Payroll and Benefits Guide Israel

Employer

Employer Payroll Contributions

Employee

Employee Payroll Contributions

Employee

Employee Income Tax

General

The monthly minimum wage in Israel is 5,571.75 ILS with effect from 1^st April 2023. It is set to increase every year until 2025 when it will reach 6,000 ILS.

Payroll Cycle

In Israel, the payroll cycle is typically monthly. All employees should receive a salary payment at least once a month.

13th Salary

The 13th-month salary payment is not legally required in Israel.

Recreation Payment

An employee is entitled to a recreation payment after one year of service. The payment is usually made between July and September, and the amount of compensation is determined by law, updated annually, and corresponds to the number of years of employment.

General

Standard working hours in Israel consists of 42 hours per week and 7-9 hours per day depending on how many days per week are worked. Employees should receive at least 48 hours of rest per week, usually taken on Friday and Saturday, resulting in a working week of Sunday-Thursday.

Making an employee work more than 12 hours a day or 16 overtime hours in a week is illegal.

Overtime

All working hours above the standard hours per week are to be paid as overtime and are regulated by the employment contract/collective agreements. It must also be mutually agreed upon between the employee and the employer before commencing any overtime working hours.

The working week may not exceed 42 hours, allocated over 5 or 6 days of work, provided that each working day does not exceed 9 hours of work.

Employees are entitled to overtime pay which is calculated daily as follows:

• For the first two overtime hours, the overtime payment is calculated at 125.00% of the regular wage
• The overtime pay is calculated at 150.00% of the regular wage for any additional work hours during the weekly day of rest
• Some companies pay a global monthly amount as compensation for overtime pay

Working Week

Sunday–Thursday

Paid Time Off

Employees receive a minimum of 12 working days annual leave for their first five years of service, increasing to 14 working days from the sixth year, 15  working days from the seventh year, and from the eighth year onward one additional day per year of service up to a maximum of 20 working days.

An employee who has a 6-day workweek is entitled to 6 days of absence from work for every seven days of leave accrued by law (since within seven days of leave, a Saturday is included, which is the weekly rest day at workplaces where people work six days a week).

Annual leave payment is calculated at the regular salary pay rate.

Public Holidays

Public holidays that fall on the weekend are usually lost.

Holidays are based on religious association and days can be swapped out to align with one’s religious observance.

Sick Days

Sick leave is accrued at a rate of 1.5 days per month with a maximum of 90 days total. Payment during sickness is dependent on the length of leave as follows:

• For the first day of sick leave, the employee is not entitled to pay
• On the second and third day of sickness, the employee is entitled to 50.00% of their regular pay
• From the 4th day onwards, the employee is entitled to 100.00% of their regular pay

Upon return, the employee must provide a medical certificate from a medical professional.

Under the Sick Pay Law amendment an employee suffering from a malignant disease (cancer) or a condition that requires regular dialysis treatments, or who recovered from such a disease, is eligible for full sick pay (100%) from the first day of absence, if on leave from work to receive care or undergo periodic examinations for that condition. (up to a maximum of 90 days).

Employees must provide a medical certificate from a medical professional confirming the necessity of treatment or examination because of the condition.

Maternity Leave

Female employees are entitled to 26 weeks of maternity leave following the completion of one year of service within an organization. The employee may take up to seven weeks of leave before the predicted due date of the child and the remainder after the birth. Israel’s social security system compensates the maternity leave if the employee is eligible which generally equals 15 weeks of fully paid leave and 11 weeks of unpaid leave.

Employees who have worked for their employer for less than one year are entitled to only 15 weeks of maternity leave.

An employee may extend their maternity leave entitlement by three weeks in the case of multiple or complicated births. In the unfortunate circumstance that a mother loses her child after the birth, she may take unpaid maternity leave up to 60 days after the birth.

Paternity Leave

Following a partner going into labor and up to 24 hours following the birth, an employee is allowed to be absent from work on account of the accrued sick leave.

Spouses are entitled to take the first five days following the child’s birth as paid paternity leave; the first three days of this leave will be paid on account of their accrued annual vacation and the following two days on account of their accrued sick leave.

Parental Leave

Fathers can take days off after the birth of a child, but these days will be subtracted from the maternity leave.

Bereavement Leave

In Israel, in the event of a death of an immediate family member, the employee is entitled to up to seven calendar days of paid leave to grieve for their loss. The employer fully compensates bereavement leave once the employee has completed three months of service.

