Employment contracts in Israel can be verbal or written. However, employers must provide employees written notice of employment terms no later than 30 days from the start date. The notice must include the commencement date, a description of the employee’s primary duties, the identity of the employee’s direct supervisor, the employee’s salary, the length of workdays, and workweeks. If concluded in writing, the employment contract should be in a language understood by the employee and include:

• identification of the employer and the employee and addresses of both,

• duration of the contract (if for a fixed term),

• job description,

• salary, payment date, method of payment, payment procedure during the employee’s absence, list of deductions from the salary for social security and income tax,

• social benefits payments by the employer to the pension insurance (8.33% of monthly salary), provident fund payments,

• dates the employment period starts and ends,

• notice period,

• probation period that does not exceed three months,

• length of workdays, workweek, and daily/weekly rest, and

• vacation, holidays, maternity leave and sick days.

A foreign employee is required to receive a permit to work in Israel through their employer.

The monthly minimum wage in Israel is 5,880 ILS with effect from 1st April 2024. It is set to increase next year to 6,000 ILS.

Common Benefits

Mobile phones or mobile phone allowances can be provided as a taxable benefit.

Meal allowance or vouchers.

Study fund – it is very common to give employees a study fund. The employer contributes a monthly amount of up to 7.5% of the monthly salary and the employee contributes an amount of 2.5% of salary. After 6 years the accumulated amount in the fund may be released tax free. There is a tax-free ceiling set at 15,712 NIS which is annually updated.

Holiday gifts – it is common to give holiday gifts twice a year for the Rosh Hashana and Passover holidays. These gifts are taxed.

Additional annual leave – in some industries it is common to give additional annual leave beyond the legal minimum.

Standard working hours in Israel consists of 42 hours per week and 7-9 hours per day depending on how many days per week are worked. Employees should receive at least 48 hours of rest per week, usually taken on Friday and Saturday, resulting in a working week of Sunday-Thursday.

Forcing an employee to work more than 12 hours a day or 16 overtime hours in a week is illegal.

Overtime

All working hours above the standard hours per week are to be paid as overtime and are regulated by the employment contract/collective agreements. It must also be mutually agreed upon between the employee and the employer before commencing any overtime working hours.

The working week may not exceed 42 hours, allocated over 5 or 6 days of work, provided that each working day does not exceed 9 hours of work.

Employees are entitled to overtime pay which is calculated daily as follows:

• For the first two overtime hours, the overtime payment is calculated at 125.00% of the regular wage

• The overtime pay is calculated at 150.00% of the regular wage for any additional work hours during the weekly day of rest

• Some companies pay a global monthly amount as compensation for overtime pay

Sick leave is accrued at a rate of 1.5 days per month with a maximum of 90 days total. Payment during sickness is dependent on the length of leave as follows:

• For the first day of sick leave, the employee is not entitled to pay

• On the second and third day of sickness, the employee is entitled to 50.00% of their regular pay

• From the 4th day onwards, the employee is entitled to 100.00% of their regular pay
  

Upon return, the employee must provide a medical certificate from a medical professional.

Under the Sick Pay Law amendment an employee suffering from a malignant disease (cancer) or a condition that requires regular dialysis treatments, or who recovered from such a disease, is eligible for full sick pay (100%) from the first day of absence, if on leave from work to receive care or undergo periodic examinations for that condition. (up to a maximum of 90 days).

Employees must provide a medical certificate from a medical professional confirming the necessity of treatment or examination because of the condition.

Maternity Leave

Female employees are entitled to 26 weeks of maternity leave following the completion of one year of service within an organization. The employee may take up to seven weeks of leave before the predicted due date of the child and the remainder after the birth. Israel’s social security system compensates the maternity leave if the employee is eligible which generally equals 15 weeks of fully paid leave and 11 weeks of unpaid leave.

Employees who have worked for their employer for less than one year are entitled to only 15 weeks of maternity leave.

An employee may extend their maternity leave entitlement by three weeks in the case of multiple or complicated births. In the unfortunate circumstance that a mother loses her child after the birth, she may take unpaid maternity leave up to 60 days after the birth.

