Employer of Record in Israel

An Employer of Record in Israel serves as the legal employer on record, managing payroll, tax withholding, and statutory compliance on behalf of a client company. Hiring through an EOR typically takes one to two weeks, compared to four to eight weeks required to incorporate a local entity, making it a faster path to establishing a workforce in the country. Gloroots operates as an EOR provider in Israel, and this guide covers employment contracts, payroll obligations, statutory benefits, termination rules, and the full step-by-step hiring process.

Compliance in Israel involves mandatory Bituach Leumi registration, with employer contributions reaching up to 7.6% of gross salary, along with pension enrollment required from the first day of employment and progressive income tax withholding applied to every payroll run. The monthly minimum wage stands at $2,067 (NIS 6,247.67), effective April 2025, and employees are entitled to one month's notice after completing one year of service.

What Is an Employer of Record in Israel?

An EOR becomes the legal employer of a worker in Israel, assuming full responsibility for employment contracts, payroll processing, income tax withholding, and statutory contributions to Bituach Leumi and pension funds. For a detailed explanation of the model, see how does EOR work.

Multinationals, startups, and scale-ups use an EOR in Israel to access local tech talent without registering a local entity.

In practice, the client selects the candidate and directs the work. The EOR issues a compliant, Hebrew-language employment contract, runs monthly payroll with Bituach Leumi and pension deductions applied correctly, administers statutory benefits, and manages day-to-day HR compliance throughout the employment lifecycle.

Get clear hiring costs

See how pricing can support the plan covered in What Is an Employer of Record in Israel.

View pricing

Your Hiring Options in Israel: EOR vs. Entity vs. PEO vs. Contractor

Companies hiring in Israel can choose from four paths: an EOR, an owned entity (private limited company or branch), a PEO or co-employment arrangement, or an independent contractor engagement. Each path carries different compliance ownership, setup timelines, and cost profiles. Gloroots EOR services cover the full employment lifecycle without requiring a local entity.

Entity setup suits long-term, large-scale operations where full operational control justifies the 4 to 8 week incorporation process and ongoing compliance overhead.

An EOR or contractor engagement suits rapid market entry, pilot hires, or project-based work where speed and flexibility matter more than permanent infrastructure.

How to Hire in Israel Through an EOR: Step by Step

Hiring through an EOR in Israel follows six defined steps, from deciding whether an EOR fits your strategy through to running compliant monthly payroll and managing the ongoing employment relationship.

Step 1: Decide Whether an EOR or Entity Fits Your Israel Strategy

Assess hiring volume, timeline, and long-term commitment before choosing a path. If you plan to employ fewer than 10 people in Israel or need to hire within six months, an EOR is typically the faster and lower-risk option compared to incorporating a local entity.

Step 2: Vet and Select an EOR Provider for Israel

Confirm that the EOR holds an owned legal entity in Israel rather than operating through a partner network. Verify in-house Israeli labor law expertise and the ability to sponsor work permits for foreign national hires.

Step 3: Draft and Issue a Compliant Employment Contract

The EOR issues a written contract covering role, salary in NIS, the 42-hour workweek, overtime structure, probation terms, and termination conditions. The contract includes Section 14 pension arrangement language and complies with Israeli labor law. Note: "General Manager" is a prohibited job title in Israeli employment contracts.

Step 4: Complete Statutory Onboarding and Registration

The EOR collects Form 101 from the employee, registers with Bituach Leumi, and enrolls the employee in an approved pension fund. Monthly payroll deductions for income tax, national insurance, and pension contributions are set up at this stage.

Step 5: Run Compliant Monthly Payroll

The EOR calculates and withholds progressive income tax, Bituach Leumi contributions, and pension deductions. Hebrew payslips are issued each month. All contributions are remitted to the Tax Authority and Bituach Leumi by the 15th of the following month.

Step 6: Manage Offboarding and Exit Compliantly

The EOR conducts the mandatory pre-dismissal hearing (Shimu'a) and issues written termination notice. Severance is calculated at one month's salary per year of service. Pension funds are settled and termination updates are filed with the Tax Authority and Bituach Leumi.

