Using an Employer of Record in Israel

Hiring and paying employees in Israel can be complicated because it’s important to comply with evolving local labor and employment laws. However, using an Employer of Record in Israel, such as Payoneer Workforce Management, simplifies the process. 

Find out more about Payoneer Workforce Management, or keep reading to learn how to engage local talent using an EOR in Israel.

How to hire employees in Israel

When it comes to engaging talent in Israel, companies generally have three options:

1. Set up a local entity: This gives companies total operational control but involves high set-up costs and ongoing obligations. Businesses must register with the appropriate government authorities and manage payroll, taxes, and benefits locally.
2. Hire independent contractors: This is a good choice for short-term or project-based work. Hiring contractors offers flexibility and minimizes compliance requirements. However, the role shouldn’t resemble an employee-employer relationship, or you risk contractor misclassification, which can come with fees and penalties.
3. Use an Employer of Record in Israel: This option allows businesses to legally access talent without setting up a local entity. The EOR assists with managing payroll, taxes, benefits, and labor law requirements.

Payoneer Workforce Management provides Employer of Record Israel services and is a trusted choice for companies looking to engage local employees. We assist you in setting up payroll, localized benefits, and mitigating risks related to contractor misclassification.

How to onboard employees in Israel

When onboarding a new remote employee, it is essential to have a clear process in place.

An effective employee onboarding process generally involves the following key phases:

• Payroll setup and benefits enrollment:
  Add the new candidate to the local payroll system and complete all legally required benefit registrations to maintain full compliance with regional employment standards.
• Equipment provisioning and workspace preparation:
  Ensure the employee receives all necessary devices, tools, and system access from day one so they can begin their responsibilities smoothly and without delays.
• First‑week orientation and onboarding sessions:
  Offer a well‑structured orientation during the initial week to familiarize the employee with company policies, operational workflows, organizational culture, and the expectations tied to their new role.
• Team and organizational introductions:
  Coordinate introductions with the employee’s immediate team and relevant cross‑functional partners to encourage strong collaboration and support a seamless integration into the broader organization.

Payoneer Workforce Management enables companies to compliantly engage talent across borders through its technology platform.

Pay employees in Israel

Managing Israel Payroll requires compliance with statutory payment schedules and benefits. 

Israel payroll basics

The payout currency in Israel is the new Israeli shekel (ILS), and salaries must be paid between the 5th and 7th of the subsequent month. 

The minimum wage in Israel is ILS 6,247.67 per month. 

The average monthly wage is 13,316 ILS.

Taxes and contributions

Employers are also responsible for the following taxes and contributions:

Israel has a progressive income tax with the following rates based on income levels:

• Employer – 6.5%
• Employee – 6%

An EOR in Israel can help you navigate contributions alongside taxation requirements.

Other employer costs

Employers are required to contribute 8.33% of an employee’s salary each month toward severance pay. 

Employee benefits

Employees in Israel are covered by mandatory public health insurance, which is funded through income-based health taxes and provided through 4 government-regulated health funds, known as Kupot Holim. 

This system grants universal access to essential medical services and is the primary form of healthcare coverage for most employees.

Using an EOR in Israel offers a streamlined way to pay employees. With Payoneer Workforce Management, our unified, all-in-one platform gives you a single dashboard to manage a global workforce and enables you to pay contractors and employees in just a few clicks.

Employment laws in Israel

All employers operating in Israel must comply with local laws and regulations when managing employees. Here are some of the most important Israeli employment laws to be aware of.

Working hours and overtime

The standard working week in Israel is 42 hours. 

Employees may work up to 16 additional overtime hours per week, subject to role, industry, and any applicable collective bargaining agreements.

Overtime compensation varies depending on timing and circumstances. Public holiday work is compensated at 250% of the employee’s normal salary, which includes 150% for working hours plus an additional 100% as holiday pay.

Probation and notice periods

There is no statutory minimum probation period in Israel. In practice, probation periods of 3 to 6 months are common.

During probation, notice is generally 1 day per month of service, up to a maximum of 6 months.

After probation, notice periods are based on length of service:

Minimum wage in Israel

The minimum wage in Israel is ILS 6,247.67 per month.

The average monthly wage in Israel is ILS 13,316. For foreign experts, the minimum base salary is ILS 26,632 per month, twice the average wage.