From the 7th week of leave, the mother can choose to return to work and transfer the remaining maternity leave period to her spouse.

Paternity Leave

Following a partner going into labor and up to 24 hours following the birth, an employee is allowed to be absent from work for up to 5 days as paternity leave. The first three days of this leave will be paid from their accrued annual vacation and the remaining two days will be deducted from their accrued sick leave.

Parental Leave

Fathers can take days off after the birth of a child, but these days will be subtracted from the maternity leave.

Employees with a 5-day working week are entitled to a minimum of 12 working days of annual leave during their first five years of service. This entitlement increases to 17 working days from the sixth year up to the ninth year, and thereafter, to a maximum of 23 working days.

Annual leave payment is calculated at the regular salary pay rate.

Bereavement Leave

In Israel, in the event of a death of an immediate family member, the employee is entitled to up to seven calendar days of paid leave to grieve for their loss. The employer fully compensates bereavement leave once the employee has completed three months of service.

In Israel, employees serving on reserve duty must still be paid by their employer. Military service is mandatory in Israel.

Public holidays that fall on the weekend are usually lost.

Holidays are based on religious association and days can be swapped out to align with one’s religious observance.

Date Day Holiday Notes

27 Feb 2024 - Tuesday - Municipal Elections Day

22 Apr 2024 - Monday - Passover (Pesach) Eve - Half working Day

23 Apr 2024 - Tuesday - Passover (Pesach)

28 Apr 2024 - Sunday - Seventh Day of Passover Eve - Half working Day

29 Apr 2024 - Monday - Seventh Day of Passover

13 May 2024 - Monday - Independence Day Eve - Half working Day

14 May 2024 - Tuesday - Independence Day

11 Jun 2024 - Tuesday - Shavuot Eve - Half working Day

12 Jun 2024 - Wednesday - Shavuot

2 Oct 2024 - Wednesday - New Year (Rosh Hashanah) Eve Half working Day

3 Oct 2024 - Thursday - New Year (Rosh Hashanah)

4 Oct 2024 - Friday - New Year (Rosh Hashanah)

11 Oct 2024 - Friday - Yom Kippur Eve

12 Oct 2024 - Saturday - Yom Kippur

16 Oct 2024 - Wednesday - Sukkot Eve - Half working Day

17 Oct 2024 - Thursday - Sukkot

23 Oct 2024 - Wednesday - Simchat Torah - Half working Day

24 Oct 2024 - Thursday - Simchat Torah

In Israel the standard termination process stipulates that employers must exercise their right to terminate an employee’s employment in good faith, for valid reasons, and in compliance with applicable law, any written employment contracts, workplace customs, and collective bargaining agreements.

The termination of employment procedure includes a hearing process. This means the employer is obligated to provide the worker with a hearing invitation in which the reasons for the intended termination of employment are detailed. The hearing should be scheduled so it leaves the worker enough time to prepare for it. The hearing should be conducted by the worker’s manager. During the hearing, the worker needs to receive a genuine opportunity to express their viewpoint regarding the intention of the employer to terminate their employment.

Once the hearing ends, the employer should take the time to consider the arguments raised by the worker seriously and in good faith. According to the Israeli National Labor Court ruling, the decision made by the employer cannot be made immediately after the hearing, but a reasonable time after, at least 48 hours from the time the hearing was held The decision made by the employer should be communicated to the worker in writing. It is recommended to provide the worker with a termination letter in person.

According to the labor court’s decisions, in certain circumstances before deciding on termination of employment, employers are required to consider whether they can offer the employee an alternative position.

Under the Prior Notice Before Termination Law, employers must provide the employee with prior written notice when ending their employment.

An employer may choose to pay the employee in lieu of notice, which would be calculated as an equal salary payment to that which the employee would have received had the employee continued to work throughout the notice period.

Notice Period

The employee’s length of service determines the notice period in Israel.

If an employee has served 0-6 months of service, then one day’s notice is required for each month of employment. For each month of service following the sixth month of service until the first year of employment, an employee accumulates 2.5 days of notice. Following one year of service, a 30-day notice is required.

