Hire in Israel through our Employer of Record (EOR)

An Employer of Record (EOR) is a third-party organization that takes on the legal and administrative responsibilities of employing workers on behalf of another company. This arrangement allows businesses to hire employees in countries where they don't have a legal entity, effectively expanding their global reach without the need to establish a local subsidiary.

In the context of Israel, an EOR can be particularly valuable for international companies looking to tap into the country's thriving tech scene and skilled workforce. By partnering with an EOR, businesses can navigate Israel's complex labor laws, tax regulations, and employment standards with greater ease and compliance.

How Does EOR Work?

When a company decides to use an EOR service in Israel, the process typically unfolds as follows:

1. The client company selects the candidate they wish to hire in Israel.

2. The EOR becomes the legal employer of the worker, handling all administrative tasks such as payroll, benefits administration, and tax withholding.

3. The client company maintains control over the employee's day-to-day activities, assignments, and performance management.

4. The EOR ensures compliance with local labor laws, manages statutory benefits, and handles any employment-related issues that may arise.

5. The client company is billed for the employee's salary plus a service fee for the EOR's services.

This arrangement allows companies to quickly and compliantly hire talent in Israel without the need to establish a local entity or navigate the complexities of Israeli employment law on their own.

Benefits of Using an EOR

Employing an EOR in Israel offers several advantages for international companies:

1. Rapid market entry: Companies can hire Israeli talent quickly without the need to set up a local entity, which can be a time-consuming and costly process.

2. Compliance assurance: EORs are well-versed in Israeli labor laws and regulations, ensuring that the client company remains compliant with local employment standards.

3. Risk mitigation: The EOR assumes much of the legal responsibility associated with employment, reducing the client company's exposure to potential compliance issues.

4. Cost-effectiveness: Using an EOR can be more economical than establishing and maintaining a local subsidiary, especially for companies hiring a small number of employees in Israel.

5. Flexibility: EORs provide the flexibility to scale operations up or down in Israel without the long-term commitments associated with maintaining a local entity.

6. Local expertise: EORs offer valuable insights into local business practices, cultural norms, and market conditions, which can be crucial for successful operations in Israel.

7. Focus on core business: By outsourcing administrative and compliance tasks to the EOR, companies can concentrate on their core business activities and strategic goals in the Israeli market.

In conclusion, an Employer of Record service can be an invaluable tool for companies looking to expand into Israel's dynamic market. By simplifying the hiring process and ensuring compliance with local regulations, EORs enable businesses to tap into Israel's talented workforce and innovative ecosystem with greater ease and confidence.

Israel's employment landscape is characterized by a dynamic and skilled workforce, with a strong emphasis on innovation and technology. The country's labor market is diverse, with high participation rates and a focus on education and professional development. Israel's unique cultural identity and work ethic significantly influence workplace dynamics, creating a distinctive environment for both local and international workers.

Overview of Labor Laws

Israel's labor laws are comprehensive and designed to protect workers' rights while promoting a fair and productive work environment. Key aspects of these laws include:

• Minimum wage regulations
• Maximum working hours and overtime compensation
• Paid annual leave and sick leave entitlements
• Maternity and paternity leave provisions
• Anti-discrimination policies
• Occupational health and safety standards

Employers must adhere to these regulations to ensure compliance and maintain positive employee relations.

Cultural Considerations

Understanding and respecting Israeli workplace culture is crucial for success in the country's job market. Some important cultural aspects to consider include:

• Direct and informal communication styles
• Emphasis on building strong professional relationships
• Work-life balance, including observance of Shabbat
• Collaborative decision-making processes
• Adaptability and innovation in problem-solving

Embracing these cultural norms can help foster positive working relationships and enhance overall job satisfaction.

Challenges of Direct Hiring

While Israel offers a talented workforce, direct hiring can present several challenges for foreign companies:

1. Complex labor laws and regulations: Navigating the intricacies of Israeli employment law can be daunting for foreign employers.

2. Language barriers: Although English is widely spoken, Hebrew is the primary language in many workplaces.

3. Cultural differences: Adapting to local work culture and communication styles may require adjustment for international companies.

