Hire Employees in Israel

Your own entity is normally a private company registered with the Registrar of Companies. Israel is a deep technology market and the entity route is common once headcount justifies it.

An Employer of Record inverts the sequence: the Israeli entity signs the contract, executes a Section 14 arrangement at the outset, enrols the employee in a pension fund and administers Keren Hishtalmut, while you direct the day-to-day work.

Israeli employment law is built on extension orders rather than a single labour code. Sector-wide agreements extended by the Minister of Labour set minimum pension, recovery pay, travel allowance and more, and they apply whether or not the employer has any union relationship.

Israel's employment framework is built on extension orders rather than a single labour code, and that shapes everything. Sector-wide agreements extended by the Minister of Labour set minimum pension, recovery pay, travel allowance and more, and they apply whether or not the employer has any union relationship.

The pension arrangement is the largest single element and the one foreign employers most often misconfigure. The employer contributes 6.5% to the pension fund plus 8.33% as a severance reserve, and the employee 6%, a combined 20.83% flowing into the fund. On top, Keren Hishtalmut, a study fund at 7.5% employer and 2.5% employee, is not statutory but is close to universal for professional roles and treated as expected rather than optional.

Section 14 is the mechanism that makes Israeli exits predictable. Where a Section 14 arrangement is in place, the monthly 8.33% severance deposit discharges the employer's severance liability in full, the employee takes the accumulated fund and no further payment falls due. Without it, the employer owes a month's salary per year of service calculated on the final salary, with the deposits merely offsetting. For a long-tenured employee whose salary has risen, that difference is substantial.

So the practical rule is: put a Section 14 arrangement in place at the outset, in writing, for every hire. It is the single highest-value decision in Israeli employment structuring and it cannot be applied retroactively.

Break-even rule of thumb: EOR fees begin to exceed the running cost of a small Israeli entity somewhere between 15 and 20 employees. Model both before committing, see EOR vs Entity for the full comparison, and plan any later migration so employees keep seniority.

The pension arrangement is the largest element and the one most often misconfigured. The employer contributes 6.5% to the pension fund plus 8.33% as a severance reserve, and the employee 6%, a combined 20.83% flowing into the fund.

Bituach Leumi runs across two brackets and resets every January. For 2026 the employer pays 4.51% on salary up to ILS 7,703, 60% of the average wage, and 7.6% on the portion between that and the ceiling of ILS 51,910, above which nothing is due. For professional salaries the blended rate is about 6.5% to 7.3%. Employers make no health insurance contribution; the health tax is an employee deduction only. Because both the threshold and the ceiling move with the average wage each January, a provider quoting a single flat Bituach Leumi rate has not built for Israel.

Keren Hishtalmut, a study fund at 7.5% employer and 2.5% employee, is not statutory but is close to universal for professional roles. It is tax-advantaged for both sides and treated as expected rather than optional, so a package without it is uncompetitive for technology hiring.

Four representative profiles, costed with the 2026 contribution rates above. Salaries are illustrative market midpoints, not GX operating data, use them to see how the on-cost percentage behaves as pay rises, not as a salary benchmark for a specific role. For real market data on your roles, ask for a costing.

Watch the on-cost percentage rather than the absolute figure. 6 of the charges here are capped and 1 are not, so the effective employer rate falls as salary rises, but it flattens rather than disappearing. The senior rows below show where it settles.

Four representative profiles costed on 2026 statutory rates. Salaries are illustrative market midpoints, not GX operating data.

Payroll runs monthly in shekels. Income tax, Bituach Leumi and health insurance are withheld and remitted monthly, and pension contributions are transferred to the employee’s chosen fund.

Income tax is progressive with credit points, nekudot zikui, reducing the liability rather than the taxable base. The number of points depends on residency, gender, children and other circumstances, so two employees on the same gross can have materially different net pay.

Dmei Havraah, a recovery payment, is a statutory annual entitlement under extension order, paid per day at a rate that rises with seniority. It is modest individually but it is mandatory and often omitted from foreign cost models.

Thresholds and ceilings are uprated periodically, so a figure correct in January may not hold later in the year. Where a row below is flagged, published sources disagreed and the conflict is recorded rather than resolved.

Thresholds move on a local cycle that does not always fall in January, so a figure correct at the start of the year may not hold through it. Where a row below carries a flag, published sources disagreed and the conflict is recorded rather than resolved, there are 5 such rows on this page.

The sections that follow set out contracts and probation, working time, leave, termination and immigration in that order. Where an entitlement comes from a collective agreement rather than statute it is marked as such, because that distinction determines whether it is negotiable.

A written notice of terms must be provided within thirty days of starting, and it must cover the matters specified by law.

