Employer of Record in Israel

Israel sits at the meeting point of three continents - Europe, Asia and Africa. Its location makes it an attractive gateway for international business operations into these three regions.

Israel is known as a global powerhouse in research and development, medical advancements, deep tech innovation and an advanced startup ecosystem. Hundreds of global companies operate core R&D centers in Israel, including Google, Teva Pharmaceuticals, Nvidia, Oracle and others.

The country features a deep talent pool of highly skilled, experienced and educated workers. Israel consistently produces the highest per capita concentrations of engineers, scientists and advanced-degree holders in the world. The internationally connected workforce is becoming increasingly multilingual, with English being spoken alongside Hebrew, Arabic, Russian, Amharic and a host of immigrant languages.

International companies hire in Israel to take advantage of specialist skills, innovation and a high-pressure entrepreneurial culture. Workers in Israel are well-compensated for their expertise, making Israel a premium hiring market. Whole R&D, medical and technology teams can be hired in Israel, but it will not be at a low employment cost.

Commonly hired roles are cybersecurity experts, AI specialists, software developers, chip architects, medical researchers, regional sales executives, product managers and customer support roles.

Employing workers in Israel involves navigating a highly sophisticated employment law framework. For companies without a local legal entity, these obligations create financial and compliance complexities. An Employer of Record (EOR) in Israel, like Rivermate, provides a way for your company to hire compliantly by becoming the legal employer on your behalf.

How an Employer of Record (EOR) Works in Israel

An Employer of Record is a third-party provider that legally employs workers through their legal entity in Israel. This simplifies the process of entering the Israeli market.

• You Find the Talent: You identify the candidate you want to hire in Israel without establishing your own legal entity.
• The EOR Hires Them: The EOR legally hires the employee and drafts an employment contract that complies with Israeli employment law.
• The EOR Onboards the Employee: The EOR manages employee onboarding, including gathering necessary documents and setting up payroll.
• HR support and Payroll Management: The EOR handles all HR administrative tasks. This includes processing salaries, withholding taxes, and managing social security contributions to Bituach Leumi (National Insurance).
• You Manage Your Team: You direct your employee's daily tasks and responsibilities, just like any other member of your team.

Why use an Employer of Record in Israel

Businesses seeking quick and efficient entry into the Israeli market will benefit from partnering with an EOR. Benefits include:

• Avoid Setting Up a Legal Entity: You can hire in Israel without the months of work and high costs associated with creating your own local company.
• Easily meet legal obligations: EORs are experts in Israeli labor law. They manage the complexities of mandatory pension contributions, health insurance, and paid leave, protecting you from legal risks.
• Simplify HR and Payroll: The EOR takes on the administrative burden of payroll, tax withholding, and benefits administration.
• Enter the Market Faster: An EOR onboards employees through its legal entity. This gives you access to the Israeli talent pool and speeds up the hiring process.

Tel Aviv, Haifa and Jerusalem have the highest concentration of R&D, technology and medical research professionals in Israel. Tel Aviv hosts a dense concentration of startups and multinational R&D centers. Haifa is known for heavy industry, semiconductors and software development, while Jerusalem features a deep medical research, biotechnology and life sciences ecosystem.

Israeli employment law relies on multiple, overlapping layers of legislation, extended collective bargaining agreements (CBAs) and employment contracts. Enforcement is handled by regional and national labor courts rather than standard civil courts. This complexity makes it essential to have local expertise involved in international hiring.

Collective bargaining agreements play a big role in determining wages across different sectors. Foreign employers should refer to the CBAs before finalizing offers. Workers in Israel receive generous mandatory and supplementary benefits. These benefits increase the gross salary by roughly 25%.

Due to its highly structured labor framework, Israeli employment contracts must be drafted in accordance with it. This will avoid costly payroll, tax and benefit errors, which can be costly for an employer to fix.