Severance Pay

In Israel, employees who are being dismissed are entitled to severance pay upon completing one year of service. The severance pay is calculated at one month’s salary multiplied by the number of years of employment (including work for part of a year).

Under the Section 14 Arrangement, the employer must carry out monthly contributions equivalent to 8.33% of the employee’s monthly salary payment towards the severance pay component. The accrued amount is to be released to the employee upon termination, even if the employee resigned without circumstances that would entitle the employee to severance pay if the employee was not subjected to the Section 14 Arrangement.

Probation Period

Probationary periods are permitted by Israeli law, and during this time the employee is considered a regular employee for all intents and purposes. The probationary period is stipulated in the employment contract or a collective agreement.

In Israel the standard termination process stipulates that employers must exercise their right to terminate an employee’s employment in good faith, for valid reasons, and in compliance with applicable law, any written employment contracts, workplace customs, and collective bargaining agreements.

The termination of employment procedure includes a hearing process. This means the employer is obligated to provide the worker with a hearing invitation in which the reasons for the intended termination of employment are detailed. The hearing should be scheduled so it leaves the worker enough time to prepare for it. The hearing should be conducted by the worker’s manager. During the hearing, the worker needs to receive a genuine opportunity to express their viewpoint regarding the intention of the employer to terminate their employment.

Once the hearing ends, the employer should take the time to consider the arguments raised by the worker seriously and in good faith. According to the Israeli National Labor Court ruling, the decision made by the employer cannot be made immediately after the hearing, but a reasonable time after, at least 48 hours from the time the hearing was held The decision made by the employer should be communicated to the worker in writing. It is recommended to provide the worker with a termination letter in person.

According to the labor court’s decisions, in certain circumstances before deciding on termination of employment, employers are required to consider whether they can offer the employee an alternative position.

Under the Prior Notice Before Termination Law, employers must provide the employee with prior written notice when ending their employment.

An employer may choose to pay the employee in lieu of notice, which would be calculated as an equal salary payment to that which the
employee would have received had the employee continued to work throughout the notice period.

Notice Period

The employee’s length of service determines the notice period in Israel.

If an employee has served 0-6 months of service, then one day’s notice is required for each month of employment. For each month of service following the sixth month of service until the first year of employment, an employee accumulates 2.5 days of notice. Following one year of service, a 30-day notice is required.

Severance Pay

In Israel, employees who are being dismissed are entitled to severance pay upon completing one year of service. The severance pay is calculated at one month’s salary multiplied by the number of years of employment (including work for part of a year).

Under the Section 14 Arrangement, the employer must carry out monthly contributions equivalent to 8.33% of the employee’s monthly salary payment towards the severance pay component. The accrued amount is to be released to the employee upon termination, even if the employee resigned without circumstances that would entitle the employee to severance pay if the employee was not subjected to the Section 14 Arrangement.

Probation Period

Probationary periods are permitted by Israeli law, and during this time the employee is considered a regular employee for all intents and purposes. The probationary period is stipulated in the employment contract or a collective agreement.

Employer Payroll Contributions
3.55% - Social Security (on the first 7,522 ILS)

7.60% - Social Security (on income between 7,522 ILS and 49,030 ILS)

8.33% - Severance Pay

6.50% - Pension Fund

Up to 21.78% Total Employment Cost

Employee Payroll Contributions

0.40% - Social Security (on the first 7,522 ILS)

7.00% - Social Security (on income between 7,522 ILS and 49,030 ILS)

3.10% - Health Insurance (on the first 7,522 ILS)

5.00% - Health Insurance (on income between 7,522 ILS and 49,030 ILS)

6.00% - Pension Fund

Up to 21.1% Total Employee Cost

Employee Income Tax

10% - Up to 7,010 ILS monthly income

14.00% - On income between 7,011 ILS-10,060 ILS monthly

20.00% - On income between 10,061 ILS-16,150 ILS monthly

31.00% - On income between 16,151 ILS-22,440 ILS monthly

35.00% - On income between 22,441 ILS-46,690 ILS monthly

47.00% - On income between 46,691 ILS-60,130 ILS monthly

50% - 60,131 ILS and above

Payroll Cycle

In Israel, the payroll cycle is typically monthly. All employees should receive a salary payment at least once a month, Salaries must be paid until the 9th of the following month.

