How to Hire Employees in Israel

Hiring in Israel requires a clear decision on structure: establish a local entity, engage an EOR, or contract independent workers.

The key compliance demands include complex National Insurance contributions, mandatory pension enrollment, sector-specific collective bargaining agreements, and the Shimua pre-dismissal hearing requirement that applies before most terminations.

This guide covers hiring models, employer obligations, payroll costs, termination rules, and the classification risks that create legal exposure.

Gloroots operates as a Global Employer of Record in Israel, managing employment contracts, payroll, statutory filings, and benefits so your team can hire without setting up a local entity. Gloroots is a paid service; this guide is written to inform, not to replace independent legal advice.

Job Market and Hiring Trends in Israel

Israel's technology sector drives most hiring demand, with shortages in cybersecurity, software engineering and life sciences. Labour market data, including the unemployment rate and job vacancies, is published monthly by the Central Bureau of Statistics.

Since October 2023, security conditions and reserve duty have affected staffing, so plan for reserve-duty absences, which are reimbursed to employers through National Insurance.

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

Foreign companies hiring in Israel choose between three paths: establishing a local entity, engaging an Employer of Record, or contracting independent workers. Each carries distinct cost, compliance, and control implications specific to Israeli law.

Entity setup creates full legal presence. You register an Israeli subsidiary, assume direct employer liability, and manage all statutory obligations. Formation involves company registration, tax and National Insurance registration, and ongoing accounting and legal costs.

Contractor engagement suits genuinely independent relationships. Israeli courts look past contract labels, so this path only works when the worker truly operates independently.

An Employer of Record becomes the legal employer in Israel while you direct day-to-day work. The EOR manages employment contracts, payroll, National Insurance contributions, pension filings, and statutory benefits. To understand the mechanism before choosing, see how does EOR work. For a comparison of providers, see best employer of record.

Path	Setup Time	Cost	Compliance Burden	Best For
Local Entity	Months	Registration plus ongoing accounting and legal costs	Full, on you	Long-term, large teams
Employer of Record	Days	Per-employee monthly fee	Shifted to EOR	Fast, compliant expansion
Independent Contractor	Immediate	Low upfront	Misclassification risk	Genuinely independent work

Employees vs. Contractors in Israel

Misclassification risk in Israel is real and active. Israeli courts regularly reclassify contractor relationships as employment, regardless of what the contract states.

Israeli courts apply a practical classification test that examines control over how work is performed, exclusivity of the relationship, economic dependence on the engaging company, and how integrated the worker is into the business. The contract label carries little weight when these factors point toward employment.

Two additional risks apply. First, repeated fixed-term contract renewals can convert a relationship into indefinite employment, triggering full statutory entitlements retroactively. Second, a 2022 Israeli Supreme Court ruling lowered the certification threshold for class action claims, increasing exposure for companies that misclassify groups of contractors.

Factor	Employee	Independent Contractor
Control	Employer directs work method and schedule	Worker controls how and when work is done
Benefits and Social Security	Mandatory: pension, National Insurance, severance	Not provided by engaging company
Taxation	Withheld at source by employer	Contractor self-files
Contractual Agreement	Employment contract required	Service agreement
Exclusivity	Typically exclusive to one employer	Works for multiple clients

Cost to Hire an Employee in Israel

Total employment cost in Israel includes gross salary plus mandatory employer contributions. Salary alone does not reflect what you actually pay.

Employers contribute to National Insurance (Bituach Leumi), mandatory pension, severance pay reserves, Keren Hishtalmut (continuing education fund), and recreation payment. Each contribution is calculated separately, and the combined stack adds materially to base payroll costs. Understanding the full picture before you make an offer prevents budget shortfalls that compound across every hire.