4. Administrative burdens: Managing payroll, taxes, and benefits in compliance with local regulations can be time-consuming and complex.

5. Recruitment and retention: Attracting and retaining top talent in a competitive job market can be challenging for foreign companies without local expertise.

6. Work permit and visa requirements: Navigating the process of obtaining necessary documentation for foreign workers can be complex and time-consuming.

To overcome these challenges, many companies opt to partner with local experts or utilize services like Rivermate's Employer of Record solution, which can simplify the hiring process and ensure compliance with local regulations.

Israel's payroll and tax system is a complex framework designed to support the country's social welfare programs while ensuring fair contributions from both employers and employees. This system encompasses various elements, including income tax, national insurance, health insurance, and pension contributions. Understanding these components is crucial for both employers operating in Israel and employees working in the country.

In Israel, the payroll process involves careful calculation of gross wages, deduction of mandatory and voluntary contributions, and the final computation of net pay. The tax year in Israel follows the calendar year, running from January 1 to December 31. Employers are responsible for withholding and remitting taxes and social security contributions on behalf of their employees, making them a crucial intermediary in the Israeli tax system.

Employer Contributions

Employers in Israel are required to make several contributions to support their employees' social security and welfare:

1. National Insurance (Bituach Leumi): Employers contribute to this mandatory social security program. The contribution rates are:

   • 3.55% on monthly income up to ILS 7,522
   • 7.6% on the portion of monthly income above ILS 7,522, up to a maximum threshold of ILS 49,030

2. Pension Contributions: Since 2008, employers are mandated to contribute to their employees' pension plans. The minimum contribution rate is typically around 6.5% of the employee's salary, subject to certain wage thresholds.

3. Severance Pay Fund: Employers are required to set aside 8.33% of an employee's monthly salary towards a severance pay fund.

4. Advanced Study Fund (Keren Hishtalmut): While not mandatory, many employers contribute to this tax-advantaged savings plan. The typical contribution rate is 7.5% of the employee's salary.

5. Disability Insurance: Some employers opt to provide additional disability insurance for their employees, though this is not mandatory.

It's important to note that these contribution rates and thresholds are subject to periodic adjustments by the Israeli government.

Employee Contributions

Employees in Israel also bear responsibility for various contributions and taxes:

1. Income Tax: Israel employs a progressive tax system, with rates ranging from 10% to 50% depending on the individual's income level. The exact rates and brackets are subject to annual revisions.

2. National Insurance: Employees contribute to the National Insurance system at the following rates:

   • 0.4% on monthly income up to ILS 7,522
   • 7% on the portion of monthly income above ILS 7,522, up to the maximum threshold

3. Health Insurance: A health tax of 3.1% to 5% of the employee's salary is deducted to fund the national health care system.

4. Pension Contributions: Employees typically contribute about 6% of their salary to their pension plans, complementing the employer's contribution.

5. Advanced Study Fund: If participating, employees usually contribute 2.5% of their salary to this fund.

These employee contributions are typically deducted directly from the employee's gross salary before the net pay is calculated.

Understanding these employer and employee contributions is essential for accurate payroll processing and compliance with Israeli labor laws. Both employers and employees should stay informed about any changes to these rates and regulations to ensure proper adherence to the Israeli tax and social security system.

Israel's employee benefits system is comprehensive and designed to provide a strong safety net for workers. As an Employer of Record (EOR), Rivermate expertly manages these benefits, ensuring compliance with local laws while allowing companies to focus on their core business operations. By partnering with an EOR, businesses can navigate the complexities of Israeli labor laws and provide their employees with the required benefits seamlessly.