Plan your next hiring step

Talk through the questions raised in How to Hire in Israel Through an EOR: Step by Step with the Gloroots team.

Book a demo

How to Choose the Right EOR in Israel

Selecting the right provider requires evaluating six criteria specific to Israeli employment law and payroll compliance.

Israel's labor framework is detailed and actively enforced. Providers must demonstrate in-house expertise across Bituach Leumi, pension regulations, Section 14 arrangements, and the Shimu'a pre-dismissal process. Generic global coverage is not sufficient.

Evaluate each provider against the criteria below before committing. For a broader comparison of providers, see the best employer of record guide.

Local Israeli Labor Law Knowledge

Confirm the provider has in-house Israeli employment law expertise. This includes Bituach Leumi, pension regulations, Section 14 arrangements, and the mandatory Shimu'a pre-dismissal hearing process.

Owned Entity vs. Partner Network

An EOR with an owned legal entity in Israel bears direct employer liability. A partner-network model introduces a third party between the client and compliance, which can create gaps in accountability and contract enforcement.

Support Model and Response Time

Confirm whether the provider offers dedicated account management and in-country HR support in both Hebrew and English. Israel operates on a Sunday to Thursday workweek with a distinct Jewish holiday calendar, so support availability must align with local working days.

Pricing Model: Flat Fee vs. Percentage of Payroll

Flat-fee pricing, such as USD 599 per employee per month, gives more predictable employer of record cost for high-salary Israeli tech hires. Percentage-of-payroll models scale with salary and can become expensive in Israel's competitive technology market.

Data Security and Privacy Compliance

Verify that the provider complies with Israel's updated Privacy Protection Law (PPL), which aligns with EU GDPR standards. Companies handling sensitive employee data may require a Data Protection Officer (DPO) under the PPL framework.

Platform Integration and Multi-Country Coverage

If Israel is one of several hiring markets, confirm the EOR platform integrates with your HRIS and covers 150 or more countries. A single system to manage Israeli and global employees reduces reporting gaps. Gloroots supports multi-country employment, including markets such as employer of record Singapore, from one centralized platform.

Workforce and Talent Pool in Israel

Israel has a workforce of approximately 4.5 million people, with a median age of around 30.5 years. More than 50% of adults hold tertiary education, with strong output from institutions such as the Technion and Tel Aviv University.

Tel Aviv, Haifa, Jerusalem, and Be'er Sheva are the primary talent hubs, covering technology, cybersecurity, biotech, and defense.

Israeli workplaces tend to be flat and direct. Employees are expected to challenge ideas and propose solutions, a cultural trait often called "chutzpah." The standard workweek runs Sunday through Thursday. Flexible and family-oriented policies are widely valued, and English proficiency is high across technology and academic sectors.

Employment Law Essentials in Israel

Israeli employment law sets firm obligations on contracts, working hours, and pay. Employers must meet these requirements from day one of the employment relationship.

Contracts must be written and must include job description, salary, benefits, working hours, and termination terms. A notice-to-employee document is required within 30 days of the start date. The Section 14 arrangement, which governs severance fund ownership, must be explicitly stated in the contract. The job title "General Manager" is prohibited under Israeli law. Fixed-term contracts are legally permitted but carry significant legal risk if terminated before the agreed end date.

Working hours are capped at 12 hours per day and 58 hours per week, including all overtime. The standard workweek is 42 hours, typically Sunday through Thursday. Overtime is paid at 125% for the first two hours and 150% thereafter. In the tech sector, a global overtime arrangement (a fixed monthly overtime component built into the salary) is common and must be specified in the contract.

The minimum wage, effective April 1, 2025, is $2,067 (NIS 6,247.67) per month or $11 (NIS 34.32) per hour. Israeli tech salaries typically exceed this floor by a significant margin. Gloroots updates payroll automatically when statutory minimum wage rates change, so employers maintain compliance without manual intervention.

Employment Contracts

A notice-to-employee document must be issued within 30 days of the start date. The Section 14 arrangement must be explicitly stated in the contract. The job title "General Manager" is prohibited. Fixed-term contracts carry significant legal risk if terminated early.

Working Hours and Overtime

Working hours are capped at 12 hours per day and 58 hours per week, including overtime. In the tech sector, a global overtime arrangement with a fixed monthly component is common and must be specified in the employment contract.