Contribution	Employer Rate	Employee Rate	Notes
National Insurance (NII) - lower bracket	3.55%	Varies by income	Applies up to the reduced-rate threshold set by the National Insurance Institute
National Insurance (NII) - upper bracket	7.6%	Varies by income	Applies between the reduced-rate threshold and the maximum insurable income
Mandatory pension	6.5%	6% (minimum)	Applies on gross salary
Severance pay reserve (Pitzuim)	8.33%	None	One month per year of service
Keren Hishtalmut (continuing education fund)	7.5%	2.5%	Employer contribution recognised for tax up to a monthly salary cap (ILS 15,712)
Pension agent fee	0.6%	None	Paid to pension fund administrator
Recreation payment (Dmei Havra'a)	Statutory formula	None	Annual payment; amount varies by sector and seniority

Employer costs are well above gross salary once these contributions are added, so model the full stack before making an offer. For companies evaluating whether to hire directly or through a third-party provider, reviewing employer of record cost structures helps benchmark the full cost of each model accurately.

A 17% VAT may apply to Employer of Record service fees where the employee conducts business activity in Israel or serves Israeli clients. Confirm VAT applicability with your provider before signing a service agreement.

Compliance Risks While Hiring in Israel

Compliance failures in Israel carry financial penalties, criminal liability, and labor court exposure. The enforcement environment is active, and errors in payroll, dismissal procedure, or record-keeping each create independent liability.

The most common compliance traps foreign employers encounter include the following.

• Incorrect sick leave payment tiers. The statutory rule is 0% on day one, 50% on days two and three, and 100% from day four onward. Paying 100% from day three creates overpayment or underpayment disputes that employees can bring to labor court.

• Shimua procedural failure. Israeli law requires a formal pre-dismissal hearing before any termination. Skipping or improperly conducting this hearing renders the dismissal unlawful regardless of the underlying cause. Courts can order reinstatement.

• Dismissing protected employees without Ministry of Labor approval. Pregnant employees, employees on maternity or paternity leave, reserve duty soldiers, employees on sick leave, and trade union representatives all require prior Ministry approval before dismissal. Proceeding without approval exposes the employer to reinstatement orders and penalties.

• Payroll records retention. Records must be kept for at least seven years. Failure to retain complete records creates audit exposure and direct financial penalties during Ministry of Economy inspections.

• PAYE remittance deadline. All taxes and statutory benefits must be remitted by the 15th of the following month. Late remittance attracts penalties and interest that accumulate from the missed deadline date.

Each of these risks is manageable with the right employment infrastructure in place. Companies that run Israeli employment through compliant EOR services transfer procedural liability to a provider with established local processes, reducing the risk of errors that trigger enforcement action.

Key Labor Laws in Israel

Employment contracts

Written contracts are legally required and must be provided within 30 days of employment start. Hebrew is strongly recommended for enforceability in disputes. Indefinite-term employment is the default; fixed-term contracts that are repeatedly renewed risk reclassification as indefinite employment. Employers must also follow the Shimua hearing requirement before terminating any employee.

Working hours and overtime

The standard workweek is 42 hours, structured as 8.4 hours per day across five days, or 8.6 hours per day with one 7.6-hour day. The daily maximum is 12 hours including overtime. Overtime is compensated at 125% for the first two hours and 150% thereafter. Many tech companies use a global overtime salary structure that bundles overtime into a fixed monthly amount.

Minimum wage

From April 1, 2026, the minimum wage is ILS 6,443.85 per month (ILS 35.40 per hour on a 182-hour month), applicable to all private sector employees. Many sectors set higher minimums through collective agreements that override individual contract terms. Israel follows a Sunday through Thursday workweek, with Shabbat observed as the statutory rest period from Friday evening through Saturday night.

Leave entitlements

Annual leave starts at 12 days a year on a five-day week and increases with seniority. Full details on sick leave, convalescence pay, and other statutory entitlements are covered in the Employment Benefits section of this guide.

What to Include in an Employment Contract or Offer Letter in Israel

Israeli labor courts interpret contract ambiguities in favor of employees. A complete, well-drafted contract is the employer's primary protection against disputes and reclassification claims.

