Definitive Guide to Hiring in Israel

Hiring in Israel

Hiring employees compliantly in Israel means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Israel so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Israel; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Labor Laws in Israel

Employment laws in Israel are uniquely suited to the country’s way of life, and crucial to understand if you want to employ local talent in this country. Get the details on Israel employment laws and Israel policies here.

Employee Probation Period

• Legislation does not regulate trial periods.
• Most collective agreements have trial periods ranging from 6 months to 3 years.

Annual Leave in Israel

• During the first four years of work – 14 days
• In the fifth year – 16 days
• Sixth year - 18 days; seventh year – 21 days
• More than seven years – an additional day per year to a maximum of 28 days

Holidays in Israel

Maternity Leave Israel

• Female employees are entitled to 12 weeks (6 weeks prenatal and 6 weeks post natal) of maternity leave
• It is 16 weeks in case of hospitalization

Paternity Leave Israel

• Male employees receive an 7 day paternity leave following the birth of their child.
  
  

Sick Leave in Israel

• Employees have the right to receive sick leave at a rate of one and a half days for each month of employment with the right to accumulate up to 90 days.
• Employees are not entitled to any payment for the first day of sickness
• For the second and third days, employees are entitled to 50% of the salary
• From the fourth day onward, 100% of salary
• It should be noted that it is common for some industries to pay full salary for sick leave from day one

Working Hours in Israel

• The standard work week in Israel is Sunday through Thursday, although non-Jewish people may choose Friday, Saturday, or Sunday as their main weekly holiday.
• Jewish people may not work on Saturday unless their employer is open on Saturdays with a special permit.
• A working day is defined as 8 hours in places where employees work a 6-day working week, and 9 hours where employees work a 5-day working week.

Overtime in Israel

• Employees are entitled to overtime pay which is calculated on a daily basis.
  • For the first 2 overtime hours, the remuneration is 125% of the regular wage
  • For any additional hour of work as well as for work during the weekly day of rest, remuneration shall amount to 150% of the regular wage.
  • Some companies pay a global monthly amount as compensation for overtime pa

Termination of Employment in Israel

• Employment may be terminated by resignation, dismissal, retirement, death, or the expiration of a limited period of employment.
• Dismissal entitles the employee to receive severance pay, however, there are certain circumstances in which the dismissed employee is not entitled to receive severance, i.e. with cause.
• The employer or employee must provide written notice before the termination.
• The minimal statutory period of prior notice for dismissal and for resignation of employees whose salaries are paid on a monthly basis is:
  • One day during the first six months of employment
  • 6 days plus an additional 2.5 days for every month worked from the seventh month for employees who have worked 6 months to 1 year
  • 30 days after completion of the first year of employment
• Other than in certain cases set out under applicable law, an employee who continuously works for the same employer or at the same place of work for at least 12 months and is dismissed (or resigns in circumstances which qualify as constructive dismissal) is entitled to severance pay.
• In general, the amount of severance pay is calculated by multiplying the employee's last month's salary prior to his or her dismissal, by the number of years worked by such employee (or any part thereof).

Notice Period in Israel

• The employer or employee must provide written notice before the termination.
• The minimal statutory period of prior notice for dismissal and for resignation of employees whose salaries are paid on a monthly basis is:
  • 1 day during the first six months of employment
  • 6 days plus an additional 2.5 days for every month worked from the seventh month for employees who have worked 6 months to 1 year
  • 30 days after completion of the first year of employment
• Wage workers:-
  • in first year of service: 1 day per month of service
  • in second year: 14 days plus 1 day for every 2 months of service beyond 1 year
  • in third year: 21 days plus 1 day for every 2 months of service beyond 2 years
  • after third year: 1 month

Severance in Israel

• Other than in certain cases set out under applicable law, an employee who continuously works for the same employer or at the same place of work for at least 12 months and is dismissed (or resigns in circumstances which qualify as constructive dismissal) is entitled to severance pay.
• In general, the amount of severance pay is calculated by multiplying the employee's last month's salary prior to his or her dismissal, by the number of years worked by such employee (or any part thereof).
• It should be noted, however, that since 2008 employers are obligated to contribute certain amounts towards severance pay, on a monthly basis, to the employee's pension insurance fund.
• Such amounts are deducted from the employee's entitlement to severance pay upon termination.
• In certain cases, the law further allows an employer to increase contributions towards severance pay.
• In such cases the amount accumulated in the insurance fund is considered as being paid to the employee in lieu of paying severance pay.
• In these cases, no outstanding obligation is incumbent on the employer upon termination.

