Employer of Record in Israel

Whether you’re looking to source top talent or grow your market share, expanding into Israel brings immense potential for your business. Partnering with Velocity Global helps you make the most of this opportunity.

By choosing our Employer of Record solution in Israel, you ensure full compliance every step of the way. We manage risk mitigation and onboarding, as well as taxes, payroll, benefits, and more. We’re here to take care of the details so you can focus on overseeing your business.

Velocity Global has the flexibility to support both short and long-term employment in Israel. Compared to the traditional path of entity establishments, our Employer of Record solution saves up to 60% in costs and 90% in time savings, enabling your business to successfully expand in Israel with confidence and trust.

Benefits 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.
• Israel is internationally well known for its innovation and thriving startup culture. The World Intellectual Property Organization’s Global Innovation Index ranked Israel as 15 among the 132 economies featured, in its most recent report of tracking innovation through the COVID-19 pandemic.
• 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, which spans the Israeli coast, that serves as a high-tech global center. It’s cited as among the reasons why Israel has become known as the “start-up nation,” since it has the largest number of startups per capita in the world.
• The Organization for Economic Co-operation and Development reports that Israel’s workforce persistently remains highly educated. The country ranks in the top of the world for ease of finding workers with tertiary education and developed, in-need skills.

Challenges of hiring in Israel

• 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, that affect a company’s ability to conduct business.
• Israel has a relatively small market, although highly mature. Accordingly, foreign companies encounter considerable competition.
• To regulate the high amount of economic activity, the Israeli government implements a significant amount of business legislation. 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 certain industries, creating an additional hurdle for manufacturing, tech, and engineering companies.

Cultural nuances and must-knows of doing business in Israel

• 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.
• Israeli business communication is direct and assertive. Avoid subtlety as Israelis do what it takes to quickly reach solutions and achieve results.
• Meetings tend to focus on a singular task rather than cover multiple topics at once. In turn, meetings tend to be 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.
• If the conversation shifts to political or religious issues, avoid debate. Israelis are proud, passionate, and sensitive about perceived attacks on their country, due to chronicled Middle Eastern politics.

Minimum wage and salaries 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.

Probation period in Israel

• Israel has a minimum statutory probation period for monthly employees of one day for 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 discretion of the employer, since the terms are not stipulated by law.

Bonus payment 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.

Onboarding in Israel

• In Israel, employers are not legally obligated to provide a written employment contract, unless it employs a foreign worker or it 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

Termination and notice period 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 3 years of employment
• 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.

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 and maternity 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)

• The Israeli government provides a series of social security programs which are 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.

• 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.

Tax thresholds in Israel

• 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.

• When doing payroll in Israel, it is important you adhere to all national and local laws. Using an employer of record in Israel ensures there are no errors.

Tax due dates in Israel

• In Israel, the tax year is the calendar year. The statutory filing date for tax returns is May 31.

Payroll cycle in Israel

• The payroll cycle in Israel is monthly.

Average working hours in Israel

• Israel’s Hours of Work and Rest Law from 1951 was amended in 2018, which shortened the working day, now consisting of 42 hours per week and 182 hours per month. Regular hours for employees include 8.6 hours per day over four days of the week and 7.6 hours for the remaining day.

Overtime in Israel

• Overtime work and pay rates are usually outlined in an employee’s contract. The statute requires the first two hours of overtime are paid at an additional 25% per hour and an additional 50% per hour thereafter.