Contracts must be provided within 30 days of employment start. Include the following elements:

• Full names and addresses of both employer and employee

• Job title and duties with sufficient specificity

• Base salary in ILS, at or above the applicable minimum wage

• Working hours and overtime policy

• Annual leave entitlement based on seniority

• Probationary period terms, if applicable (typically 3 to 6 months)

• Notice period for termination by either party

• Pension and severance fund arrangements

• Form 101 completion required before the first payroll run

• Governing law: Israeli law

• IP ownership clause: work product created during employment belongs to the employer

• Confidentiality and NDA clause

• Non-compete clause (if applicable): must meet the four-part test applied by Israeli courts, covering scope, duration, geography, and legitimate business interest

• Collective agreement coverage disclosure, where applicable

• Shimua hearing clause reference, confirming the employer's obligation to conduct a hearing before termination

• Hebrew language note: Hebrew contracts are strongly recommended for legal proceedings

Payroll and Taxes in Israel

Payroll runs monthly in Israeli new shekels (ILS). Salaries must be paid by the 9th of the following month, and payslips are issued in Hebrew.

Foreign employers without an Israeli entity must use an Employer of Record or a registered payroll agent to run compliant payroll. Direct bank transfer is the standard payment method. Employees must complete Form 101 before the first payroll run.

Income tax is withheld at source under a PAYE system. Employers remit tax and National Insurance Institute (NII) contributions to the relevant authorities by the 15th of the following month. Form 106, the annual tax summary, is issued to each employee at year end.

Employer and employee contributions

Contribution	Employer	Employee
National Insurance (NII)	3.55% / 7.6% (by income band)	3.5% / 12% (by income band)
Health insurance	Not applicable	~5%
Mandatory pension	6.5%	6%
Keren Hishtalmut (study fund)	7.5%	2.5%

Payroll records must be retained for a minimum of seven years. Failure to maintain records is a compliance violation subject to regulatory penalties.

Employment Benefits in Israel

Statutory benefits in Israel are extensive and non-negotiable. Employers must provide annual leave, recreation payment (known as dmei havra'a), sick leave, maternity and paternity leave, and pension contributions.

In the technology sector, Keren Hishtalmut is a study fund that functions as a tax-advantaged savings vehicle. It is customary and mandatory under many collective bargaining agreements. Employer contributions are typically 7.5% of salary, with employees contributing 2.5%.

Paid time off and public holidays

Annual leave accrues based on length of service. Employees on a five-day week receive 12 days a year in their first four years of service, and entitlement increases with seniority under the Annual Leave Law.

Employers must ensure employees take at least seven days of annual leave per year. Unused leave is paid out on termination. A half-day applies before each public holiday.

Israel observes nine named public holidays: Rosh Hashanah (2 days), Yom Kippur, Sukkot, Shemini Atzeret/Simchat Torah, Passover (2 days), Independence Day, and Shavuot.

Recreation payment (dmei havra'a) is a statutory annual payment. Employees receive 5 days in year one, 6 days in years two and three, and 7 days in years four through ten. Payment is made in spring or fall.

Sick leave

Sick leave accrues at 1.5 days per month, giving employees 18 days per year, up to a maximum accrual of 90 days. The statutory pay rate is 0% on day one, 50% on days two and three, and 100% from day four onward. Employers may choose to pay from day one. A medical certificate is required on return.

Maternity and paternity leave

Employees with at least one year of service are entitled to 26 weeks of maternity leave. Employees with less than one year of service receive 15 weeks. NII pays maternity benefit for 15 weeks if the employee contributed in 10 of the 14 months or 15 of the 22 months before the birth. Eight weeks of NII payment applies if the employee contributed in 6 of the 14 months prior.

Dismissal is prohibited during maternity leave and for 60 days after return. Parental leave sharing between partners is permitted. Fathers have limited statutory leave around a birth and commonly use annual leave or sick days.

Public health insurance

Health insurance tax is deducted directly from the employee's salary. Employers do not contribute directly to the health insurance fund. Employees are covered by one of four health maintenance organizations (Kupot Holim) of their choosing.

Keren Hishtalmut (study fund)

The employer contributes 7.5% and the employee contributes 2.5%. Tax-recognised contributions are capped at a monthly salary of ILS 15,712. The fund is tax-free and becomes liquid after six years. It is mandatory under many technology sector collective agreements and customary across other industries.

Reserve duty (miluim)

Employers must continue paying salary during reserve duty. NII reimburses employers up to a statutory monthly ceiling. Dismissal is prohibited during service and for 30 days after. For absences exceeding 60 days during the October 7, 2023 to December 31, 2024 wartime period, the protection extends to 60 days after return.

