Hire Employees in Palestine

Two routes exist. Registering a local entity gives direct employment; an Employer of Record removes that setup and acts as legal employer.

Establish which framework governs the work location first. The legal framework is fragmented geographically — the West Bank operates under a different legal setup from Gaza, and much of the underlying law is inherited and dated.

Conditions have been materially disrupted since October 2023. Operational feasibility, banking access and duty of care sit outside payroll compliance and require separate assessment. Gaza in particular is excluded from the benchmarks on this page.

Employer cost is close to salary alone — but the sources do not fully agree on why.

Three independent sources state plainly that there are no social security contributions in Palestine, that there is no employee payroll tax, and that there is no payroll tax on corporations.

A fourth describes an operating social security system, with employers contributing on behalf of employees towards pensions, disability and unemployment support. But it publishes no rates for it — the contribution split is described only as "typically split between the employer and the employee".

That absence of figures is itself informative. A source describing a live scheme would normally state what it costs. Weigh it against three specific denials accordingly — but confirm the current position locally rather than treating either as settled.

Context supports the sceptical reading: the World Bank calculates that about 81.2% of the Palestinian labour force does not contribute to any social security scheme at all.

Break-even rule of thumb: EOR fees begin to exceed the running cost of a local entity somewhere between 15 and 25 employees — late, because there is no contribution load. See EOR vs Entity.

With no contribution to calculate on the employer side, the obligations that matter are withholding, contract form and the statutory entitlements under Labour Law No. 7.

Payroll runs in a currency Palestine does not issue. The economy uses the Israeli new shekel as its primary currency, alongside the Jordanian dinar in some areas. There is no independent Palestinian currency.

That has a practical consequence: monetary policy, and therefore the real value of salaries, sits outside Palestinian control entirely. Fix the currency of payment explicitly in the contract.

VAT is similarly constrained. The standard rate is 16%, and under the arrangements governing trade, VAT and other taxes are bound to Israeli rates — effectively a customs union. So the rate is not set independently either.

Gross monthly salaries in Israeli new shekels, reflecting the formal West Bank private sector. Average gross pay was around ILS 3,200 before October 2023.

Benchmarks below are gross monthly salaries in Israeli new shekels. Figures reflect the formal West Bank private sector; Gaza is excluded given the scale of economic disruption.

Payroll runs monthly. Income tax is progressive at 5% to 15%, and both residents and non-residents are taxed only on income sourced in Palestine — a territorial system.

Each individual must file a tax return, and joint filing is not permitted.

Withholding rules turn on documentation. Where a payment to a resident exceeds ILS 2,500, tax must be withheld at the percentage or amount specified in the withholding certificate issued by the Tax Department. If no certificate is provided, the payer must deduct 10%.

Payments to non-residents that are taxable under the law attract a 10% final withholding tax. Payments for services provided by foreign entities also attract 10%.

There is no capital duty, no branch remittance tax and no payroll tax on corporations.

Residence is tested differently depending on nationality. A Palestinian individual is resident if they have resided and maintained principal business activities in Palestine for 120 days during the year. A non-Palestinian individual requires 183 days.

That distinction is unusual and easy to miss. The same pattern of presence can produce different residence outcomes for two people on the same team.

Employment is governed by Palestinian Labour Law No. 7 of 2000, adopted as part of reforms designed to unify a fragmented legal system.

It replaced the Jordanian labour law of 1960, in force in the West Bank, and the Egyptian labour law of 1964, in force in Gaza. The law was ratified in accordance with International Labour Organisation and Arab Labour Organisation standards and is organised into ten sections.

Maximum ordinary hours are 45 a week — 8 hours a day across 6 days — with overtime payable at 1.25 times. Friday is the weekly rest day.

The minimum wage is ILS 1,880 a month for formal private sector workers in the West Bank.

The employment contract should be written in Arabic and include the terms and conditions, wage, type and duration of work, benefits, termination conditions and all other agreed terms.

Probation is capped at three months and cannot be extended further with the same employer — so a second probationary period on a new role with the same employer is not available.

There is no specific law mandating thirteenth-month pay, though it may be provided under a collective agreement.

Ordinary hours are capped at 45 a week over six days, with Friday as the rest day and overtime at 1.25 times normal pay.

With no contribution layer, additional hours affect the wage bill and income tax withholding but nothing further.

Note that the six-day week and Friday rest day differ from the Sunday-to-Thursday or Monday-to-Friday patterns a foreign employer may assume.

Palestine observes national holidays alongside Islamic and Christian dates, several of which follow the lunar calendar and shift each year relative to the Gregorian calendar used for payroll.

Palestine observes national holidays alongside Islamic and Christian dates, several of which follow the lunar calendar and shift each year.

Statutory entitlements rest on Labour Law No. 7 rather than on an insurance scheme, which places the obligations directly on the employer.

Coverage across the labour market is very limited. The World Bank calculates that about 81.2% of the Palestinian labour force, formal and informal, does not contribute to any social security scheme. Workers in informal enterprises have no access to health insurance and do not contribute to pension funds providing retirement income.

Transition from the informal to the formal sector is described as extremely limited.

For an employer, that means benefits offered directly — health cover, retirement provision — carry more weight in attracting staff than they would where a state scheme fills the gap.

Both employer and employee may terminate by giving notice.

An employer may terminate without notice where the worker commits specified infractions, including assault on the employer or their representatives.

Final pay including accrued leave is due on separation and must be reflected in the withholding return for the period.

A work visa route exists for foreign experts and professionals employed in specific sectors, requiring a job offer from a Palestinian employer and relevant qualifications. A business visa route may permit short-term employment under specific conditions.

One distinction matters more than the visa category. Workers employed in Israel work under Israeli labour law, which has different provisions entirely — including a different minimum wage. Where the work is performed determines which framework applies, not where the employer sits.

Establish that at offer stage, since it changes the entire basis of the employment relationship.

Assuming a settled social security position is the main risk. Most sources report none; one describes a scheme without publishing rates. Confirm locally rather than relying on either.

Applying one residence test to everyone is the second. Palestinians are tested at 120 days, non-Palestinians at 183.

Omitting withholding where no certificate exists is the third — payments to residents above ILS 2,500 require 10% deduction absent a certificate.

Note also the Arabic contract requirement; the non-extendable three-month probation; the Friday rest day; and that work performed in Israel falls under Israeli law.

Establish the governing framework for the work location and confirm the social security position locally before quoting.

Draft in Arabic, keep probation within three months, fix the currency of payment explicitly, and configure withholding including the 10% default where no certificate is held.

Check whether the work will actually be performed in Israel — if so, a different labour law governs.