Section 14 is the single highest-value decision in Israeli employment structuring. Where a Section 14 arrangement is in place, the monthly 8.33% severance deposit discharges the employer’s severance liability in full, the employee takes the accumulated fund and nothing further falls due.

Without it, the employer owes a month’s salary per year of service calculated on the final salary, with the deposits merely offsetting. For a long-tenured employee whose salary has risen, that difference is substantial. It cannot be applied retroactively, so it is an at-hire decision or it is lost.

The standard week is 42 hours. Overtime is paid at 125% for the first two hours in a day and 150% thereafter, and work on the weekly rest day attracts 150%. The working week runs Sunday to Thursday for most employers, with the rest day on Saturday.

Overtime is where payroll disputes usually start. Record hours from day one even where the role is salaried and the expectation is that overtime will not arise, reconstructing records after a complaint is far harder than keeping them.

Overtime is where payroll disputes usually begin, and the burden of proving hours worked generally sits with the employer. Record hours from the first day even for salaried roles where overtime is not expected, reconstructing a record after a complaint is considerably harder than keeping one.

Public holidays sit on top of the annual leave entitlement. Where a holiday falls at a weekend, practice varies, some markets move it, some grant a substitute day and some do neither, so check the position before assuming a day in lieu.

The 12 dates below are the statutory position. Employers in many markets grant more by policy or collective agreement, and sector agreements sometimes add local or patronal days that do not appear in a national list.

Israel observes 12 paid public holidays in 2026. Dates that fall at a weekend and any substitution rules are set out below; entitlement is separate from annual leave.

Maternity: 26 weeks, of which 15 are paid. Paid directly to the employee by Bituach Leumi, not the employer. Requires 10 months of contributions in the 14 before the birth. Paternity: Part of the maternity period may be shared. Bituach Leumi funded. Sick leave: Accrues at 1.5 days a month, to 90 days. Unpaid on day 1, 50% on days 2 and 3, 100% from day 4 unless the contract is more generous. Reserve duty (Miluim): As called. Bituach Leumi reimburses the employer; the employee must be paid as normal.

Bereavement: 7 days for close family. Paid, after three months of service.

A Shimua hearing must be held before any dismissal. The employee is given written notice of the grounds, adequate time to prepare, the right to be accompanied, and a genuine opportunity to respond, and the decision-maker must approach it with an open mind. Israeli labour courts treat a defective or pro-forma hearing as invalidating the dismissal itself, independently of whether the underlying reason was sound.

Severance is a month's salary per year of service. Where a Section 14 arrangement applies, the accumulated 8.33% deposits satisfy that entitlement in full. Where it does not, severance is calculated on the final salary and the employer funds the shortfall.

Notice runs from one day per month during the first six months to a full month after a year of service. Advance notice must be given in writing.

Certain groups have enhanced protection: pregnant employees, those undergoing fertility treatment, employees on or shortly returning from maternity leave, and reservists. Dismissal in those cases may require a permit from the Ministry of Labour.

A foreign national needs a B/1 work visa with an employer-obtained permit. Quotas apply in several sectors and the process is administered by the Population and Immigration Authority.

Allow two to three months. The expert route for foreign specialists carries a salary threshold set at a multiple of the average wage and is the usual path for technology roles.

Israel has a substantial population of dual nationals and returning residents who require no permit at all, so establishing status early can remove the immigration question entirely.

A Shimua hearing must be held before any dismissal. The employee is given written notice of the grounds, adequate time to prepare, the right to be accompanied and a genuine opportunity to respond, and the decision-maker must approach it with an open mind. Israeli labour courts treat a defective or pro-forma hearing as invalidating the dismissal itself, independently of whether the underlying reason was sound.

Enhanced protection applies to pregnant employees, those undergoing fertility treatment, employees on or shortly returning from maternity leave, and reservists, and dismissal in those cases may require a permit from the Ministry of Labour.

Practical controls: execute Section 14 in writing at the outset for every hire, enrol in a pension fund within the qualifying period, hold a properly constituted Shimua before any dismissal, and check protected status before initiating one.

Work backwards from the start date. For an Israeli national or resident through an EOR, one to two weeks is realistic. A foreign national needs a B/1 work visa with an employer-obtained permit, adding two to three months, and quotas apply in several sectors.

Confirm before making an offer: that a Section 14 arrangement will be executed in writing at the outset, since it cannot be applied retroactively and it determines the entire severance exposure; whether Keren Hishtalmut is being offered, since professional candidates will expect it; and which extension orders cover the role.

Pension enrolment is due after the statutory qualifying period, which is shorter for an employee who already has an active pension arrangement, commonly three months rather than six. Missing that date creates a retroactive obligation, so it should be diarised from day one rather than tracked informally.