference between hiring with uncertainty and building your team on a legally sound foundation.

Israel's payroll system involves multiple mandatory contributions that employers must carefully manage, including progressive income tax withholding (10-47%), National Insurance contributions (4.51-7.6%), and pension fund payments (14.83% total employer contribution).

Monthly reporting is required by the 15th of each month, with annual reconciliation due by April 30th. Employers must provide detailed payslips to employees by the 9th of each month and maintain comprehensive records for at least seven years. Non-compliance risks include financial penalties, interest charges, and potential legal action.

The complexity of Israel's tiered contribution rates and progressive tax system makes payroll management software particularly valuable for employers operating in Israel, helping to consolidate payroll data, automate calculations, and ensure timely, accurate reporting to all relevant authorities.

When you’re scaling quickly, setting up local payroll systems in each new country slows you down. In Israel, the administrative load can include government registration, benefits management, and accurate, on-time payment delivery. An EOR gives you a plug-and-play solution that handles all of this while your internal team stays focused on growth, not red tape.

Key Ways an EOR Supports Payroll in Israel:

• Rapid Payroll Setup: Onboards employees quickly with ready-to-go infrastructure.
• End Administration: Handles salary, tax, and benefits with no extra internal resources.
• Vendor Simplicity: Consolidates payroll across countries for centralized oversight.
• No Entity Required: Operates legally, saving your business the time and resources needed for local incorporation.

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. Employers are also required to submit a copy of the employment contract before work commences and must notify authorities when a foreign national starts or fails to start work, changes job title or scope of responsibility, or terminates employment. Fees and processing times vary, with applications generally taking four to 12 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 with a 5-day workweek (14 days for those with a 6-day workweek) during the first five years of employment. After five years, the entitlement increases. 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 up to 6 calendar days after the child's birth. The first day and final two days are remunerated as sick leave (no pay for first day and 50% of daily pay for final two days). The second, third, and fourth days are remunerated as annual leave at full pay. If the mother has returned to work, the employee is entitled to up to six weeks 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: no pay for the first day, 50% pay for the second and third days, and 100% pay from the fourth day onward.

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.

For startups and small teams, managing global employee benefits isn’t just complex, it’s a full-time job. In Israel, understanding what benefits are required, how to deliver them, and how to stay compliant can be overwhelming, especially without local HR expertise. An Employer of Record removes that pressure by taking complete ownership of benefits administration, so you don't have to become an expert in local employment law.

Whether it’s healthcare contributions, pension enrollment, or statutory leave, the EOR ensures everything is delivered accurately and on time. They navigate any country-specific nuances, keep up with legal changes, and ensure each benefit is properly tracked and documented. For founders, that means fewer distractions and more time to focus on growth. Your employees get the security and support they expect from a local employer, and you get to scale your team in Israel without building complex infrastructure or worrying about compliance missteps.

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 (race, religion, gender, age, disability, political belief, sexual orientation), complaints against the employer or employee for workplace violations, absence due to a national emergency, sickness (unless specific conditions are met), maternity leave, fertility treatments, military reserve duty, 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.