Employer of Record Guide in Israel
Navigating the hiring landscape in Israel can be complex, but with the right insights, you can streamline your process. Discover how to compliantly hire top talent and manage your workforce effectively in one of the world's most dynamic tech ecosystems.
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Your EOR guide in Israel
From payroll cycles to holiday observances, Israeli employment law has unique requirements that can make or break your hiring strategy. This comprehensive guide breaks down everything you need to know about compensation, benefits, and compliance to hire confidently in Israel.
Minimum Wage
The national minimum wage in Israel is ₪5,880 per month as of 2025, applicable to all employees regardless of sector or location. This translates to approximately ₪34.65 per hour based on a standard 170-hour work month.
Writer's Note: Please verify the exact minimum wage rate and effective date, as the research documentation shows some discrepancies.
Payroll Cycle
Israeli employers typically follow these payment schedules:
- Monthly: Most common, paid by the 9th of the following month
- Bi-weekly: Less common but permitted
- Weekly: Rare, mainly in construction or temporary work
Payment must be made in Israeli Shekels (₪) unless specifically agreed otherwise in writing.
Individual Income Tax
Israel operates a progressive tax system with the following brackets for 2025:
| Annual Income (₪) | Tax Rate |
|---|---|
| Up to ₪81,480 | 10% |
| ₪81,481 - ₪116,760 | 14% |
| ₪116,761 - ₪187,440 | 20% |
| ₪187,441 - ₪241,680 | 31% |
| ₪241,681 - ₪647,640 | 35% |
| Over ₪647,640 | 47% |
Tax Residency Criteria
Individuals are considered Israeli tax residents if they meet any of the following:
- Present in Israel for 183 days or more in a tax year
- Centre of life is in Israel (family, economic interests, social ties)
- Israeli citizen who spent any time in Israel during the tax year
Employer Payroll Contributions
Israeli employers must contribute to several mandatory social insurance schemes:
| Contribution Type | Employer Rate | Employee Rate | Notes |
|---|---|---|---|
| National Insurance | 3.45% - 7.5% | 0.4% - 12% | Varies by income level |
| Health Insurance | 3.1% | 3.1% | Mandatory universal coverage |
| Severance Fund | 8.33% | 0% | Required after 1 year |
| Pension/Provident | 6% - 7.5% | 5.5% - 6% | Mandatory after 6 months |
| Total Employer Cost | ~21% - 26% | Additional to gross salary |
Working Hours
The standard work week in Israel is 42 hours, typically distributed as:
- Sunday to Thursday: 8.4 hours per day
- Friday: Shortened day (varies by season and religious observance)
- Saturday: Day of rest (Shabbat)
Certain sectors may have different arrangements, and collective agreements can modify standard hours.
Overtime Pay
Overtime compensation follows a tiered structure:
- First 2 hours daily: 125% of regular hourly rate
- Beyond 2 hours daily: 150% of regular hourly rate
- Weekly overtime: Hours beyond 42 per week at 125% minimum
- Rest day work: 150% of regular rate
Maximum overtime is generally limited to 12 hours per week, though exceptions exist for essential services.
Bonus Payments
While not legally mandated, many Israeli employers provide:
- 13th month salary: Common year-end bonus
- Holiday bonuses: Often paid before major Jewish holidays
- Performance bonuses: Merit-based compensation
Contractual bonuses become legally enforceable obligations.
Full-Time vs. Part-Time
- Full-time: 32+ hours per week (entitled to full benefits)
- Part-time: Less than 32 hours per week (pro-rated benefits)
- Temporary: Fixed-term contracts with specific end dates
Vacation Leave
Annual leave entitlement increases with tenure:
| Years of Service | Annual Leave Days |
|---|---|
| 1st year | 14 days |
| 2nd-4th year | 18 days |
| 5th-9th year | 21 days |
| 10th-19th year | 24 days |
| 20+ years | 28 days |
Leave must be taken within 14 months of accrual and is paid at full salary rate.