Minimum Wage

The minimum wage in Israel is $2,067 (NIS 6,247.67) per month or $11 (NIS 34.32) per hour, effective April 1, 2025. Israeli tech salaries typically exceed this floor by a wide margin. Gloroots updates payroll automatically when minimum wage rates change, keeping employers compliant without manual tracking.

Leave and Statutory Benefits in Israel

Israeli law mandates a range of leave entitlements and statutory benefits. Employers must account for annual leave, sick leave, parental leave, public holidays, and several mandatory financial benefits.

Sick leave accrues at 1.5 days per month, capped at 90 days total. The first day is unpaid; the second and third days are paid at 50%; all subsequent days are paid at 100%.

Bereavement leave is 5 paid working days for the death of a spouse or first-degree relative. Employees with 6 or more months of service are entitled to unpaid childcare leave of up to 25% of their total employment period, with a maximum of one year and full job protection on return. Employees on military reserve duty receive full paid leave; the government reimburses the employer up to $15,703 (ILS 47,465) per month, and employees have 60-day dismissal protection on return.

Non-Jewish employees may choose Friday, Saturday, or Sunday as their weekly rest day. They may also substitute their own religious holidays for Jewish national holidays, provided they notify the employer at the start of the tax year.

Two additional statutory benefits apply to all employees. Keren Hishtalmut (study fund) requires an employer contribution of 7.5% (capped at a salary of $5,198 (ILS 15,712), or uncapped by agreement) and an employee contribution of 2.5%; this benefit is tax-advantaged and highly valued in the Israeli tech sector. A statutory travel allowance of $107 (ILS 323) per month (or a daily maximum of $7 (ILS 22.60) based on public transport pass cost) is a mandatory employer obligation.

Annual Leave

Annual leave entitlement in Israel is based on tenure and measured in calendar days: years 1 to 5 give 16 calendar days (12 working days); year 6 gives 18 days; year 7 gives 21 days; years 8 to 13 give 23 days; and year 14 and beyond gives 28 days.

Sick Leave

Employees accrue 1.5 sick days per month. The lifetime ceiling is 90 days total. The first day is unpaid; days two and three are paid at 50%; all subsequent days are paid at 100%.

Maternity and Paternity Leave

Maternity leave is 26 weeks, with 15 weeks paid by National Insurance. Fathers may take a portion of leave in qualifying cases.

Employees with six or more months of service may take unpaid childcare leave of up to 25% of their total tenure with the same employer, capped at one year. This leave is job-protected.

Bereavement leave is five paid working days for the death of a spouse or first-degree relative. Employees called for military reserve duty receive full paid leave during service; the government reimburses the employer up to $15,703 (ILS 47,465) per month. Employees returning from reserve duty have 60-day dismissal protection.

Public Holidays

Israel observes 9 to 10 public holidays annually, based on the Jewish calendar. Non-Jewish employees may designate Friday, Saturday, or Sunday as their weekly rest day and may substitute their own religious holidays for Jewish national holidays at the start of the tax year. If the workplace closes for a Jewish holiday, non-Jewish employees may need to use vacation days.

Payroll, Tax and Statutory Contributions in Israel

Israel runs a monthly payroll cycle. Employers must remit all withholdings to the tax authority by the 15th of the following month.

Employers must apply the updated 2026 Bituach Leumi rates. Using outdated rates creates back-payment liability and exposes the employer to financial penalties. Verify rates before each payroll run.

2026 Bituach Leumi contribution rates

Income tax slabs (2024 rates, retained pending 2025 update)

Employer and employee statutory contributions

Payroll records must be retained for a minimum of seven years. Under the Section 14 arrangement, the severance component of the pension fund offsets the employer's statutory severance obligation.

Work Visas and Permits in Israel

Israel issues several work permit categories for foreign nationals. The B-1 work visa is the primary entry document, valid for 30 days, with the work permit issued separately by the relevant authority.

An EOR services provider in Israel can sponsor work permits for foreign hires and manage the three-phase application process, including Ministry of Interior approval, which is required for most permit categories.

