If you're considering expanding your business and hire employees in Isreal, you should consider partnering with an Employer of Record (EOR). An Israel EOR assumes all employment risks and responsibilities for your company to hire and expand in the country compliantly. This entails managing an employee’s payroll, taxes, and compliance with local labor laws. While your company retains control over day-to-day employee activities, an EOR assumes the role of the legal employer, and offloads administrative responsibilities off your shoulders. 

Starting a business in Israel involves navigating specific regulations, legal frameworks, and cultural nuances unique to the country. While the process shares some common elements with other countries, there are many differences, too. Specific regulations govern the employment of temporary workers in Israel, including limitations on the duration of temporary employment and provisions for equal treatment of temporary and permanent workers. Israel has a strong tradition of trade unions, and workers have the right to form or join unions. Worker committees, which represent employees at the workplace, are also common. Israel has labor laws that protect workers' rights, including provisions for collective bargaining, working conditions, and minimum wage, while employment in the U.S. is generally "at-will," allowing employers to terminate employees for any reason. 

With such unique labor laws and regulations, it is important to seek expert help. Partner with an Israel Employer of Record (EOR) like Gloroots to onboard local talent in under a day. With a single partner to manage payroll taxes, your HR operations become less confused and more streamlined. The Israel EOR  will ensure full compliance with local employment obligations, and you can fully focus on core business functions and growth plans.

Israel EOR services typically offer two pricing models: fixed and variable. Gloroots' Uruguay EOR adopts a transparent fixed fee, eliminating hidden charges and simplifying budget planning for employers. This contrasts with variable fee structures, which can complicate salary budgeting as costs increase with higher employee salaries. Choosing Gloroots ensures a straightforward and predictable approach to managing workforce expenses.

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Key Metrics For Foreign Employers 

Israel is a high-income country ranking 25 in Insead’s Global Talent Competitiveness Index 2023. Israel has a reputation for being at the forefront of technological advancements. The country is a global leader in areas such as cybersecurity, biotechnology, and artificial intelligence, making it a great place for businesses to find talent.

The table below depicts key indicators from the Global Talent Competitiveness Report for employers wishing to hire from Israel.

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Source: The Global Talent Competitiveness Index 2023

In Israel, the challenge of "Misclassification of Workers" is addressed by Gloroots through precise compliance with labor laws, accurate worker classification, and seamless payroll management. As your partner, we ensure efficient adherence to regulations, fostering confidence in your business endeavors and promoting operational efficiency in the Israeli labor landscape.

In Israel, employment relationships are established through either fixed-term contracts for specific tasks or indefinite-term contracts for full-time positions. Notably, statutory requirements for written employment contracts are eliminated for simplified hiring. 

Employment contract

In Israel, employment relationships are established through either fixed-term contracts for specific tasks or indefinite-term contracts for full-time positions. Notably, statutory requirements for written employment contracts are eliminated for simplified hiring. 

Essential information required by employment law encompasses:

• Company details: Name, registered office address, registration number, etc.
• Employee details: Date of birth, current address, nationality, job designation, etc.
• Start date of employment
• Nature of the employment
• Employee duties
• Duration of employment for determinate contracts
• Payroll cycle and monthly salary disbursement date
• Compensation structures
• Length of the probationary period, if applicable
• Leave details
• Notice period
• Applicable collective bargaining agreements

Working time

In Israel, the standard workweek encompasses 42 hours, distributed across 7-9 hours per day, depending on the number of days worked each week. Employees are entitled to a minimum of 48 hours of rest per week, typically observed on Friday and Saturday, resulting in a working week from Sunday to Thursday. It is against the law to require an employee to work beyond 12 hours in a single day or accumulate more than 16 overtime hours in a week.

Overtime

Any hours worked beyond the standard weekly hours require overtime compensation, as specified in the employment contract or collective agreements. The agreement for overtime must be mutually decided upon by both the employer and employee before commencing any additional working hours. The total working week is capped at 42 hours, distributed over 5 or 6 days, with each daily work period not exceeding 9 hours. Overtime pay is mandated and calculated daily, with the first two overtime hours compensated at 125.00% of the regular wage, and any additional work hours during the weekly day of rest paid at 150.00% of the regular wage. Some companies opt for a fixed monthly amount to cover overtime compensation.

Public Holidays

Iran has 9 public holidays throughout the year.

Minimum Wage

As of April 1, 2023, the monthly minimum wage in Israel stands at 5,571.75 ILS. There is a scheduled annual increment in place, and by the year 2025, it is anticipated to reach 6,000 ILS.

