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Israeli New Shekel (ILS)
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This country guide is for general informational purposes only and should not be construed as legal advice, nor as binding based on your relationship with Lano. When using Lano's solutions, the specifics may depend on your EOR and Payroll setup with our partners. Although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
The 2020 Ease of Doing Business Index published by the World Bank has ranked Israel as the 35th most business-friendly country in the world. Among the aspects taken into account by the index, Israel particularly stands out with regard to the ease of starting a business and paying taxes.
What’s more, Israel has been found to be the country with the highest R&D expenditure in the world, and its creative, highly skilled workforce offer multinational organizations an attractive talent pool. The fact that English is widely spoken makes it even easier to hire employees in Israel.
There is no legal obligation to conclude a written employment contract when hiring employees in Israel – unless the employed person is a foreigner. However, employers are obligated to provide their employees with a written statement detailing the terms of employment, including:
Identification of both parties
Date of commencement (and employment duration if applicable)
Job description, duties and responsibilities
Basic salary as well as other compensation or benefits
Daily and weekly working hours
Weekly rest day
Pension fund details
Reference to applicable collective agreements
The only existing language requirement for contracts is that they must be in a language both employee and employer understand.
It is possible to define a probationary period for a new employee. The common length for probation periods is 3 months. In no case should the trial period exceed 12 months.
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A normal workweek in Israel comprises 42 hours. Employees usually work from Sunday to Thursday. A regular workday should not be longer than 9 hours.
Any hour worked by an employee in addition to his or her regular weekly working hours is considered overtime and must be compensated accordingly. The pay rate for overtime is 125% for the first two additional hours and 150% for any hour thereafter. Under no circumstances should employees work for more than 12 hours per day, including overtime. Overtime further shouldn’t exceed 16 hours per week.
The payroll cycle in Israel is generally monthly.
In April 2022, Israel’s national minimum wage rose from ILS 5,300 to ILS 5,400 per month. The hourly minimum wage is ILS 29.67. The local government has further announced to gradually increase the minimum wage over the course of the next couple of years until it will reach ILS 6,000 in December 2025.
Employees in Israel accrue 1.5 days of paid sick leave for each month worked, up to a maximum of 90 days. The first day of sick leave is unpaid and it’s only with the second day of absence that the employee’s sick leave entitlement starts.
Days two and three of sick leave are paid at a rate of 50% of the employee’s usual wages. From the fourth day onwards, the employee receives full pay. It is mandatory for employees to provide a medical certificate.
There are no legal provisions for a 13th month salary as such, but employees are entitled to a so-called “recreation payment” after having completed one year of service. The amount of the recreation payment depends on the employee’s length of service and the payment is usually made in two installments, one in spring and one in fall.
Employees and employers in Israel are subject to the following tax and social security contribution rates (last review February 2023):
23% corporate tax rate
17% VAT (standard rate
up to 50%
Income is taxed based on progressive rates ranging from 10% to 50%. *
up to around 23%
National Insurance at rates of 3.55% (on the first ILS 7,122 earned per month) and 7.6% (on the part of the income between ILS 7,122 and ILS 47,465) **
Pension Fund at a rate of 6.5%
Severance Pay Fund at a rate of 8.33%
Disability insurance at a rate of 2.5%
up to around 18%
National Insurance at rates of 0.4% (on the first ILS 7,122 earned per month) and 7% (on the part of the income between ILS 7,122 and ILS 47,465) **
Health Insurance at rates of 3.1%(on the first ILS 7,122 earned per month) and 5% (on the part of the income between ILS 7,122 and ILS 47,465) ***
Pension Fund at rate of 6%
* Read more
Tax rates are progressive. The following tax rates and brackets apply:
Up to ILS 81,480: 10%
ILS 81,480 – ILS 116,760: 14%
ILS 116,760 – ILS 187,440: 20%
ILS 187,440 – ILS 260,520: 31%
ILS 260,520 – ILS 542,160: 35%
ILS 542,160 – ILS 698,280: 47%
Above ILS 698,280: 50% (incl. surtax)
It should be noted that the surtax doesn’t apply to all types of income.
** Different contribution rates apply to non-resident employees.
*** Non-resident employees are not subject to health insurance contributions.
Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).
During the first five years of service, employees are entitled to 12 paid vacation days. Thereafter, the employee’s annual leave entitlement gradually increases as follows:
6th year of service: 14 vacation days
7th year of service: 15 vacation days
8th year of service: 16 vacation days
9th year of service: 17 vacation days
10th year of service: 18 vacation days
11th year of service: 19 vacation days
Starting with the 12th year of service: 20 vacation days (i.e. four weeks)
In addition, Israel observes 9 national public holidays. Some districts have additional local holidays.
Female employees who have worked for their current employer for more than one year are entitled to 26 weeks of maternity leave. Employees who become pregnant during their first year of service are only entitled to 15 weeks of maternity leave. The leave period can start up to 7 weeks before the expected date of birth.
Maternity leave is only partly paid and the number of weeks during which the employee receives a maternity allowance depends on her previous social security contributions. Depending on the employee’s contributions history, either 8 or 15 weeks of maternity leave will be paid.
According to the current rules and regulations, fathers can take 5 days of leave immediately after birth, which are taken out of the father’s accrued annual leave and sick leave entitlement. Furthermore, fathers are allowed to share their partner’s maternity leave; however, this reduces the number of weeks the mother gets to spend with the baby.
A new law is expected to enter into force in 2023 which will give fathers the right to go on paid paternity leave as early as 15 weeks after birth – without it affecting the duration of the mother’s maternity leave.
There are no legal provisions for any additional parental leave.
Employees who have lost a spouse or an immediate member of their family are entitled to up to 7 days of paid bereavement leave. Some employers also offer their employees additional disability insurance, meal and transport allowances or make a monthly 7.5% contribution to a separate study fund.
Employers are allowed to dismiss their employees at any time for a reason other than discrimination. However, the employee must receive the chance to defend him- or herself in a proper hearing before the final decision is taken. The final decision must be communicated to the dismissed employee in writing.
Statutory notice periods can reach up to 30 days, depending on the employee’s length of service. The length of the notice period increases as shown in the following table.
Length of Service
Minimum Notice Period
Employees who are dismissed are entitled to severance pay if they have completed more than one year of service. The amount of severance pay must equal one month’s salary for each year of service. For this purpose, employers are obligated to set aside an amount equal to 8.33% of the employee’s earnings each month and pay it into a separate Severance Pay Fund (see section “Taxes and social security contribution”).
This country guide is for informational purposes only and should not be construed as legal advice. The content of this guide contains general information, and although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
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