Hire employees in Israel

The 2020 Ease of Doing Business Index published by the World Bank has ranked Israel as the 35th most business-friendly country in the world. Among the aspects taken into account by the index, Israel particularly stands out with regard to the ease of starting a business and paying taxes. 

What’s more, Israel has been found to be the country with the highest R&D expenditure in the world, and its creative, highly skilled workforce offer multinational organizations an attractive talent pool. The fact that English is widely spoken makes it even easier to hire employees in Israel.

There is no legal obligation to conclude a written employment contract when hiring employees in Israel – unless the employed person is a foreigner. However, employers are obligated to provide their employees with a written statement detailing the terms of employment, including:

• Identification of both parties 

• Date of commencement (and employment duration if applicable) 

• Direct supervisor

• Job description, duties and responsibilities

• Basic salary as well as other compensation or benefits

• Daily and weekly working hours

• Weekly rest day

• Social benefits

• Pension fund details

• Reference to applicable collective agreements

The only existing language requirement for contracts is that they must be in a language both employee and employer understand.  

Probation Period

It is possible to define a probationary period for a new employee. The common length for probation periods is 3 months. In no case should the trial period exceed 12 months.

Working Hours and Breaks

A normal workweek in Israel comprises 42 hours. Employees usually work from Sunday to Thursday. A regular workday should not be longer than 9 hours.

Overtime

Any hour worked by an employee in addition to his or her regular weekly working hours is considered overtime and must be compensated accordingly. The pay rate for overtime is 125% for the first two additional hours and 150% for any hour thereafter. Under no circumstances should employees work for more than 12 hours per day, including overtime. Overtime further shouldn’t exceed 16 hours per week.

The payroll cycle in Israel is generally monthly.

Minimum Wage 

In April 2022, Israel’s national minimum wage rose from ILS 5,300 to ILS 5,400 per month. The hourly minimum wage is ILS 29.67. The local government has further announced to gradually increase the minimum wage over the course of the next couple of years until it will reach ILS 6,000 in December 2025. 

Sick Pay

Employees in Israel accrue 1.5 days of paid sick leave for each month worked, up to a maximum of 90 days. The first day of sick leave is unpaid and it’s only with the second day of absence that the employee’s sick leave entitlement starts.

Days two and three of sick leave are paid at a rate of 50% of the employee’s usual wages. From the fourth day onwards, the employee receives full pay. It is mandatory for employees to provide a medical certificate. 

Bonuses

There are no legal provisions for a 13th month salary as such, but employees are entitled to a so-called “recreation payment” after having completed one year of service. The amount of the recreation payment depends on the employee’s length of service and the payment is usually made in two installments, one in spring and one in fall. 

Employees and employers in Israel are subject to the following tax and social security contribution rates (last review February 2023):

Taxes

Employers

23%

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• 23% corporate tax rate

• 17% VAT (standard rate

Employees

up to 50%

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Income is taxed based on progressive rates ranging from 10% to 50%. *

Social security

Employers

up to around 23%

---

• National Insurance at rates of 3.55% (on the first ILS 7,122 earned per month) and 7.6% (on the part of the income between ILS 7,122 and ILS 47,465) **

• Pension Fund at a rate of 6.5%

• Severance Pay Fund at a rate of 8.33%

• Disability insurance at a rate of 2.5%

Employees

up to around 18%

---

• National Insurance at rates of 0.4% (on the first ILS 7,122 earned per month) and 7% (on the part of the income between ILS 7,122 and ILS 47,465) **

• Health Insurance at rates of 3.1%(on the first ILS 7,122 earned per month) and 5% (on the part of the income between ILS 7,122 and ILS 47,465) ***

• Pension Fund at rate of 6%

Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).

Annual Leave

During the first five years of service, employees are entitled to 12 paid vacation days. Thereafter, the employee’s annual leave entitlement gradually increases as follows: 

• 6th year of service: 14 vacation days

• 7th year of service: 15 vacation days

• 8th year of service: 16 vacation days

• 9th year of service: 17 vacation days

• 10th year of service: 18 vacation days

• 11th year of service: 19 vacation days 

• Starting with the 12th year of service: 20 vacation days (i.e. four weeks)

In addition, Israel observes 9 national public holidays. Some districts have additional local holidays. 

Maternity Leave and Paternity Leave

Female employees who have worked for their current employer for more than one year are entitled to 26 weeks of maternity leave. Employees who become pregnant during their first year of service are only entitled to 15 weeks of maternity leave. The leave period can start up to 7 weeks before the expected date of birth. 

Maternity leave is only partly paid and the number of weeks during which the employee receives a maternity allowance depends on her previous social security contributions. Depending on the employee’s contributions history, either 8 or 15 weeks of maternity leave will be paid. 

According to the current rules and regulations, fathers can take 5 days of leave immediately after birth, which are taken out of the father’s accrued annual leave and sick leave entitlement. Furthermore, fathers are allowed to share their partner’s maternity leave; however, this reduces the number of weeks the mother gets to spend with the baby. 

A new law is expected to enter into force in 2023 which will give fathers the right to go on paid paternity leave as early as 15 weeks after birth – without it affecting the duration of the mother’s maternity leave.

Parental Leave

There are no legal provisions for any additional parental leave.

Additional Leaves and Benefits

Employees who have lost a spouse or an immediate member of their family are entitled to up to 7 days of paid bereavement leave. Some employers also offer their employees additional disability insurance, meal and transport allowances or make a monthly 7.5% contribution to a separate study fund.

Employers are allowed to dismiss their employees at any time for a reason other than discrimination. However, the employee must receive the chance to defend him- or herself in a proper hearing before the final decision is taken. The final decision must be communicated to the dismissed employee in writing.

Statutory notice periods can reach up to 30 days, depending on the employee’s length of service. The length of the notice period increases as shown in the following table.

Employees who are dismissed are entitled to severance pay if they have completed more than one year of service. The amount of severance pay must equal one month’s salary for each year of service. For this purpose, employers are obligated to set aside an amount equal to 8.33% of the employee’s earnings each month and pay it into a separate Severance Pay Fund (see section “Taxes and social security contribution”).