Work Permits and Visas in Israel

Foreign nationals require work authorization before starting employment in Israel. The B-1 visa is the primary route for skilled professionals and expert hires.

The employer must sponsor the application and demonstrate that no qualified Israeli citizen is available to fill the role. The permit is employer-specific, so a change of employer requires a formal transfer and reapplication.

Israel issued 61,000 new foreign work permits in 2025, bringing the total foreign workforce to 227,044. Quota limits and sector restrictions apply, so permit planning should begin well before the intended start date.

Visa Type	Purpose	Validity
B-1 Expert	Skilled professionals and specialist roles sponsored by an Israeli employer	Set by the authorities
B-2 Temporary	Short-term work or training assignments not exceeding a defined period	Up to 3 months
Sector-specific permits	Construction, agriculture, caregiving, and other designated industries	Varies by sector and quota

Permit approval timelines vary by sector and applicant profile. Build permit processing into your hiring schedule before making an offer to a foreign national.

Onboarding New Hires in Israel

Onboarding in Israel is a compliance sequence. Several mandatory steps must be completed before an employee's first working day, not after.

Missing Form 101 before the first payroll run triggers automatic 47% withholding for employees with multiple income sources. That single gap creates immediate payroll errors and employee disputes.

Before Day One

• Register the employee with the National Insurance Institute (Bituach Leumi)

• Enroll in the mandatory pension fund

• Collect completed Form 101 from the employee

• Verify work permit status for foreign nationals

• Execute a signed Hebrew employment contract

• Configure payroll and all statutory deductions

Day One

• Provide the employee with their signed contract copy

• Issue company policies in writing

• Conduct workplace safety orientation

• Assign a direct manager and confirm reporting structure

First week

• Confirm collective agreement coverage and applicable sector terms

• Brief the employee on leave policies and convalescence pay entitlements

• Confirm Keren Hishtalmut (training fund) enrollment if applicable to the role

Beyond the first week

• Schedule a formal probation review at three to six months

• Maintain a personnel file containing payslips and pension enrollment records

• Retain all employment records for a minimum of seven years

NDAs, Confidentiality and IP Protection in Israel

NDAs, confidentiality clauses, and IP assignment agreements are enforceable in Israel under the Protection of Privacy Law 5741-1981. Employers can protect trade secrets, client data, and proprietary processes through written agreements.

Non-compete clauses must satisfy a four-part test: legitimate interest (trade secrets, not general skills), independent consideration such as separate payment or specific training, reasonableness in duration and geographic scope, and a balance of interests between employer and employee. Israeli courts scrutinize these clauses closely and will strike down restrictions that are overly broad.

Non-solicitation of employees is more acceptable than non-competes but must be reasonable in scope and duration. Non-solicitation of customers depends on the employee's level of direct contact with those clients.

IP protection routes available in Israel:

• Copyright: automatic upon creation; can be registered with the Israeli Copyright Office

• Patents: filed with the Israel Patent Office for processes, tools, and products

• Trademarks: registered with the Israel Patent Office

Background checks are governed by the Protection of Privacy Law 5741-1981 and Basic Law: Human Dignity and Liberty. Criminal record checks are generally prohibited except for government or security roles. Employers must notify candidates of the purpose and use of their data, and written consent is required before any check proceeds.

Termination and Offboarding in Israel

Termination in Israel requires documented grounds, proper notice, and a mandatory Shimua pre-dismissal hearing. For protected employees, Ministry of Labor approval is required before any dismissal can proceed.

Final pay must include outstanding salary, unused vacation payout, and full severance drawn from the reserve fund. Employers must also issue Form 106 at year-end and update National Insurance Institute and pension fund records.

Notice periods follow a three-tier structure:

• Months 1 to 6: one day per month of employment

• Months 6 to 12: 2.5 days per month, on top of the six days accumulated in the first phase

• After year one: 30 days flat

The Shimua procedure requires the employer to send a written invitation detailing the claims against the employee. The employee may appoint a lawyer. The employer must reassess after the hearing and send the final decision in writing. Procedural defects render a dismissal unlawful regardless of the underlying cause.

