Employer of Record in Israel

How hiring through an Employer of Record works in Israel

Israel is a globally recognized pioneer of the Employer of Record (EOR) model, serving as an attractive hub for R&D projects, tech innovation, and advanced startup ecosystems. As setting up a local entity to hire employees presents significant financial and administrative challenges, a practical option is to partner with an EOR like Rivermate. Instead of registering a new entity to leverage Israel’s talent pool, using an EOR involves hiring through an existing entity which acts as a legal employer and handles compliance throughout the employment lifecycle. In this setup, the foreign company retains control over daily tasks and manages the employee’s performance, while the EOR handles all employment-related matters compliantly.

Israeli labor market: a snapshot

The hiring market
Greatest hiring activity:	Major hiring hubs are primarily found in the center of Israel, including Tel Aviv, Herzliya and Rishon LeZion. Jerusalem serves as a second-tier location.
Hiring timelines:	Locals: Once all documentation is in place, registration can be completed in as little as 1 day. Foreign nationals: 2-4 months for B-1 visa processing.
In-demand sectors:	Sales, technology, software development, R&D, cybersecurity, AI, finance, and pharmaceuticals.
Sectors with skills shortages:	Specialized software engineering, data science, advanced technical research.

The salary market
Employer tax contributions:	Up to approximately 23% on top of employee’s gross salary (National insurance, pension contributions, severance, disability) plus common benefits
Monthly minimum wage:	Gross ILS 6,443.85 / month for full-time employees (from April 2026)
Average gross monthly salary:	ILS 14,534 (July 2026)
Personal income tax rates:	Progressive income tax brackets ranging from 10% to 50%. Tax brackets applicable on annual taxable income for 2026:
ILS 0 - 84,120: 10% ILS 84,120 - 120,720: 14% ILS 120,720 - 228,000: 20% ILS 228,000 - 301,200: 31% ILS 301,200 - 560,280: 35% ILS 560,280 - 721,560: 47% ILS 721,560 and above : 50% Same rates applicable to non-residents.

The real cost of hiring in Israel

Israel’s unique compensation structure includes base salaries which are supplemented by mandatory benefits and allowances. Salaries are disbursed monthly via bank transfer, and employers must provide a detailed monthly payslip.

Base salary

Salaries in Israel vary significantly across sectors, with the high-tech industry typically commanding the highest compensation packages.

The Central Bureau of Statistics publishes periodic data on average wages at current prices across sectors. According to the latest report based on July 2026 data, the following averages have been observed:

• NGOs: 8,046 / month
• Non-financial corporations: ILS 15,896 / month
• Financial corporations: ILS 24,491 / month
• High-tech sector: ILS 34,301 / month

No formal 13th salary is applicable in Israel.

Employer social security contributions

Statutory payroll obligations in Israel include mandatory contributions to the National Insurance Institute (Bituah Leumi). This national insurance contribution is applied at two different rates for both employer and employee, depending on the amount. Wages up to 60% of the average wage (for 2026 that threshold is ILS 7,703) are subject to a reduced rate, while the portion exceeding that amount is subject to the full rate. Threshold amounts are revised each year. The table below presents the employer contribution rates on the insured earnings.

Bituach Leumi	Employer contribution paid up to 60% of average (up to ILS 7,703 in 2026) - reduced rate	Employer contribution paid on amount in excess of 60% of average (above ILS 7,703 in 2026) - full rate
National insurance contribution	4.51%	7.6%

For the employees, either a 1.04% (reduced rate portion) or 7% (full rate portion) applies. The Health contribution - paid entirely by the employee - is paid on the same schedule at rates of 3.23% (up to the threshold) and 5.17% (above it).

Beyond the National Insurance contribution described above, employers also mandatorily contribute to Pension Insurance, at a fixed rate of 6.5% of the monthly salary.

Yet a third component is payable by the employer but only where so-called Section 14 arrangements apply. When that is the case, the employer contributes 8.33% of the salary each month towards future severance pay. The amount is transferred monthly into a fund that is employee-specific and which the employee can withdraw at termination under certain conditions (including having worked for the employer for at least a year).

