Planning to hire employees in Israel? Here’s a quick guide

Employment in Israel is governed by well-defined labor laws that shape how businesses hire and manage their workforce. Employees are entitled to a minimum of 12 days of annual leave, accrue 1.5 days of sick leave per month, and benefit from comprehensive social security coverage, including maternity and work injury protection. Working hours are regulated at 42 hours per week, with strict rules on overtime, including premium pay that can go up to 250% on public holidays.

At the same time, employers must meet several compliance requirements, such as registering employees with the National Insurance Institute (Bituach Leumi), setting up pension and severance contributions, and managing progressive tax withholdings. 

Given these obligations, partnering with an Employer of Record (EOR) like Payoneer Workforce Management can help streamline hiring and support efficient workforce management while also maintaining the employment regulations in Israel.

How to hire employees in Israel

There are three main ways in which you can engage employees in Israel:

1. Set up a legal entity in Israel
   • To operate your business in Israel, you may choose to open a legal entity. The registration process is managed through the Registrar of Companies (Ministry of Justice). 
   • This facilitates easy communication with the government and all other stakeholders. Nevertheless, this is a time-consuming and expensive procedure.  
2. Hire independent contractors
   • Independent contractors can help businesses attain their goals without much administrative complexity. However, be cautious about avoiding any instance of misclassification, which may result in penalties.  
3. Partner with an EOR in Israel
   • An Employer of Record like Payoneer Workforce Management is a third-party organization that supports compliant onboarding, payroll processing, administering leaves, benefits, HR functions, etc., all while adhering to the local laws of Israel. 

Where to find employees in Israel

Hiring talent in Israel begins with sourcing the right candidates. Here are some of the most effective ways to find employees in Israel:

1) Online job portals

You can advertise your job in some of Israel’s top job portals. Some of them are: 

• AllJobs.co.il 
• Drushim.co.il 
• Jobmaster 
• Jobnet 
• Nefesh B’Nefesh Job Board 
• LinkedIn Israel 

2) Recruitment agencies and development networks

There are several recruitment agencies that have a huge database of potential employees. These local agencies and staffing firms can streamline your search for the most appropriate candidate by screening and shortlisting them based on your requirements. 

3) EOR support

You can also engage employees in Israel through an Employer of Record like Payoneer Workforce Management. An EOR supports the recruitment process by handling drafting contracts, managing payroll, handling taxation, and so on. This gives you time to source and identify suitable candidates for the role.

Onboarding employees in Israel

1. A written employment contract in English is ideal. The contract should contain all the details like the job title, commencement date, salary structure, leave entitlements, and other terms. 
2. Obtain all the essential documents like the employee’s educational certificates, ID card, and bank account details. 
3. Make sure that your employees fill out the Form 101 for tax withholdings. 
4. Register your employee with the National Insurance Institute (Bituach Leumi) for social security contributions and benefits. 
5. Set up all the mandatory contributions for severance funds, pensions, etc. 
6. Get your employee acquainted with the work culture and help them get started. 

Key employment laws in Israel

When employing individuals in Israel, you must understand the key labor laws that govern employee rights and employer obligations. Core regulations include the Hours of Work and Rest Law (1951), the Annual Leave Law (1951), and social security legislation, which together outline working conditions, leave entitlements, and essential benefits such as old-age, maternity, and work injury coverage.

Employment contracts

The National Labor Law of Israel specifies two main types of employment contracts: 

1. Definite/ fixed-term contract: This kind of employment contract between you and your employee is terminated at the end of a certain period. No formality is required for the dismissal of the contract. Typically, for a year, which can be extended.
2. Indefinite-term contract: This type of employment contract does not specify a fixed duration. However, it can be terminated by either party by observing a due notice period. 

An employment contract in Israel should consist of the following:

• The type of employment contract
• The role for which the employee is being hired and its description
• Terms related to wage/salary
• Working hours and conditions
• Leave entitlements 
• Terms related to termination, like notice period, severance, etc. 
• Other applicable entitlements or benefits

Employee benefits

Employees in Israel are entitled to a range of benefits. Some of them are mentioned below: 

• Employees get a minimum of 12 paid leaves per year. 
• They accrue 1.5 days’ sick leave every month, up to a maximum of 90 days. 
• Female employees shall get 15-26 weeks of maternity leave. 
• Paternity leave in Israel is different from that in other countries in the region. Male employees may share a portion of the female employees’ maternity leave. This, however, is subject to mutual agreement and eligibility. 
• All residents are covered under a government-regulated public healthcare system funded through income-based contributions.
• In Israel, employees benefit from comprehensive social security coverage. Benefits include maternity, work injury, and employee protection insurance. The system is supported by progressive taxation, with certain exemptions and deductions available to foreign professionals.

Working hours and holidays 

The normal working hours in Israel are 42 hours per week. In case of excessive workload or any other kind of urgency, you may ask your employee to work overtime. However, the overtime hours should not exceed 16 hours per week. 

If your employees work overtime on public holidays, you must pay them 250% of their normal salary (150% for the additional working hours and 100% extra as holiday pay). 

There are also 9 public holidays in Israel, which are observed on the following occasions: 

• Passover (First Day)
• Passover (Seventh Day)
• Independence Day
• Shavuot (Pentecost)
• Rosh Hashanah (New Year)
• Yom Kippur (Day of Atonement)
• Sukkot (First Day)
• Shemini Atzeret / Simchat Torah

Tax obligations 

Tax on personal income is applicable based on an employee’s income.

Termination and severance pay in Israel

An employment contract may be terminated in the following situations:

• When the employee chooses to resign
• When both you and the employee mutually agree to end the contract
• When termination occurs during the probation period
• When dismissal is based on poor performance, misconduct, or unauthorized absence

Notice period

When ending an employment contract, a specified notice period must be observed.

During probation: 

If an employment contract is dissolved while an employee is still on probation, the notice period is 1 day per month (up to 6 months). 

After probation: 

Once the probation period is over, the notice period is as follows: 

Severance pay

You must contribute 8.33% of an employee’s monthly salary to a fund that is payable upon the employee’s termination as severance pay. 

Explore Payoneer Workforce Management in Israel

The hiring process in Israel involves navigating detailed labor laws, tax regulations, and mandatory benefits such as social security, pensions, and severance contributions. From efficient workforce management in Israel to managing payroll and progressive taxation and complying with leave policies and overtime rules, compliance with the local laws may seem complex, especially when expanding across multiple countries.

Payoneer Workforce Management simplifies this process by enabling you to hire employees in Israel and 160+ countries without setting up a local entity. It supports onboarding, global payroll, tax and benefits management, timesheets, and ongoing compliance, helping you build and manage your workforce efficiently.

Book a demo now!

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