13th Salary

The 13th-month salary payment is not legally required in Israel.

Recreation Payment

An employee is entitled to a recreation payment after one year of service. The payment is usually made between July and September, and the amount of compensation is determined by law, updated annually, and corresponds to the number of years of employment.

For work or business purposes, a professional relocating to Israel should use the B/1 work visa (combined work permit and employment visa).

The B/1 work visa is a business visa granted to foreigners who have been approved to stay in Israel for a limited time for work. It is issued to experts, scientists, high-tech workers, and artists.

Israeli work visa requirements for this permit are as follows:

• approval from the Ministry of the Interior

• visa interview

• verified certificate of good conduct

• certification of medical exam performed by an approved clinic or hospital recognized by the mission

• biometrics (fingerprints and photograph)

• completed Israeli work permit visa application form

• two passport-size photos

• a signed document from the employer stating that they are offering a position of employment
  

Upon arrival in Israel, customs will stamp the visa, validating it for 30 days. Extensions are then possible for up to one year and allow the foreigner to leave and enter Israel as many times as required.

Specialists working in academic or non-academic fields for more than three months will be issued the B/1 visa and require:

• A higher salary requirement (at least double the average wage)

• CV/resume

• Academic certificates (if not in English, diplomas will need to be officially translated into Hebrew and notarized by an Israeli notary)

• Copy of passport (must be valid for a minimum of a year and three months from the start of the process)

• Power of attorney

• Completed and signed application forms

• Three passport-size photos

• Marriage and birth certificates (for children under 18) for any accompanying family members (original with apostille)

• Police clearance (issued within the last six months)

• Medical clearance (issued within the last three months)
  

The maximum stay and work period for these employees is five years and three months from the start date in Israel. The visa usually takes between two to three months to process.

The standard rate of VAT in Israel is 17%.

Setting up a legal entity

There are six types of businesses in Israel: company, foreign company, self-employed, partnership, non-profit, and corporation.

Companies are the most common types of business in Israel, and you will most likely register as a private or a public company. Private companies must have a director and at least one shareholder.

Public companies are registered on the Israeli stock market and must have at least seven shareholders. If you register as a foreign company in Israel, your company will have the status of a branch or a subsidiary.

In Israel, all businesses register in the same basic format regardless of business category (this includes self-employed businesses and non-profit organisations). A business must first obtain the necessary registration documents from an attorney. The attorney certifies them for a fee. The forms include: Form No. 1 (this is the Registrar’s form, and your attorney will get it for you)

• Memorandum of the Association (description of the company’s objectives and responsibilities of director and shareholders)

• Articles of Association signed by initial shareholders

• Directors’ affidavit stating competence to serve

• The attorney then submits the documents to the Registrar of Companies.

Most documents can be in English, Hebrew, and Arabic, but the Articles of Association must be in Hebrew.

After registering with the Registrar of Companies, you will need to register with two other government departments: The Income Tax Department and the Customs and VAT Department. These are both bodies under the Ministry of Finance and charge no registration fees. Together with registering your company with the National Insurance Institute (NII).

The employer is responsible for making national insurance and health fund payments to the NII on behalf of their employees. the employers also deduct income tax payments from the employees’ salaries, which is then sent to the Income Tax Department.

Business registration must be renewed annually.

Registration as an employer

There are two common types of contracts in Israel: indeterminate duration and fixed-term contracts.

The indeterminate duration contract is the most common type of contract. It means that the worker will work indefinitely “at will” for a company under specified terms and conditions. The employer will not terminate the contract after completing a given task or time period.Fixed-term contracts mean that the worker will work for a specific amount of time or on a specific project. This is commonly used for freelance and seasonal work. The contract is over when the time expires or the project is completed.

New Employee Registration

A written contract of employment is required and should state the employee/employer conditions together with compensation details.

Information required to register a new employee includes salary/wage and tax data, work pattern, health insurance, Worker Declaration (Form 101), bank details and personal details.