What is an employer of record in Israel?

An employer of record (EOR) in Israel is a strategic partner that serves as the legal employer of your employees living in Israel. An EOR assumes all employment duties and liabilities on your behalf, managing payroll, benefits, taxes, and compliance. Partnering with an EOR allows you to hire employees in Israel without the burden of setting up a local entity in Israel or navigating intricate labor laws.

Employment Guide to Hiring in Israel

Explore the topics below to learn everything you need to know about hiring employees in Israel.

Hiring in Israel

Employment agreements in Israel

In Israel, employers are not legally obligated to provide a written employment contract unless it employs a foreign worker or is a physical labor business. However, employers must provide each employee with a notice of employment terms which include the following:

  • Employer and employee name, address, and identification information
  • Employment start date
  • Term of employment
  • Position and duties description
  • Supervisor information
  • Salary
  • Working hours per day and per week
  • Rest day
  • Social benefits and payments
  • Details of the pension fund and contributions to it
  • Applicable collective bargaining agreements, if any

Probationary periods in Israel

Israel has a minimum statutory probation period for monthly employees: one day each month during the first six months of employment and two-and-a-half days for every additional month. For all other employees, probationary periods are determined at the employer's discretion since the terms are not stipulated by law.

Average working hours in Israel

Labor law in Israel states that the standard working week is 42 hours, often from Sunday to Thursday. Daily hours are flexible and can range from seven to nine, depending on how many workdays the employee plans to work that week.

How an employer of record helps you hire in Israel

An employer of record (EOR) allows you to hire in Israel without the headache of setting up a legal entity in Israel. Because most companies don’t have the resources or extensive knowledge to compliantly hire in international markets, an EOR helps you engage top talent from anywhere and support them based on their local needs. 

As an industry-leading EOR in Israel, Velocity Global is a trusted partner in hiring in Israel. By acting as the legal employer, we hire your new team members through local, compliant employment contracts—and you get back the time and flexibility to focus on your growing business.

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Payroll in Israel

Payroll cycles in Israel

In Israel, the payroll cycle is typically monthly, with employees paid by the ninth of the following month. However, companies can make payments weekly or every two weeks.

Wages in Israel

As of April 1, 2022, Israel’s Ministry of Finance and Ministry of Economy increased the national minimum wage to ₪5,400 per month. Israel’s minimum wage increases annually. Legislation has been passed to increase the minimum wage in Israel, each year, through the end of 2025.

Bonus payments in Israel

Employers in Israel are not statutorily required to pay employees a bonus or a 13th month salary, however, they can and some do.

After one year of service, an employee is entitled to a recreation payment. The payment is usually made between July and September, and the amount of compensation is determined by years of employment.

How an EOR helps you run payroll in Israel

An employer of record (EOR) in Israel helps you compliantly manage your global team payroll, ensuring consistent and accurate pay and tax withholdings for employees living in Israel. Think of an EOR as your international HR team that understands the complex labor laws and payroll regulations of different markets. 

Partnering with a trusted EOR partner like Velocity Global for global payroll administration in Israel offers numerous benefits, like access to a centralized platform for payroll data and reporting, secure data privacy and protection, and time and cost savings.

Taxes in Israel

Tax due dates in Israel

In Israel, the tax year is the calendar year. Tax returns must be filed by April 30. The tax filing deadline for the self-employed is June 15.

Tax thresholds in Israel

An individual is considered an Israeli tax resident if present in Israel for:

  • 183 days or more during the tax year
  • At least 30 days during the relevant tax year and a total of 425 days or more during the relevant tax year and the preceding two tax years

If the employees are Israeli tax residents, they will be taxed on worldwide income. Non-resident employees are taxed only on Israel-source income.