Sick Leave
Employees are entitled to 18 sick days per year after completing 6 months of employment:
- Days 1-3: Unpaid (unless covered by collective agreement)
- Days 4-18: Paid at full salary
- Medical certificate: Required for absences over 3 consecutive days
Maternity Leave
Female employees receive 15 weeks of paid maternity leave:
- Can begin up to 6 weeks before due date
- Minimum 7 weeks must be taken after birth
- Paid by National Insurance, not employer
- Job protection guaranteed
Paternity Leave
Male employees are entitled to:
- 5 days paid leave during the first month after birth
- Additional unpaid leave may be available by agreement
Parental Leave
Beyond maternity/paternity leave:
- Unpaid parental leave: Up to 1 year (job protection)
- Shared leave: Parents can divide certain leave periods
- Adoption leave: Similar entitlements for adoptive parents
Reserve Duty Leave
Unique to Israel, employees called for military reserve duty receive:
- Paid leave: Up to 31 days per year
- Job protection: Cannot be terminated for reserve service
- Compensation: Paid by National Insurance
Summary
| Leave Type | Duration | Paid? | Funding |
|---|---|---|---|
| Annual Leave | 14-28 days/year | Yes | Employer |
| Sick Leave | 18 days/year | Partially | Employer |
| Maternity Leave | 15 weeks | Yes | National Insurance |
| Paternity Leave | 5 days | Yes | National Insurance |
| Reserve Duty | Up to 31 days/year | Yes | National Insurance |
Termination Types
Termination With Cause:
- Serious misconduct, breach of contract, or criminal activity
- No notice or severance required
- High burden of proof on employer
Termination Without Cause:
- Permitted with proper notice and severance
- Must not be discriminatory or in bad faith
- Economic reasons are acceptable grounds
Notice Period Requirements
Notice periods are based on length of service:
| Length of Employment | Notice Period |
|---|---|
| Up to 6 months | 1 day per month worked |
| 6 months - 2 years | 1 day per month worked (minimum 30 days) |
| 2+ years | 1 day per month worked (maximum 90 days) |
Employers may provide pay in lieu of notice.
Severance Pay
Israeli law mandates generous severance payments:
- Rate: 1 month's salary per year of service
- Minimum: After 1 year of employment
- Calculation: Based on last month's salary including regular benefits
- Payment: Must be paid within 30 days of termination
Probationary Periods
- Standard period: Up to 6 months
- Extended period: Up to 9 months with employee agreement
- During probation: Reduced notice requirements (1 day per month)
- Severance: Not required during probation
Final Pay Requirements
Employers must provide final payment within 7 days of termination, including:
- Outstanding salary
- Accrued vacation pay
- Overtime compensation
- Severance pay (if applicable)
Anti-Discrimination Laws
Termination is prohibited based on:
- Gender, pregnancy, or family status
- Religion, race, or nationality
- Political opinions or union membership
- Military service or reserve duty
- Disability (with reasonable accommodation)
National Holidays
Israel observes both secular and religious holidays:
| Holiday | Date (2025) | Type |
|---|---|---|
| New Year's Day | January 1 | Secular |
| Purim | March 14 | Jewish |
| Passover | April 13-14, 19-20 | Jewish |
| Independence Day | May 5 | National |
| Lag BaOmer | May 18 | Jewish |
| Shavuot | June 2-3 | Jewish |
| Rosh Hashanah | September 16-17 | Jewish |
| Yom Kippur | September 25 | Jewish |
| Sukkot | September 30, October 7 | Jewish |
Religious Observances
Jewish Employees:
- Entitled to time off for religious holidays
- Sabbath observance (Friday evening to Saturday evening)
- May request flexible scheduling for religious practices
Non-Jewish Employees:
- Entitled to time off for their religious holidays
- Christmas and New Year's are recognised for Christian employees
- Islamic and other religious holidays accommodated
Holiday Pay Rules
- Paid holidays: All statutory holidays are paid at regular rate
- Work on holidays: 150% premium pay plus substitute day off
- Religious accommodation: Unpaid leave for non-statutory religious observances
Required Documents
Employment Contract Must Include:
- Job title, duties, and reporting structure