Employment contracts & must-have clauses

Israeli employment contracts should be drafted in Hebrew. According to Israeli law, employees can be employed under two types of contracts:

• An indefinite contract: No predetermined termination date.
• A fixed-term contract: Predefined for a specific period, project or task.

Your employment contracts should include:

• Employee and employer details: Full names and identification numbers.
• Job description: The employee's title and main responsibilities.
• Start date: The official first day of employment.
• Working hours: The standard daily and weekly hours.
• Salary and benefits: Include the base salary, payment schedule, and details on social benefits like pension funds.
• Leave entitlements: Information on annual vacation and sick leave.
• Termination notice: The required notice period for both parties.

Expert insight: In an R&D, technology and startup-driven environment like Israel, confidentiality and intellectual property clauses are essential. These clauses protect sensitive information, define creative ownership and prevent information leaks.

Probation periods

Probationary periods are common in Israel and typically last from three to six months. During this time, both you and the employee can assess if the role is a good fit. Employees on probation are still entitled to all statutory benefits, like minimum wage and social insurance contributions.

Even during probation, you must follow a formal hearing process before ending the employment relationship. However, the notice period for termination during the first year is shorter than for long-term employees.

Working hours & overtime

The standard workweek in Israel is 42 hours. For those working a five-day week, a typical workday is 8.6 hours. Any work beyond these hours is considered overtime.

Here’s how overtime pay works:

Overtime Hours	Pay Rate
First two hours	125% of the regular hourly wage
After the first two hours	150% of the regular hourly wage
Work on a rest day or holiday	150% of the regular hourly wage plus an alternative day off

Public & regional holidays

Employees in Israel are entitled to paid time off for public holidays. There are 9 official Jewish holidays each year.

Here is a list of the main public holidays:

• Rosh Hashanah (2 days)
• Yom Kippur
• Sukkot (first day)
• Simchat Torah
• Passover (first and seventh days)
• Independence Day
• Shavuot

Non-Jewish employees can choose to take paid leave on their own religious holidays instead of the Jewish holidays.

Hiring contractors in Israel

Contractors are widely used in Israel across the technology, research, consulting, construction and medical industries. However, the contractor industry is heavily regulated in Israel.

Independent contractors are viewed as separate business entities, rather than formal employees. Labor courts routinely reclassify contractors as employees when the actual working conditions indicate that financial and economic activity is controlled by a single company. In this case, authorities can require back payments in salary, taxes and mandatory benefits from the employer.

An Employer of Record (EOR) in Israel can help you avoid compliance risks by properly classifying workers. They ensure that hiring practices comply with Israeli labor laws, allowing you to hire the appropriate type of worker in Israel.

Payroll is processed monthly in Israel, and it is required that each employee receive a monthly payslip (Tlush Maskoret). Compensation consists of a gross salary, overtime pay (where applicable), a seniority payment (D’mei Havraa), a transportation allowance, national insurance, health insurance and pension. Tax is paid according to marginal tax rates.

The size of the deductions influences the net salary, and therefore, compensation is often stated as both total salary and net salary. This helps employees to understand the impact of the mandatory benefits on their take-home pay.

Payroll cycles & wage structure

You process payroll in Israel on a monthly cycle. Employees must receive their pay at least once a month. The payslip is typically detailed, showing gross pay and all deductions.

Beyond the base salary, your employee's compensation can include other payments.

• Bonuses and Commissions: You must report and tax any extra payments like bonuses or commissions within the pay cycle they are paid.
• Recreation Payment (Dmei Havraa): After an employee completes one year with your company, you are required to pay them an annual recreation payment. The amount depends on their seniority and is typically paid in the summer months.

Overtime & minimums

You must pay employees at least the national minimum wage. As of April 2026, the minimum wage is NIS 6,443.85 per month.

For any hours an employee works beyond their standard day, you must pay overtime.

• First two hours: Pay 125% of the employee's regular hourly rate.
• After two hours: Pay 150% of their regular rate for any additional hours.

Employer taxes and contributions

As an employer, you contribute a percentage of the employee's salary to social security and pension funds. These payments are mandatory. The total employer cost is typically between 20.8% and 24.33% of an employee's salary.