As of 2022, the Israeli income tax code provides for the following categories:

  • ₪0 – ₪77,400: 10%
  • ₪77,400 – ₪110,880: 14%
  • ₪110,880 – ₪178,080: 20%
  • ₪178,080 – ₪247,440: 31%
  • ₪247,440 – ₪514,920: 35%
  • ₪514,920 – ₪663,240: 47%
  • Over ₪663,240: 50%

The corporate income tax rate in Israel is 23%.

Social security payments due on monthly salaries are the following:

  • For income up to ₪6,331, the rate is 7.05%: 3.55% is paid by the employer, 0.4% is paid by the employee, and 3.1% is deducted for health insurance payments.
  • For income of ₪6,332 to ₪44,020, the rate is 19.6%: 7.6% is paid by the employer, 7% is paid by the employee, and 5% is deducted for health insurance payments.

Health insurance in Israel

Since 1995, Israel’s National Health Insurance Law has ensured universal healthcare coverage for residents and citizens. Through monthly payments to the National Insurance Institute (NII), all Israeli residents and citizens are obliged to receive medical care.

Pension in Israel

According to Israel’s National Insurance Institute (NII), to be entitled to receive an old age retirement pension in Israel, individuals are required to be at least 67 years old as men and 62-65 years old as women, depending on their date of birth.

Individuals are entitled to an old age retirement pension if they have accumulated one of the following insurance periods:

  • 60 months within the 10 years before their age of retirement begins
  • 144 months total
  • At least 60 months, provided that the number of insurance coverage months exceed the number of months without insurance coverage

In addition, individuals seeking an old age retirement pension in Israel must pass an income test and insurance contributions must have been paid by an employer throughout the employee’s career.

How an EOR helps you calculate taxes in Israel

Payroll taxes are taxes imposed on employers and employees. They vary between countries, making compliance a hurdle for businesses that may not have the expertise or resources to navigate payroll taxes in Israel. 

As an employer of record (EOR) with a tenured global footprint, Velocity Global is knowledgeable in handling all aspects of payroll for you, including calculating and filing payroll taxes, withholding and remitting taxes, and issuing tax forms in Israel.

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Leave Entitlements in Israel

Annual leave in Israel

Israel’s Annual Leave Law guarantees employees annual paid leave, for the following accrual periods:

  • During the first four years of employment: 14 days
  • In the fifth year of employment: 16 days
  • In the sixth year of employment: 18 days
  • In the seventh year: 21 days
  • More than seven years: an additional day per year to a maximum of 28 days.

Parental leave in Israel

Israel’s Employment of Women Law entitles employees to statutory maternity leave, known as birth and parenting leave (BPL), which may be taken by only the mother or shared between parents. An employee is entitled to 26 weeks of BPL if she has worked for the same employer for at least 12 months. Otherwise, the leave is set at 15 weeks. The BPL may be extended in certain circumstances such as a multiple birth or hospitalization of the employee or child.

As determined by Israel’s National Insurance Law, the National Insurance Institute (NII) makes payments for 15 weeks of BPL, while the other 11 weeks of BPL is unpaid.

A mother’s partner is entitled to statutory unpaid leave after the completion of BPL, amounting to a quarter of the employee’s length of service. However, the leave cannot be longer than a year after childbirth.

An employee whose partner has given birth is entitled to BPL, to be paid by the NII, beginning six weeks after childbirth.

Sick leave in Israel

Israel’s Sick Leave Pay Law entitles employees to one and a half-sick days for each month of employment up to a maximum of 90 days. An employee is not entitled to pay on the first day of sick leave. An employer pays 37.5% of the employee’s regular wage for the second and third days of illness and 100% thereafter.