Israel Salary and Wages

13 / 14th Month Salary in Israel

• No
• There is no statutory requirement to pay the 13th or 14th month salary.
• Some employees do pay the 13th month salary but it is rare.

• National insurance contributions are generally payable on taxable income as calculated for income tax purposes.
• The table below sets out the rates of national insurance contributions.
• For residents, these rates include a supplementary health levy.
• Foreign residents generally arrange comprehensive private health care.
• The table below sets out the rates of national insurance contributions.

Immigration Israel

• A foreign national may work in Israel only if he or she enters the country with a permanent residence visa or a temporary residence visa or holds a B1, B4 or A1 visa.
• An applicant and his or her employer can apply for a work permit valid for 2 years, 1 year, 90 days or 45 days.
• An applicant and his or her employer must file certain items to obtain a work permit and a B1 work visa.
• The B1 work visa is always issued for a maximum period of one year and may be renewed annually, assuming that the employer and employee comply with the terms of the work permit.
• The following are examples of the items that must be filed (other forms or submissions may be required):
  • Recommendation of the Ministry of Interior
  • Employee’s certificate of valid medical insurance
  • Salary letter with verification of the expert’s salary threshold (twice the average salary in the Israeli market, approximately USD5,750; amount is subject to change and needs to be checked)
  • An employer’s undertaking that assures the employee’s departure on termination of the employment contract
  • The employee’s accurate personal data, including his or her passport number, curriculum vitae (CV) and diploma (police clearance and medical checks are being requested by the Israeli embassy or consulate during the consular procedure)
  • Letter from an Israeli employer or other Israeli party, explaining the reasons why the employee’s presence is needed
  • Affidavit on a specified form concerning the above items
• The following can apply for a B1 visa:
  • An Israeli-based employer
  • A foreign employer that has business ties or has entered into a service agreement with an Israeli-based entity.
• As of January 2019, the amount of government registration fees for a work permit and B1 work visa application (per principal applicant for one year) is approximately USD3,160.

Value Added Tax (VAT) in Israel

• The current rate of VAT is 17%.
• Exports of goods and certain services and various other transactions are zero-rated, and certain transactions are exempt.

Mandatory Benefits in Israel

• These are mandatory benefits as postulated by law
• These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, notice period, severance pay and 13th month pay
• Mandatory benefits also include social security benefits.

Payroll Accrual in Israel

Country Accruals Additional Information

Description

Employers are obligated to pay national insurance contributions based on a percentage of each employee’s income on a monthly
basis. Employers are responsible for withholding employees’ contributions from wages and remitting these together with the
employer’s own contributions. The employer’s contribution rates (current as of January 2021) for Israeli-resident employees are 3.55%,
up to monthly income of ILS 6,331, and 7.6% on the difference between ILS 6,331 and the maximum monthly income of ILS 44,020.

Property taxes
Real estate capital gains
Transfer tax
Stamp taxes
Payroll taxes

Employer’s national insurance contributions
For non-resident employees, the employer rates are significantly lower and are 0.59%, up to monthly income of ILS 6,331, and 2.65%
on the difference between ILS 6,331 and the maximum monthly income of ILS 44,020.

The minimal national insurance payments for
non-resident employees do not provide any retirement benefit for the non-resident but generally provides a certain element of work
accident coverage.

When an irregular salary payment in excess of one quarter of the usual salary is made, special provisions apply to the computation of
social charges by which the application of this payment is equally attributed to the current month and to the past 11 months.
Israel has social security totalisation agreements with 18 countries that may allow for an exemption from Israeli national insurance
throughout the employment period of the employee in Israel.

Payroll Accruals Additional Information

Accrued Benefits in Israel

Why use Global Expansion to hire in Israel

Establishing a branch office or subsidiary in Israel can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Israel labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Israel law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Israel. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Israel Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.