In Israel, employees serving on reserve duty must still be paid by their employer. Military service is mandatory in Israel.

Termination Process

In Israel the standard termination process stipulates that employers must exercise their right to terminate an employee’s employment in good faith, for valid reasons, and in compliance with applicable law, any written employment contracts, workplace customs, and collective bargaining agreements.

The termination of employment procedure includes a hearing process. This means the employer is obligated to provide the worker with a hearing invitation in which the reasons for the intended termination of employment are detailed. The hearing should be scheduled so it leaves the worker enough time to prepare for it. The hearing should be conducted by the worker’s manager.

During the hearing, the worker needs to receive a genuine opportunity to express their viewpoint regarding the intention of the employer to terminate their employment. Once the hearing ends, the employer should take the time to consider the arguments raised by the worker seriously and in good faith.

The decision made by the employer should be communicated to the worker in writing. It is recommended to provide the worker with a termination letter in person, approximately 48 hours from the time the hearing was held.

According to the labor court’s decisions, in certain circumstances before deciding on termination of employment, employers are required to consider whether they can offer the employee an alternative position.

Under the Prior Notice Before Termination Law, employers must provide the employee with prior written notice when ending their employment.

An employer may choose to pay the employee in lieu of notice, which would be calculated as an equal salary payment to that which the employee would have received had the employee continued to work throughout the notice period.

Notice Period

The employee’s length of service determines the notice period in Israel.

If an employee has served 0-6 months of service, then one day’s notice is required for each month of employment. For each month of service following the sixth month of service until the first year of employment, an employee accumulates 2.5 days of notice. Following one year of service, a 30-day notice is required.

Severance Pay

In Israel, employees who are being dismissed are entitled to severance pay upon completing one year of service. The severance pay is calculated at one month’s salary multiplied by the number of years of employment (including work for part of a year).

Under the Section 14 Arrangement, the employer must carry out monthly contributions equivalent to 8.33% of the employee’s monthly salary payment towards the severance pay component. The accrued amount is to be released to the employee upon termination, even if the employee resigned without circumstances that would entitle the employee to severance pay if the employee was not subjected to the Section 14 Arrangement.

Probation Period

Probationary periods are permitted by Israeli law, and during this time the employee is considered a regular employee for all intents and purposes. The probationary period is stipulated in the employment contract or a collective agreement.

General

• Mobile phones or mobile phone allowances can be provided as a taxable benefit.
• Meal allowance or vouchers.
• Study fund – it is common to give employees a study fund. The employer contributes a monthly amount of up to 7.5% of the monthly salary and the employee contributes an amount of 2.5% of salary. After 6 years the accumulated amount in the fund may be released tax free. There is a tax-free ceiling set at 15,712 NIS which is annually updated.
• Holiday gifts – it is common to give holiday gifts twice a year for the Rosh Hashana and Passover holidays. These gifts are taxed.
• Additional annual leave – in some industries it is common to give additional annual leave beyond the legal minimum

VISA

For work or business purposes, a professional relocating to Israel should use the B/1 work visa (combined work permit and employment visa).

The B/1 work visa is a business visa granted to foreigners who have been approved to stay in Israel for a limited time for work. It is issued to experts, scientists, high-tech workers, and artists.

Israeli work visa requirements for this permit are as follows:

• approval from the Ministry of the Interior
• visa interview
• verified certificate of good conduct
• certification of medical exam performed by an approved clinic or hospital recognized by the mission
• biometrics (fingerprints and photograph)
• completed Israeli work permit visa application form
• two passport-size photos
• a signed document from the employer stating that they are offering a position of employment

Upon arrival in Israel, customs will stamp the visa, validating it for 30 days. Extensions are then possible for up to one year and allow the foreigner to leave and enter Israel as many times as required.

Specialists working in academic or non-academic fields for more than three months will be issued the B/1 visa and require:

• A higher salary requirement (at least double the average wage)
• CV/resume
• Academic certificates (if not in English, diplomas will need to be officially translated into Hebrew and notarized by an Israeli notary)
• Copy of passport (must be valid for a minimum of a year and three months from the start of the process)
• Power of attorney
• Completed and signed application forms
• Three passport-size photos
• Marriage and birth certificates (for children under 18) for any accompanying family members (original with apostille)
• Police clearance (issued within the last six months)
• Medical clearance (issued within the last three months)

The maximum stay and work period for these employees is five years and three months from the start date in Israel. The visa usually takes between two to three months to process.

General

The standard rate of VAT in Israel is 17.00%.