Visa and permit types in Israel

Equity and ESOP Consulting in Israel

Equity compensation is standard practice in Israel's technology sector. Stock options are a primary tool for attracting and retaining talent in startups and scale-ups.

Israeli tax law provides a favorable treatment for employee stock options under the 102 Capital Gains Track. Employees who hold shares for 24 months through a trustee qualify for a reduced capital gains tax rate. The alternative 3(i) track taxes option gains as ordinary income, which is less favorable for employees and less competitive as a retention tool.

Misclassification Risk in Israel

Israeli courts apply a substance-over-form test. The label on a contract does not determine whether a worker is an employee or an independent contractor.

Criteria courts examine

• Control over how, when, and where work is performed, including scheduling and task direction.

• Integration into the company's organizational structure, such as attending internal meetings or using company systems.

• Who provides tools and equipment, and which party bears financial risk for the work outcome.

• Exclusivity of the working relationship, including whether the worker serves multiple clients simultaneously.

Penalties for misclassification

• Retroactive pension contributions, severance pay, and paid leave entitlements owed from the original start date.

• Back-payment of income tax and Bituach Leumi contributions, plus statutory penalties and interest on unpaid amounts.

• Fines issued by the Israeli Tax Authority and the National Insurance Institute for non-compliance.

• Reclassified workers may file claims for wrongful termination, damages, and unpaid statutory benefits.

An Employer of Record removes misclassification risk by issuing compliant employment contracts and managing all statutory contributions from day one.

What our clients are saying

“China's employment regulations are highly nuanced, and we needed confidence that our offers would meet local expectations without risking compliance issues or losing candidates.”

HR Manager

Agratas Corp UK

Read Case Study

Hiring, Onboarding, Termination and Offboarding in Israel

Hiring in Israel requires compliant contracts, correct payroll registration, and careful attention to statutory benefits from the first day of employment. The sections below cover onboarding, termination, and offboarding in structured phases.

Onboarding

Before Day One

• Draft a compliant written employment contract that includes Section 14 arrangement language for pension and severance.

• Confirm the job title is not a prohibited or restricted title under Israeli labor law or sector-specific regulations.

• Prepare the notice to employee document for delivery to the worker within 30 days of the start date.

Day One

• Collect a completed Form 101 so the Israeli Tax Authority can assign the correct tax credit points.

• Register the employee with Bituach Leumi, the National Insurance Institute, to activate social security coverage.

• Enroll the employee in an approved pension fund. Pension participation is mandatory from the first day of employment.

First Week

• Issue the notice to employee document if it was not provided at the time of contract signing.

• Confirm payroll deductions are configured for income tax, Bituach Leumi contributions, and mandatory pension amounts.

• Provide an employee handbook covering leave entitlements, working hours, overtime rules, and statutory benefits.

Beyond

• Enroll the employee in a Keren Hishtalmut (study fund) if the employer offers this as a benefit.

• Confirm that convalescence pay (dmei havra'ah) entitlement activates after the employee completes one year of service.

• Review the setup for statutory travel allowance reimbursement and confirm it is reflected in monthly payroll.

Termination

Termination in Israel requires a valid reason, a mandatory pre-dismissal hearing (Shimu'a), and written notice. Notice periods range from one day per month of service during the first six months to one full month after one year of tenure. Severance of one month's salary per year of service applies to employees with at least one year of service. Dismissing protected employees, including pregnant workers and reservists, requires prior approval from the Ministry of Labor.

Offboarding

Settlement

• Calculate the final payroll, including outstanding salary, unused vacation days, overtime owed, and any bonuses due.

• Calculate and pay severance at one month per year of service, unless offset through a Section 14 pension arrangement.

• Transfer all accrued pension contributions to the employee's fund and settle any remaining severance accounts.

Documents

• Notify Bituach Leumi and the Israeli Tax Authority of the employee's official termination date.

• Issue Form 106, the annual tax summary, and a final payslip showing all deductions and contributions.

• Provide written confirmation of the employment duration and the stated reason for termination.

Exit

• Recover company assets including laptops, mobile phones, access cards, and any other company property.

• Revoke all system access and account credentials on or before the employee's final working day.