Annual Leave

Employees are entitled to a minimum of 12 working days of annual leave during their initial five years of service. This allocation increases to 14 working days starting from the sixth year, 15 working days from the seventh year, and, from the eighth year onwards, an additional day per year of service, reaching a maximum of 20 working days. For employees with a 6-day workweek, the entitlement is 6 days of absence for every seven days of legally accrued leave, considering that a Saturday is included within seven days of leave. The calculation for annual leave payment is based on the regular salary pay rate.

Paid Sick Leaves

Employees accrue sick leave at a rate of 1.5 days per month, with a maximum accumulation of 90 days. Payment during sickness varies based on the duration of leave:

• The employee is not entitled to pay for the first day of sick leave.
• On the second and third days of sickness, the employee receives 50.00% of their regular pay.
• From the 4th day onward, the employee is entitled to 100.00% of their regular pay.

Upon returning to work, employees must submit a medical certificate from a healthcare professional. Additionally, according to an amendment to the Sick Pay Law, individuals dealing with malignant diseases (such as cancer) or conditions requiring regular dialysis treatments are eligible for full sick pay (100%) from the first day of absence, if on leave for care or periodic examinations related to the condition, with a maximum of 90 days. Medical certification confirming the necessity of treatment or examination is required.

Maternity leaves

Female employees, after completing one year of service, are eligible for 26 weeks of maternity leave. Up to seven weeks can be taken before the predicted due date, with the remaining weeks used after the birth. Israel's social security system provides compensation for maternity leave, typically covering 15 weeks of fully paid leave and 11 weeks of unpaid leave, for eligible employees.

Employees with less than one year of service are entitled to a 15-week maternity leave. In cases of multiple or complicated births, the maternity leave entitlement can be extended by three weeks. Unfortunately, in the event of a child loss after birth, a mother can take unpaid maternity leave for up to 60 days following the birth.

Tax and Social Security contribution:

Employer Payroll Contribution 

Employee Payroll Contribution 

Employee Income tax

Termination 

In Israel, the standard termination process mandates that employers terminate an employee's contract in good faith, based on valid reasons, and in accordance with relevant laws, employment contracts, workplace norms, and collective bargaining agreements.

The termination procedure involves a hearing, where the employer must send a hearing invitation detailing the reasons for termination and scheduling it with ample time for the worker to prepare. The hearing is typically conducted by the worker's manager. During this process, the employee has a genuine opportunity to express their perspective on the intended termination. After the hearing, the employer should conscientiously consider the worker's arguments before making a decision.

The employer communicates the decision in writing, preferably through a termination letter provided to the worker in person approximately 48 hours after the hearing. In certain situations, before deciding on termination, employers are advised to explore whether offering the employee an alternative position is feasible, as per labor court decisions.

According to the Prior Notice Before Termination Law, employers are obligated to provide written notice before terminating employment. Alternatively, an employer may opt to pay the employee in lieu of notice, equivalent to the salary the employee would have received during the notice period.

Severance Pay

In Israel, employees who face dismissal are eligible for severance pay after completing one year of service. The calculation for severance pay involves multiplying one month's salary by the total years of employment, including partial years.

As part of the Section 14 Arrangement, employers are required to make monthly contributions equivalent to 8.33% of the employee's monthly salary towards the severance pay component. The accumulated amount is to be disbursed to the employee upon termination, even if the termination results from the employee resigning, provided the circumstances don't otherwise warrant severance pay under conditions without the Section 14 Arrangement.

Notice Period

In Israel, the notice period for an employee is determined by their length of service. If the employee has been in service for 0-6 months, one day's notice is needed for each month worked. For each month of service beyond the sixth month but within the first year, the employee accumulates 2.5 days of notice. After completing one year of service, a 30-day notice is required.

Probation period

Israeli law allows for probationary periods, during which the employee is regarded as a regular employee in all respects. The terms of the probationary period are outlined in the employment contract or a collective agreement.

Expanding your global workforce comes with a host of compliance challenges, from employment laws to data protection and diversity requirements. At Gloroots, we streamline this process with a unified platform. Our experts handle everything from employment contracts to on-time payments and compliant benefits. This way, you can concentrate on talent acquisition, while we ensure a stress-free global employment experience for both you and your employees. Connect with our experts today to kickstart your global hiring journey.

Expand your team in Israel with Gloroots, leveraging the nation's vibrant tech ecosystem, innovative startups, and a highly skilled workforce. Israel is positioned at the crossroads of Europe, Asia, and Africa and provides a dynamic business environment. Whether entering technology, cybersecurity, biotech, or other sectors, Gloroots offers expertise in navigating cultural nuances, ensuring compliance, and overcoming recruitment challenges. With our support, you will achieve a seamless and successful expansion, allowing you to concentrate on building a strong presence and meeting your business objectives in the Israeli market.