Protected categories requiring Ministry of Labor approval before dismissal include: pregnant employees, employees expecting to adopt, foster, or use surrogacy, employees undergoing fertility treatments, employees on maternity or paternity leave and for 60 days after, employees on reserve duty and for 30 days after (60 days for wartime absences), employees on sick leave, and trade union representatives.

Practical offboarding steps:

• Revoke system access and collect company equipment

• Issue the final payslip with all statutory deductions

• Provide Form 106 at year-end

• Update National Insurance Institute and pension fund records

• Retain the personnel file for seven years

Termination agreements must be in writing. Waivers must be specific and informed. Non-waivable rights such as minimum wage, pension, and accrued vacation cannot be released. For a waiver to be valid, compensation must exceed the statutory entitlement. Repeated renewals of fixed-term contracts risk reclassification as indefinite employment, which triggers full statutory entitlements.

Business Culture in Israel

Israeli workplace culture is direct, flat, and fast-moving. Understanding it before your first hire reduces friction and improves retention.

• Direct communication: Israelis value candor and open debate. Disagreement in meetings is normal and not considered disrespectful. Expect employees to push back on decisions, including yours.

• Flat hierarchy: Junior employees address senior leaders by first name. Decision-making draws heavily on input from individual contributors, not just management.

• Entrepreneurial mindset: Employees expect autonomy and ownership. They will challenge processes they consider inefficient. This is a feature, not a problem.

• Sunday to Thursday workweek: Friday is a short day or non-working day. Shabbat begins Friday evening, which affects scheduling for calls and deadlines.

• Reserve duty (miluim): Employees may be called up for military reserve duty with limited notice. Plan for periodic absences, particularly during security escalations.

• Relationship-building: Trust is built through direct interaction and demonstrated competence, not formal titles or seniority.

• Negotiation style: Israelis negotiate assertively. Initial offers are rarely final. Expect counteroffers and direct pushback at every stage.

Top Sectors to Hire From in Israel

Israel's talent market is concentrated in a small number of high-output sectors. Each has distinct in-demand roles and a track record that justifies the hiring investment.

• Cybersecurity: Israel is the world's second-largest cybersecurity exporter after the United States. In-demand roles include security engineers, penetration testers, and threat intelligence analysts.

• Software and SaaS: The high-tech sector accounts for approximately 20% of Israeli GDP and over 50% of exports. In-demand roles include full-stack developers, DevOps engineers, and product managers.

• Life sciences and MedTech: Israel has one of the highest concentrations of MedTech companies per capita globally. In-demand roles include biomedical engineers, regulatory affairs specialists, and clinical data managers.

• Fintech: Tel Aviv has over 500 active fintech companies. In-demand roles include blockchain developers, compliance officers, and data scientists.

• Defense technology: Israel's defense tech sector drives significant R&D spillover into commercial markets. In-demand roles include systems engineers, embedded software developers, and RF engineers.

Companies scaling across multiple markets often pair Israeli tech hires with talent from other high-output regions. If you are also looking to hire employees in India, Gloroots supports compliant employment across both markets from a single platform.

Top Cities to Hire From in Israel

Israel's talent is concentrated in a small number of cities, each with a distinct specialization. Knowing where to hire shapes which roles you can fill and how quickly.

• Tel Aviv: Israel's primary tech and startup hub. Home to the majority of high-tech companies, venture capital firms, and multinational R&D centers. Talent specialization: software engineering, fintech, cybersecurity, and product management.

• Jerusalem: Government, academia, and life sciences hub. Hebrew University and Hadassah Medical Center anchor a strong biomedical and research talent pool. Talent specialization: life sciences, academic research, and government technology.

• Haifa: Home to major R&D centers for Intel, Microsoft, Google, and Amazon. Strong engineering and semiconductor talent base. Talent specialization: hardware engineering, semiconductor design, and industrial technology.

• Beer Sheva: Emerging cybersecurity hub anchored by Ben-Gurion University and the CyberSpark national cyber campus. Talent specialization: cybersecurity, defense technology, and software engineering.

• Herzliya and Ra'anana: Suburban tech corridor north of Tel Aviv. Home to many multinational headquarters and R&D centers. Talent specialization: enterprise software, telecommunications, and medical devices.