It’s important to check regularly for any changes to minimum wage rates to stay compliant.

Employment contracts in Israel

All contracts should align with local employment regulations in Israel. Employment contracts generally contain the following information:

• Identification details and legal addresses of the employer and employee
• The place and date of the contract’s execution
• The primary location of the workplace
• A description of the job duties and role
• The agreed salary, payment frequency, form of payment, and any non-monetary benefits like accommodation or meals
• The type of contract (fixed term or indefinite) and termination conditions

Payoneer Workforce Management allows you to onboard talent quickly and securely with localized contracts and payroll.

Leave policy in Israel

Israeli law sets minimum requirements for paid time off, public holidays, sick leave, and parental leave.

Public holidays and vacation time

Israel observes 9 public holidays each year.

Employees are entitled to a minimum of 12 days of paid vacation time, depending on length of service. Vacation balances may be carried forward, but no more than 2 years’ worth of unused time may be accumulated. Employees must take at least 7 consecutive days of vacation time each year.

Parental leave

Maternity leave ranges from 15 to 26 weeks, depending on eligibility and length of service.

Fathers may take paid paternity leave by using part of the mother’s maternity leave, subject to mutual agreement. This option becomes available after the first 6 weeks of the mother’s paid 15-week maternity leave. Fathers may take up to 7 weeks, provided they have worked for at least 6 months before the birth.

Sick leave

Employees accrue sick leave at a rate of 1.5 days per month, up to a maximum accumulation of 90 days.

Work permit in Israel

The rules for work permits in Israel vary depending on the employee’s country of origin and the role being performed. It’s important to always check government websites and resources for specific details.

Background check in Israel

Employers may want to carry out background checks before engaging an employee in Israel. These typically include things like criminal checks, employment and education history, and social media checks. Before performing any checks, you will likely need consent from the employee and have to disclose what you’re checking.

Always check local regulations before running any employee checks.

Employment termination in Israel

Employment termination in Israel must be based on valid grounds. Termination without just cause may be considered unfair dismissal and can result in legal consequences for the employer.

Valid termination scenarios

Employment may end due to:

• Employee resignation
• Mutual agreement between the employee and the employer
• Termination during the probationary period
• Termination by the employer due to misconduct, performance issues, or absence without leave

Notice period

During probation, notice is generally 1 day per month of service, up to a maximum of 6 months.

After probation, notice periods are based on length of service:

Severance pay

Severance pay in Israel is funded through monthly employer contributions equal to 8.33% of the employee’s salary. These contributions accumulate in a government-mandated fund and are redeemed by the employee at the end of employment.

Company registration in Israel

Some businesses choose to register a local company in Israel to establish a long-term presence, access regulated industries, or sign local commercial agreements.

Information on company formation and registration procedures is available through government resources. 

For companies looking to engage talent quickly, an Employer of Record in Israel offers a more efficient alternative. Payoneer Workforce Management enables compliant onboarding and engagement of talent in 160+ countries without having to set up a legal entity.

PEO in Israel

A Professional Employer Organization (PEO) in Israel can support HR and payroll functions, but requires you to have a legal entity in-country. 

On the other hand, an Employer of Record in Israel does not require a legal entity and instead acts as the legal employer for the local team. This often makes it the better choice for companies new to the Israeli market.

Payoneer Workforce Management’s Employer of Record services in Israel

Payoneer Workforce Management helps growing companies onboard, pay, and manage employees in Israel without setting up a local entity. 

As your EOR in Israel, we offer assistance with employment contracts, benefits administration, taxes, payroll, timesheets, and more.

Book a demo to learn more about Payoneer Workforce Management.

FAQs

1) What is an Employer of Record in Israel?

An Israeli Employer of Record is a third-party organization that legally employs workers on your behalf and manages payroll, taxes, and employment contracts, so you can engage talent without a local entity.

2) How much does it cost to hire in Israel?

Typically, it is 1.3 times the salary, which ranges from approximately 25.24% to 28.43% depending on the income bracket and specific contributions. Please use our employee cost calculator for a detailed employment cost breakdown.

3) Why should you hire talent with an EOR in Israel?

Working with an EOR in Israel can help streamline the talent engagement process. Payoneer Workforce Management allows you to pay independent contractors and employees across the globe in 70+ currencies. Get in touch for more details.