Statutory employee benefits and premiums

The standard working hours in Israel are set at 42, with the typical workweek running from Sunday to Thursday. Saturday is usually a weekly rest day. Certain statutory benefits, premiums and protections applicable in Israel include:

Overtime	Compensated at 125% of the regular rate for the first two overtime hours per day. All additional overtime hours are paid at 150%.
Sick leave	Accrued at a rate of 1.5 days per month worked with a maximum of 90 days applicable. By law, the first day is unpaid (though some employers may elect to pay it), the next two days are paid at a rate of 50%. From the fourth day onward, 100% payment is due.
Maternity leave	For employees with at least 12 months of prior service with the employer, a 26-week maternity leave is granted, 15 weeks of which are paid by the National Insurance Institute, subject to additional criteria. Employees with service shorter than 12 months usually receive only 15 weeks of leave.
Annual leave	Paid vacation eligibility starts at 16 calendar days per year and remains at that level for the first five years. In the sixth year, the eligibility reaches 18 calendar days; 21 calendar days are granted during the seventh year. From the 8th year onwards, an additional day is added each year, reaching the maximum of 28 days in the 14th year of service.
Reserve duty	Paid if an employee is called up for reserve duty. Length varies case by case. Initially covered by the employer and then refunded by the National Insurance.
Recovery / Convalescence pay	Under certain rules, an entitlement to recovery pay may be applicable. Usually it is granted in an amount calculated at a prescribed daily rate and depends on the length of service.

Employers are also typically liable to reimburse commuting expenses to eligible employees.

Additional benefits

A very common but not legally mandatory benefit in Israel is the study fund or Keren Hishtalmut. Although it is optional, most senior candidates would not accept a role if the compensation does not include it. Usually, it is paid at a rate of 7.5% of the gross salary by the employer (employees contribute 2.5%). The contribution is accumulated and can be withdrawn after six years; tax deductions and exemptions may apply.

Another common additional benefit in Israel is the meal allowance (such as the Sibus food card), usually in an amount around ILS 1,000 per month.

Private health insurance is sometimes provided but is not as common.

Calculate employment costs

Practical insights into hiring in Israel

The Israeli market is characterized by intense competition for specialized talent, a low unemployment rate and a strong culture of innovation. While the hiring process is highly efficient for local workers, navigating complex local regulations, strict immigration rules, and termination hearing procedures requires local expertise.

Market condition	Current reality
Hiring momentum	High demand in high-tech, software, engineering, cybersecurity, specialized project management
Onboarding procedures	Quick and easy hiring process for local hires; retroactive registrations possible within limits
Talent availability	Highly educated and multilingual workforce; tightly contested senior roles
Salary pressure	Steady 3%-4% wage growth per year
Candidate expectations	Highly valued perks include remote work and study fund benefit (Keren Hishtalmut)
Employer cost	About 25% mandatory cost on top of gross salary plus additional voluntary but commonly paid benefits
Administrative complexity	Strict termination rules, complex immigration procedures

Hiring foreigners in Israel

Hiring foreign nationals in Israel is a generally complex procedure as immigration generally requires a number of criteria to be fulfilled. An EOR like Rivermate can sponsor only B-1 specialist visas, which require proof that an Israeli local cannot be sourced for the particular position.

Applications are reviewed on a case-by-case basis as no occupation shortage list exists. Non-specialist positions (such as general sales professionals or marketing executives) generally do not qualify for the visa. Our local experts advise clients about the likelihood of a successful visa application, for which the cost is also high and the processing time is two to four months. Foreign experts hired in Israel can stay in the country for a maximum of 63 months.

High-tech visas also exist in Israel but cannot be sponsored through an EOR.

Compliance risks for employers in Israel

Employment agreements and notice periods

Employment contracts in Israel are often concluded in English only; however, such contracts include a clause in Hebrew where the employee confirms that they understand English and that the contract could have been concluded in Hebrew as well. Our local experts advise that indefinite contracts with a probation period are preferable over fixed-term contracts.

It is important to note that employers generally must also provide a written notice of employment terms within 30 days of the employment start date.

In case of indefinite-term contracts, a 30-day’ notice period applies after the first year.

Terminations and dismissal hearings

A distinctive feature of terminations in Israel is pre-dismissal hearings (Shimua). Prior to scheduling a hearing, the proposed reasons must be communicated to the employee in advance. Sufficient time must be provided to the employee to reply before the hearing. A hearing is mandatory and the employee’s response must be genuinely considered. No decisions can be made without a hearing.

Benefits of hiring employees through an EOR in Israel

An attractive talent market in a global innovation-focused location may have led foreign businesses to consider setting up their own legal entity in Israel. However, for individual hires or even small teams, using EOR services instead may be a better, faster and more flexible option, even if only during the initial setup or exploratory stage.

Ready to hire in Israel?

Hiring in Israel involves much more than simply finding the right candidate. From managing complex payroll processing rules, remitting taxes and contributions on time, and compliantly administering country-specific benefits, Rivermate handles all complexities so you can hire with confidence. Talk to an Israel Hiring Expert to take the first step in scaling your business in Israel.

Sources:
Minimum Wage in Israel
Central Bureau of Statistics: Main indicators
Central Bureau of Statistics: Average wages per employee job at current prices, by sector and sub-sector
Central Bureau of Statistics: Average Gross Wages per Employee job in July 2026
PwC Tax Summary Israel
BTL: rates for national and insurance contributions
Government of Israel: Pension Insurance
Ministry of Labor: Sector 14 arrangements