Mandatory Benefits

• Annual Leave: Minimum 12 paid vacation days per year, increasing with seniority (up to 28 days)
• Public Holidays: Paid time off for various holidays throughout the year
• Sick Leave: Accrual of approximately 1.5 days per month
• Maternity Leave: 14 to 26 weeks of paid leave for female employees
• Paternity Leave: One week of paid leave for fathers
• Bereavement Leave: Paid leave for immediate family member deaths
• National Insurance: Employer and employee contributions towards social security
• Severance Pay: Entitlement upon employment termination, based on various factors

Optional Benefits

• Supplemental Health Insurance: Coverage for dental care, vision, and other services
• Wellness Programs: On-site gyms, yoga classes, or gym membership subsidies
• Flexible Work Hours: Allowing employees to achieve better work-life balance
• Childcare Assistance: Free or subsidized childcare services
• Transportation Allowances: Daily allowance to cover commute costs
• Meal Subsidies or Cafeteria Discounts: Reduced-cost meals for employees
• Employee Discounts: On company products or partner business offerings
• Company Car: Provided for work-related or personal use in certain cases
• Holiday Gifts: Given during major holidays like Rosh Hashanah and Pesach
• Professional Development: Coverage for licenses, memberships, or tuition reimbursement

By offering a mix of mandatory and optional benefits, employers in Israel can create a competitive and attractive package for their workforce. As an EOR, Rivermate ensures that all mandatory benefits are properly administered while also helping companies implement optional benefits that align with their organizational goals and employee needs.

The process of termination and offboarding in Israel is governed by a structured legal framework, primarily the Severance Pay Law 1963. This process involves several key steps and considerations to ensure compliance with Israeli labor laws and protect both employer and employee rights.

Lawful Grounds for Dismissal

In Israel, employers must have valid reasons for terminating an employee's contract. These reasons may include:

• Poor performance or lack of necessary skills
• Misconduct or violation of company policies
• Workforce reduction due to economic factors
• Business closure
• Significant changes in work conditions that the employee reasonably refuses

It's important to note that in cases of misconduct or performance-related issues, employers are expected to follow a process that includes warnings, documentation, and providing the employee with an opportunity to address the concerns before proceeding with termination.

Notice Requirements

Both employers and employees are required to provide notice when terminating an employment contract. The notice period typically depends on the employee's length of service, as outlined in the Severance Pay Law 1963. However, collective agreements or individual contracts may specify longer notice periods.

Severance Pay

In most cases of dismissal, Israeli law mandates severance pay, known as "Pitzuim." The calculation of severance pay is generally based on:

1. The employee's length of service (typically one month's salary for each year of employment)
2. The employee's final salary

Severance pay aims to provide financial support to employees during their transition between jobs. However, it's worth noting that severance pay may not be required in certain cases of disciplinary dismissal.

Offboarding Process

The offboarding process in Israel typically involves the following steps:

1. Formal notification of termination
2. Calculation and payment of final wages, including any accrued vacation days
3. Provision of required documents, such as a letter of termination and salary slips
4. Return of company property
5. Conducting an exit interview (optional but recommended)
6. Updating internal systems and revoking access to company resources

By following these guidelines and ensuring compliance with Israeli labor laws, employers can navigate the termination and offboarding process effectively while minimizing potential legal risks.

Israel is a vibrant country with a thriving economy that attracts many foreign workers. However, navigating the visa and work permit requirements can be complex. Here's a concise overview of what foreign workers need to know about working legally in Israel:

Work Visa Types

Israel offers several types of work visas, including:

• B/1 Work Visa: The most common type for foreign employees
• Expert Visa: For highly skilled professionals
• Student Visa: Allows limited work for international students

Work Permit Process

1. Employer applies for a work permit from the Ministry of Interior
2. Once approved, the foreign worker applies for a work visa at an Israeli consulate in their home country
3. Upon arrival, workers must register with the Ministry of Interior

Key Requirements

• Valid passport with at least six months validity beyond the intended stay
• Proof of employment or job offer from an Israeli company
• Health insurance coverage
• Clean criminal record

Time Frame and Validity

• Work permits are typically valid for one year
• Renewals are possible, subject to approval
• Processing time can take several weeks to months

Restrictions

• Work permits are usually tied to a specific employer
• Changing jobs may require a new work permit application

Family Members

• Spouses and dependent children may be eligible for accompanying visas
• These visas do not automatically grant work rights

It's important to note that immigration laws can change, and the process can be complex. Many companies choose to work with an Employer of Record like Rivermate to navigate these requirements and ensure compliance with local labor laws.