Companies expanding across the region also consider pairing Israeli hires with talent in adjacent markets. See our guide to hire employees in UAE for a regional comparison.

Hire Compliantly in Israel with Gloroots

Gloroots acts as the legal employer for employees hired in Israel, managing employment administration such as National Insurance Institute (NII) registration, pension and applicable severance contributions, payroll in ILS, and other local employment requirements. This allows companies to hire in Israel without establishing their own local entity, subject to the applicable employment structure and Gloroots’s local coverage.

This model can be useful for companies entering the Israeli market, testing new hiring plans, or scaling teams without taking on the cost and administration of establishing a local entity.

• No local entity required: Hire employees in Israel through Gloroots without establishing your own Israeli employing entity.

• Streamlined onboarding: Gloroots can coordinate employment contracts, NII registration, pension setup, and other pre-employment requirements within its onboarding process.

• Local payroll and compliance support: Manage ILS payroll and applicable employment requirements, including sick-leave entitlements, applicable collective agreements or extension orders, and pre-dismissal hearing (Shimua) procedures.

• Predictable pricing: Get a clear breakdown of employment costs and applicable statutory contributions.

• Dedicated support: Access local HR and employment support for day-to-day employee administration and country-specific requirements.

Gloroots is one option among several EOR providers. The right choice depends on your hiring plans, budget, required local support, and whether you need employment coverage across Israel and other international markets.

Frequently Asked Questions About Hiring in Israel

What is the standard workweek in Israel?

The standard workweek runs Sunday through Thursday, totalling 42 hours across 8.4-hour days. Shabbat, from Friday evening to Saturday night, is a legally protected rest period.

The half-day before public holidays is standard practice. Overtime is compensated at 125% for the first two hours and 150% thereafter.

What are the mandatory employee benefits in Israel?

Mandatory benefits include annual leave of 12 to 28 days scaled by seniority, recreation payment (dmei havra'a), and tiered sick leave at 0%, 50%, and 100% of daily pay.

Employers also fund maternity leave of up to 26 weeks, contribute 6.5% of gross salary to pension, and provide Keren Hishtalmut contributions of 7.5% in the technology sector. Nine public holidays apply across all employees.

What is the Shimua hearing and when is it required?

The Shimua is a mandatory pre-dismissal hearing required before any termination. The employer must send a written invitation, allow legal representation, and genuinely reassess the decision after the hearing.

A written final decision must follow. Skipping any step renders the dismissal unlawful, regardless of the underlying reason for termination.

How does the notice period work in Israel?

Notice accrues in three tiers. During months one through six, employees earn one day of notice per month worked. From month six through month twelve, the rate rises to 2.5 days per month, plus six accumulated days.

After the first full year of employment, the notice period becomes a flat 30 days. Payment in lieu of notice is permitted under Israeli law.

What work permits do foreign nationals need to work in Israel?

Skilled professionals typically require a B-1 Expert Visa. The visa is tied to a minimum salary threshold set by the authorities, so confirm the current figure before you sponsor.

A B-2 visa covers temporary assignments. Sector-specific permits apply in construction, agriculture, and caregiving. Processing takes two to four months regardless of visa category.

What are the income tax rates in Israel?

Israel applies progressive income tax across six brackets, with marginal rates from 10% to 47%. Annual income exceeding ILS 651,600 attracts an additional 3% surtax.

Tax is withheld at source by the employer under a PAYE system. Employees must submit Form 101 before the first payroll run, which the employer retains on file.

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

EOR onboarding typically completes within one to five business days once all documentation is in order. NII registration, pension enrollment, and contract execution all occur before the employee's first day.

By contrast, setting up a local entity takes two to four months and requires ongoing legal and accounting support before a single hire can be made compliantly.

Official Sources

• National Insurance Institute (Bituach Leumi)
• Ministry of Economy and Industry: labour laws
• Israel Tax Authority
• Central Bureau of Statistics
• Nevo legal database
• Population and Immigration Authority

Related Gloroots Guides

• Employer of Record services in Israel
• Best Employer of Record providers in Israel
• Employee cost calculator: estimate the total cost of hiring in Israel
• Gloroots Employer of Record pricing

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