Contribution	Employer Rate	Notes
National Insurance	4.51% - 7.6%	This covers various social benefits. The rate varies based on the employee's income.
Pension Fund	6.5%	A mandatory contribution to the employee's retirement savings.
Severance Pay (Pitzuim)	8.33%	Set aside in the employee's pension fund. It is paid out if the employee is laid off.

Employee taxes and deductions

Employees also contribute to social security and health insurance from their gross salary. You must deduct these amounts and pay them to the government.

Deduction	Employee Rate	Notes
National Insurance	0.4% - 7.0%	The rate depends on income.
National Health Insurance	3.1% - 5.0%	This is a mandatory health contribution, also based on income.
Pension Fund	6.0%	The employee's direct contribution to their retirement fund.
Income Tax	10% - 50%	Israel uses a progressive tax system. Higher earnings are taxed at higher rates.

Israelis are entitled to a comprehensive set of mandatory benefits, but employers often offer additional benefits to attract top talent. Common supplementary benefits are contributions to private health insurance, additional pension fund contributions, and leave benefits.

Statutory leave

Here's a breakdown of the legally required leave you must provide:

• Annual Leave: The amount of paid vacation your employees get increases with their seniority. For the first five years, the minimum is 12 working days for employees on a five-day work week. This entitlement grows to 14 days in the sixth year and 15 in the seventh, with an additional day for each subsequent year up to a maximum.
• Sick Leave: Employees accumulate 1.5 sick days for each month of work, with a cap of 90 days. You don't pay for the first day of sickness. For the second and third days, you pay 50% of their regular wage, and from the fourth day on, it's 100%.
• Maternity Leave: An employee who has worked for you for at least a year is entitled to 26 weeks of maternity leave. The National Insurance Institute pays for 15 of these weeks. For employees with less than a year of service, the leave is 15 weeks.

Public holidays & regional holidays

Your employees are entitled to paid leave for public holidays. The number of days can vary based on the employee's religion. Here are the main public holidays in Israel:

Holiday	2025 Date
Passover (First Day)	April 13
Passover (Last Day)	April 19
Independence Day	April 29
Shavuot	June 2
Rosh Hashanah	September 23-24
Yom Kippur	October 2
Sukkot (First Day)	October 7
Simchat Torah	October 14

Typical supplemental benefits

To stay competitive, many companies offer more than the legal minimum. Here’s a look at statutory versus common non-statutory benefits:

Statutory Benefits	Non-Statutory Benefits
Minimum Wage	Supplemental Health Insurance
Annual Leave	Education Fund (Keren Hishtalmut)
Sick Leave	Wellness Programs (gym memberships, etc.)
Maternity & Paternity Leave	Meal Stipends or Vouchers
Public Holidays	Company Car or Transportation Allowance
Pension Contributions	Stock Options or Equity
Severance Pay	Annual Bonuses
National Insurance Contributions	Professional Development Budgets

How an EOR can help with setting up benefits

Setting up a benefits plan in a new country can be complex. An Employer of Record (EOR) simplifies this process for you.

An EOR already has a legal entity in Israel. This means you don't have to go through the time and expense of setting one up yourself. They handle all the legal and HR responsibilities that come with hiring employees.

Here's how an EOR can help you with benefits:

• Compliance: An EOR ensures your benefits package complies with all of Israel's labor laws. This saves you from having to become an expert in local regulations.
• Speed: You can hire and onboard employees in a fraction of the time it would take to do it on your own.
• Benchmarking: An EOR can provide insights into what other companies in your industry are offering. This helps you create a competitive benefits package that attracts top talent.
• Administration: The EOR manages the day-to-day tasks of benefits administration. This includes everything from enrolling employees in plans to handling payroll deductions.

By partnering with an EOR, you can offer your employees in Israel a comprehensive and compliant benefits package from day one.