- Salary, benefits, and working hours
- Termination clauses and notice periods
- Confidentiality and non-compete provisions
Government Forms:
- Tax withholding form: For income tax calculations
- National Insurance registration: Social security enrollment
- Health fund selection: Choice of health insurance provider
- Pension fund designation: Mandatory retirement savings
Work Authorization
Israeli Citizens: No restrictions on employment
Foreign Workers: Must obtain appropriate work permits:
- B1 Work Visa: For skilled professionals
- A5 Visa: For investors and senior executives
- Temporary permits: For specific projects or sectors
Background Checks
Permitted with employee consent for:
- Criminal record checks (relevant to position)
- Employment verification
- Educational credentials
- Security clearances (for sensitive positions)
Data Protection
Israeli Privacy Protection Law requires:
- Employee consent for data collection
- Secure storage of personal information
- Right to access and correct personal data
- Notification of data breaches
Language Requirements
- Hebrew: Official language, required for most positions
- Arabic: Co-official language, required in Arab-majority areas
- English: Widely used in international business
- Contracts: Must be provided in Hebrew (translations acceptable)
Onboarding Timeline
| Step | Timeline |
|---|---|
| Offer acceptance | Day 0 |
| Work permit verification | Day 1-3 |
| Contract execution | Day 3-5 |
| Government registrations | Day 5-7 |
| Benefits enrollment | Day 7-10 |
| Payroll setup | Day 10-14 |
Worker Classification
Israeli law strictly distinguishes between employees and independent contractors:
Employees:
- Subject to employment laws and protections
- Entitled to benefits and social insurance
- Taxes withheld by employer
- Protected from arbitrary termination
Independent Contractors:
- Operate own business with multiple clients
- Invoice for services and pay own taxes
- No employment law protections
- Can be terminated without notice or severance
Misclassification Risks:
- Back payment of benefits and taxes
- Penalties from labour authorities
- Potential lawsuits from workers
Collective Bargaining
Israel has a strong tradition of collective bargaining:
- Histadrut: Major labour federation covering many sectors
- Sector agreements: Apply to entire industries
- Company agreements: Negotiated at workplace level
- Extension orders: Government can extend agreements economy-wide
Cultural Considerations
Religious Diversity:
- Accommodate Jewish, Muslim, Christian, and other religious practices
- Flexible scheduling for religious observances
- Kosher food options in workplace cafeterias
Military Service:
- Most Israeli citizens serve in military and reserves
- Employers must accommodate reserve duty
- Military experience valued in hiring decisions
Work-Life Balance:
- Family time highly valued
- Early Friday closures common
- Vacation time typically taken in blocks
Remote Work Framework
Israeli law supports flexible work arrangements:
- Legal framework: Employment laws apply to remote workers
- Equipment: Employer responsible for providing necessary tools
- Safety: Workplace safety laws extend to home offices
- Hours: Standard working time limits still apply
Cross-Border Considerations:
- Tax implications for remote work from other countries
- Social insurance coverage requirements
- Work permit restrictions for foreign employees
What Borderless AI Handles
When you hire through Borderless AI in Israel, we manage:
- Local employment contracts compliant with Israeli labour law
- Payroll processing including all mandatory contributions
- Tax compliance and government reporting
- Benefits administration including pension and health insurance
- Leave management and statutory compliance
- Termination procedures and severance calculations
- Government liaison for permits and registrations
Built-in benefits packages for Israel
When the world is your competition, it pays to incentivize new hires and existing alike. Borderless AI benefits packages typically inlucde:
Medical Insurance
Dental Insurance
Retirement Contribution
Life Insurance
Vision Insurance
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