• Conduct an optional exit interview for knowledge transfer, particularly in technology and startup environments.

What's New: Recent Regulatory Changes in Israel

Effective January 1, 2026, the National Insurance Institute (Bituach Leumi) updated employer and employee contribution rates. The income threshold for the reduced rate increased to $2,548 (NIS 7,703) per month, and the maximum income ceiling rose to $17,174 (NIS 51,910) per month.

• 2026 Bituach Leumi employer rate: 4.51% on monthly income up to $2,548 (NIS 7,703), and 7.6% on income above that threshold.

• 2026 Bituach Leumi employee rate: 4.27% on monthly income up to $2,548 (NIS 7,703), and 12.17% on income above that threshold.

• Minimum wage increased to $2,067 (NIS 6,247.67) per month ($11 (NIS 34.32) per hour), effective April 1, 2025.

• Israel's updated Privacy Protection Law (PPL) introduces EU-style data protection alignment, expanded Privacy Protection Authority (PPA) enforcement powers, and potential data protection officer requirements for companies handling sensitive employee data.

• Iron Sword War provisions introduced additional leave rights for spouses of military reservists called to active duty.

Employers using outdated Bituach Leumi rates or minimum wage figures face back-payment liability and penalties. Quarterly rate reviews are recommended for all payroll teams.

Assign a payroll compliance owner to review Bituach Leumi rates, minimum wage, and income tax brackets each quarter to avoid exposure.

Costs and Financial Planning for Hiring in Israel

Total employer cost in Israel exceeds gross salary by 25–35% once statutory contributions, mandatory benefits, and administrative costs are included.

Several costs catch first-time employers off guard. Convalescence pay (dmei havra'ah) is paid as an annual lump sum. Mandatory travel allowance reimbursement runs $107 (ILS 323) per month. If Keren Hishtalmut is offered as a benefit, the employer contributes 7.5% of salary on top of other obligations. These items do not appear in a basic salary calculation but are legally required or market-standard.

Companies hiring through a direct entity must also absorb entity setup costs, ongoing payroll administration, and the compliance risk of misapplying Bituach Leumi rates. Gloroots bundles these obligations into a single, predictable monthly fee. For a cost comparison across markets, see employer of record Germany.

Common Challenges and How Gloroots Solves Them in Israel

Practical compliance in Israel requires more than a standard payroll setup. Employers must apply updated Bituach Leumi rates, structure Section 14 arrangements correctly, conduct mandatory pre-dismissal hearings, and sponsor work permits for foreign hires.

Each of these areas carries legal exposure if handled incorrectly. The table below covers challenges not addressed in earlier sections of this guide.

Why Gloroots Is a Strong EOR Partner in Israel

Gloroots is well suited for foreign companies hiring small or growing teams in Israel without establishing their own local entity, particularly technology, cybersecurity, and biotech companies that need compliant employment contracts and competitive benefits quickly.

Country-specific capabilities include Israeli employment-law expertise, Section 14 arrangement documentation where applicable, Hebrew-language payslip administration, compliance with current Bituach Leumi requirements, and support with applicable work-permit processes for foreign hires. These are important areas of Israeli employment and payroll administration that can require local expertise.

Gloroots can support accelerated onboarding for Israeli employees and manage the core employment lifecycle, including contracts, payroll, statutory contributions, benefits, leave administration, and offboarding.

This makes Gloroots a practical fit for companies entering Israel for the first time, scaling a pilot team, or hiring a single specialist without immediately establishing their own Israeli entity. For companies already using Gloroots in other markets, see employer of record UK as an example of the platform's international coverage.

Buyers should confirm whether Gloroots employs workers through its own Israeli entity or a partner network, as the underlying employment structure can affect how employment, payroll, immigration, and compliance responsibilities are allocated. They should also confirm the scope of work-permit support and any associated government fees before signing.

Put your hiring plan into action

Create an account to move from Why Gloroots Is a Strong EOR Partner in Israel to your next compliant step.

Sign up

Conclusion

Israel's mandatory pension enrollment from day one and the Section 14 arrangement make compliant employment structuring more complex than in most markets.