Employers who terminate employment in Israel without cause can face significant penalties. Israel’s labor law requires that a pre-termination hearing be held, that advance written notice be provided, and that a complete financial settlement be finalized.

Employees who are dismissed without a hearing or due process may file a claim with the Labor Court. This can result in the reinstatement of the employee or a significant financial payout if the court determines that such action is appropriate.

Notice periods

You must provide employees with written notice before termination. The length of the notice period depends on how long the employee has worked for you.

For salaried employees:

• First 6 months: 1 day of notice for each month of work.
• Months 7 to 12: 6 days of notice, plus an additional 2.5 days for each month worked after the sixth month.
• After 1 year: 1 full month of notice.

For hourly employees, the notice period is:

• First year: 1 day for each month worked.
• Second year: 14 days, plus 2 days for every two months of work.
• Third year: 21 days, plus 1 day for every two months of work.
• After three years: 1 full month of notice.

Severance pay

Terminated employees in Israel are generally entitled to severance pay. The standard is one month's salary for each year of service. The calculation uses the employee's average pay over the last 12 months. Some employers contribute a portion of the employee's monthly salary to a severance fund, which can offset this cost.

How Rivermate handles compliant exits

At Rivermate, we manage the entire offboarding process to ensure you comply with Israeli law. We take a clear and structured approach to every employee exit.

Our process includes:

• Pre-termination Hearing: We guide you through the mandatory "shimu'a" hearing. We help you prepare the written invitation with the reasons for the potential termination and ensure the employee has adequate time to prepare.
• Documentation: We handle all necessary paperwork. This includes the final decision letter and any settlement agreements. We make sure everything is clear and properly documented.
• Final Payments: We calculate and process all final payments. This includes the employee's last salary, unused vacation days, and any severance pay they are owed.
• Pension Fund Release: We ensure a prompt release of the employee's pension funds.
• Company Property: We coordinate the return of all company property, such as laptops and phones.

Foreign workers in Israel must be sponsored by an employer through the Population and Immigration Authority. Employment is restricted to the B1/Expert/Work Visa. This type of visa regulates the amount a foreign worker can be paid and the maximum stay limit.

Standard work visas are valid for up to one year with the possibility of extension. Most expert working visas have a maximum duration of 5 years. Working without a visa in Israel is a serious offence with consequences for both the worker and the employer.

Employment visas & sponsorship realities

The most common route for foreign workers is the B/1 work visa. This visa is for individuals who have a job offer in Israel and have obtained a work permit. The B/1 visa is typically valid for one year and can be renewed.

Here is a breakdown of the process:

• Employer's Role: You, as the employer, must start the process by applying for a work permit from the Ministry of Interior.
• Employee's Role: Once the permit is approved, your employee applies for the B/1 visa in their home country.
• Arrival in Israel: Upon arrival, the employee must register with the local authorities to finalize the process.

An Employer of Record (EOR) can help you navigate this process. They can manage the paperwork and ensure compliance with local laws. However, the Israeli government has not fully established regulations for EORs to sponsor work visas. This means that applications submitted by an EOR may face extra questions and scrutiny. The authorities prefer the company where the employee will physically work to be the direct sponsor.

The most practical route to obtaining a work permit is through direct sponsorship by your company if you have a legal entity in Israel. If you do not have a local entity, an EOR can still be a valuable partner, but you should be aware of the potential challenges.

Business travel compliance

For short-term business trips, many nationalities can enter Israel for up to 90 days without a visa for activities like meetings and negotiations. However, any "productive work," such as hands-on repairs or active consulting, requires a work visa, regardless of the trip's length.

Starting in January 2025, visitors from visa-exempt countries will need an Electronic Travel Authorization (ETA-IL) before traveling to Israel. This authorization is for stays up to 90 days.

For short-term work assignments, the Short-Term Employment Authorization (SEA) offers a faster alternative to the standard B/1 visa process. The SEA program allows for work in Israel for up to 45 days in a calendar year. The application process is quicker, taking about 6-10 working days for approval.