Regional and national holidays in Israel

Israel has eight public holidays in a calendar year, which are not included in the minimum paid leave entitlement but are taken in addition to annual leave. The following are national holidays in Israel:

  • Passover (April, the specific day fluctuates each year)
  • Seventh Day of Passover (April, the specific day fluctuates each year)
  • Independence Day (April or May, the specific day fluctuates each year)
  • Feast of Shavuot (May or June, the specific day fluctuates each year)
  • Rosh Hashanah (September or October, the specific days fluctuates each year)
  • Yom Kippur (September or October, the specific day fluctuates each year)
  • First Day of Sukkot (September or October, the specific day fluctuates each year)
  • Simchat Torah (September or October, the specific day fluctuates each year)

How an EOR helps you manage leave and PTO in Israel

An employer of record (EOR) supports companies by managing annual leave, paid time off (PTO), and even local holidays all over the world—including Israel. When it comes to handling a company's annual leave requirements, an EOR ensures compliance with local labor laws in Israel at every step. 

Some EOR partners, like Velocity Global, provide a platform that helps you oversee employee time off in Israel. By outsourcing leave and time-off management to Velocity Global, you can ensure accurate tracking, compliance, and seamless administration, freeing up valuable time and resources for other business priorities.

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Employment Benefits in Israel

Federal benefits in Israel

The Israeli government provides a series of social security programs administered by Israel’s National Insurance Institute (NII) and the Ministry of Welfare and Social Affairs. These branches of the Israeli government are responsible for ensuring the public’s welfare by overseeing the administration of social services and employment matters. They provide programs such as old-age retirement and survivor pensions, maternity benefits, childcare, work injury benefits, general disability benefits, long-term care, unemployment benefits, bankruptcy assistance, and income loss protections.

Supplemental benefits in Israel

Supplemental benefits are extra benefits an employer provides to improve their workers' benefits packages. Examples include:

  • Telework perks
  • Transportation allowances

Since Israel's public health system covers nearly all services for Israeli citizens, additional health insurance is uncommon. However, some larger companies offer it as an extra, either as a group health insurance policy paid by the employer or as an allowance, with different rules for foreign workers. Supplemental health insurance may include services like dental services, vision care, and long-term care.

Other supplemental benefits include work-from-home privileges, home office allowances, travel allowances, company cars, and meal cards.

How an EOR helps you administer benefits in Israel

As the legal employer for your employees living in Israel, an employer of record (EOR) administers statutory benefits and ensures they are enrolled and contributing to the appropriate government benefits. Additionally, an EOR partner manages the administration of supplemental benefits, including ensuring employees in Israel receive tailored, expert-vetted, and competitive supplemental benefits packages. 

Velocity Global makes understanding foreign statutory and supplemental benefits easy and offers your workforce competitive benefits packages tailored specifically to Israel and beyond.

Terminations in Israel

Notice periods in Israel

Israel’s Advanced Notice of Discharge or Resignation Law requires employers and employees to give prior written notice when ending the employment relationship.

The advance notice period is as follows:

  • One day for every month worked during the first year of employment
  • 14 days during the second year of employment
  • 21 days during the third year of employment
  • One month after three years of employment

Severance pay in Israel

If an employer or employee ends the employment contract without advanced notice, Israeli law requires payment to the other party with a sum equivalent to one month’s salary.

Under Israel’s Severance Pay Law, a terminated employee is authorized severance pay of one month’s salary for each year worked. The severance pay can be reduced or denied if the employee is discharged due to a disciplinary violation.

How an EOR helps you process terminations in Israel

An employer of record (EOR) is responsible for processing terminations in the event you need to terminate an employee in  Israel. This may include adhering to local labor laws and regulations regarding termination procedures, including notice periods, severance pay, and any other statutory requirements. 

As an EOR with experience in terminations, Velocity Global helps businesses minimize the risk of legal disputes or liabilities in Israel.


  • How does Velocity Global’s EOR help businesses expand into Israel?

    An experienced employer of record (EOR) partner like Velocity Global makes it easy for companies to quickly and compliantly build and support distributed teams in Israel without the time and effort of establishing an entity. Velocity Global hires, pays, and manages your team in Israel on your behalf, allowing you to quickly engage talent without setting up local entities or worrying about violating local employment regulations. Partnering with an EOR in Israel is ideal for companies that want to convert contractors in Israel to employees, streamline mergers or acquisitions, or simply test the Israel market before making a long-term investment.