Companies hiring in Israel for the first time should map their statutory obligations before making an offer. That means accounting for Bituach Leumi, pension contributions, convalescence pay, and travel allowance. Once those costs are clear, the decision between an EOR and a direct entity comes down to timeline and headcount. An EOR fits companies that need to hire quickly or want to test the market before committing to a local entity.

Frequently Asked Questions About Employer of Record in Israel

What does an Employer of Record do in Israel?

An Employer of Record in Israel legally employs workers on behalf of a foreign company. The EOR signs the employment contract, runs payroll, withholds income tax, remits Bituach Leumi contributions, and manages mandatory benefits including pension, severance, and convalescence pay.

The client company directs the employee's day-to-day work. The EOR handles all statutory obligations, including compliance with the Annual Leave Law, Sick Pay Law, and Notice Period Law. This allows the client to operate in Israel without registering a local entity.

How long does it take to hire an employee in Israel through an EOR?

Hiring through an EOR in Israel typically takes 1–2 weeks from contract signing to the employee's first day. This includes drafting a compliant employment agreement, enrolling the employee in pension and Bituach Leumi, and setting up payroll.

By comparison, setting up a private limited company in Israel takes 4–8 weeks and requires additional steps including tax registration, director appointments, and a local bank account. An EOR removes all of those prerequisites.

Is a probation period mandatory in Israel?

Israeli law does not mandate a probation period, but it is standard practice to include one in employment contracts. The typical probation period is 3–6 months, during which notice periods are shorter.

During probation, an employer can terminate employment with shorter notice: one day per week of employment for the first six months. After probation, standard statutory notice periods apply, ranging from one month to several months depending on tenure.

Can an EOR sponsor work permits for foreign nationals in Israel?

Yes. An EOR with the appropriate authorization can sponsor work permits for foreign nationals hired in Israel. The process involves applying to the Israeli Population and Immigration Authority and meeting specific criteria based on the employee's role and nationality.

Buyers should confirm that their EOR provider has direct experience with Israeli work permit applications. Processing times vary, and some permit categories require employer-specific approvals. Gloroots supports work permit sponsorship for eligible foreign hires in Israel.

What is the Section 14 arrangement and why does it matter?

Section 14 of the Severance Pay Law allows employers to substitute ongoing pension contributions for the statutory severance obligation. Under this arrangement, the employer's monthly pension contributions (currently 6% for severance) are paid into the employee's pension fund and cannot be reclaimed upon termination.

This arrangement must be documented in the employment contract. If it is not, the employer may owe severance pay in addition to pension contributions at the end of employment. Most Israeli employers use Section 14 arrangements, and EOR providers should include this language as standard in all contracts.

How much does it cost to employ someone in Israel?

Total employer cost in Israel typically runs 25–35% above gross salary. Statutory contributions include Bituach Leumi (employer share), pension contributions of 6.5%, and severance contributions of 6% under Section 14. Additional costs include convalescence pay, a mandatory travel allowance of $107 (ILS 323) per month, and Keren Hishtalmut if offered.

Administrative costs such as payroll processing, compliance management, and record retention add further overhead for companies running a direct entity. An EOR consolidates these costs into a single monthly fee, which improves cost predictability across the employment lifecycle.

Are non-compete clauses enforceable in Israeli employment contracts?

Non-compete clauses are enforceable in Israel, but courts apply a reasonableness standard. Israeli courts will uphold a non-compete only if it protects a legitimate business interest, is proportionate in scope and duration, and does not unreasonably restrict the employee's ability to earn a living.

Clauses that are overly broad in geography, duration, or industry scope are frequently struck down. Employers should draft non-compete provisions narrowly and tie them to specific confidential information or client relationships. Legal review of non-compete language is advisable before including it in an Israeli employment contract.

What is the payroll deadline in Israel and do I need an Israeli bank account?

Israeli law requires that salaries be paid by the ninth day of the following month. For example, January salary must be paid by February 9. Employers must also issue a payslip (tלוש שכר) in Hebrew for each pay period.

A direct entity requires an Israeli bank account to run payroll and pay statutory contributions. An EOR handles payroll from its own registered entity and bank account, so the client company does not need a local account. Gloroots issues Hebrew payslips and manages all payroll remittances on behalf of the employer.