  • Can I hire in Israel without an employer of record?

    Yes. There are two options available for hiring in Israel without an employer of record (EOR): establishing a local entity or engaging contractors in Israel.

    Establishing an entity in Israel allows you to create a local branch or subsidiary, giving your company full autonomy over hiring and onboarding. This is a good option if you plan to hire a large team or establish a long-term presence in Israel.

    However, entity establishment is a costly and time-consuming process. It requires in-country expertise with local employment and tax regulations and can delay your ability to hire talent in Israel for many months. If you're not prepared for long-term investments in Israel or intend to hire a small team, setting up an entity can often be more trouble than it's worth.

    Hiring contractors is a flexible, affordable alternative to hiring employees in Israel, though it involves unique misclassification risks.

  • How are employees and contractors classified in Israel?

    In Israel, employees and contractors are classified based on the determination of the employer-employee relationship. In Israel, employees and contractors are classified based on the determination of the employer-employee relationship. Various tests are used to determine whether a worker is an employee or independent contractor.

    Here are some factors used to determine the status of an employee in Israel:

    • The intentions of the parties, communicated in the employment contract
    • Integration into the business operations
    • Duration and permanence of the working relationship
    • Job responsibilities and duties
    • Payment structure (salary, wages, benefits)
    • Degree of autonomy and independence
    • Supervision and direction received
    • Control over work processes and methods
    • Schedule of working hours
    • Ownership of tools and equipment
    • Degree of exclusivity in the relationship
    • Degree of financial risk
    • Opportunity for profit or loss


  • What are the benefits and challenges of hiring in Israel?

    Despite being one of the smallest countries in the world, Israel consistently scores toward the top in IMD Business School’s world competitiveness ranking. Israel received a rank of 25 in 2022. The country is internationally well-known for its innovation and thriving startup culture. The World Intellectual Property Organization’s Global Innovation Index ranked Israel 14 among the 132 economies.

    Israel is home to major companies in the high-tech sector, and the country’s population is one of the world’s most technologically literate. Silicon Wadi is the region that spans the Israeli coast and serves as a high-tech global center. It’s cited as among the reasons why Israel has become known as a “start-up nation” since it has the world's largest number of startups per capita. The Organization for Economic Co-operation and Development reports that Israel’s workforce persistently remains highly educated. The country ranks at the top of the world for ease of finding workers with tertiary education and developed in-need skills.

    Hiring in Israel has its challenges. Historically, Israel has a strongly divided and fragmented political landscape influenced by Middle Eastern politics. The country is subject to geopolitical forces, which create economic instability, affecting a company’s business ability.

    Israel has a relatively small market, although highly mature. Accordingly, foreign companies encounter considerable competition. The Israeli government has implemented significant business legislation to regulate the high amount of economic activity. Many companies grimace at the overwhelming web of bureaucracy and regulations affecting their businesses. Using an employer of record in Israel helps take the stress out of navigating business laws and regulations. Israel recognizes EU technical standards rather than international standards in specific industries, creating an additional hurdle for manufacturing, tech, and engineering companies.

  • What cultural nuances should businesses consider when hiring in Israel?

    Israeli business communication is direct and assertive. Avoid subtlety, as Israelis do what it takes to reach solutions and achieve results quickly. When meeting a colleague for the first time, it is polite to use formal titles. First-name basis comes quickly, but it is important to be invited to use first names in the workplace when doing business in Israel. Meetings tend to focus on a singular task rather than cover multiple topics at once. In turn, meetings are time efficient. Meetings are often preferred to be done in person as opposed to communication by email or phone call. Management styles in Israel tend to be collaborative. Everyone is given an opportunity to express viewpoints and contribute to the decision-making process.

Get expert help hiring in Israel

We’re ready to answer your questions about:

  • Hiring and paying talent without an entity
  • Maintaining compliance in Israel
  • Partnering with an EOR and how it works


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