Employee benefits and compensation in Israel are governed by national labor law and include a statutory minimum wage, National Insurance contributions, paid annual leave, sick leave, maternity and parental rights, mandatory pension contributions, and statutory severance protections.
What Are Employee Benefits?
Employee benefits in Israel fall into two groups: statutory entitlements every employer must provide, and additional benefits a company chooses to offer.
The statutory baseline covers minimum pay, leave, social insurance, pension contributions, and employment protections. Companies build on that baseline with benefits that fit their workforce and their industry. In the professional and technology sectors, supplementary health coverage, transport benefits, extra paid leave, and a keren hishtalmut (study fund) are common additions.
For employers, one distinction matters more than any other. A benefit can be standard in the local market without being required by law, and a discretionary perk can never stand in for a statutory entitlement. If you are mapping the full legal picture before you hire, Multiplier’s guide to Israel employment laws sets out the compliance requirements in detail.
Statutory Minimum vs. Market Practice vs. Multiplier-Administered
| Benefit type | Statutory minimum | Typical market practice | Multiplier-administered option |
|---|---|---|---|
| Minimum wage | ILS 6,443.85/month from April 1, 2026; hourly figure depends on the calculation basis | Skilled and technology roles are usually paid well above the minimum | Compliant payroll using the current rate |
| Annual leave | Rises with tenure, 16 to 28 calendar days | Extra leave, particularly for senior and professional roles | Leave-policy administration |
| Sick leave | 1.5 days/month, 90-day cap, graduated pay | Some employers pay full salary from the first day | Sick-leave accrual and pay administration |
| Severance | Around one month per year of service where conditions are met | Usually built into standard arrangements via a Section 14 fund | Termination processing and severance administration |
| National Insurance | Employer pays 4.51% / 7.6% by earnings band for qualifying resident employees | Employer meets the statutory contribution | National Insurance contribution processing |
The minimum-wage figures reflect the National Insurance Institute’s rates effective April 1, 2026. The National Insurance contribution rates are those effective January 1, 2026.
Compensation Laws in Israel
Israeli employment law sets minimum standards for pay, working time, leave, and employment protections. A contract can improve on these terms. It can never reduce them.
Minimum wage
From April 1, 2026, Israel’s minimum monthly wage is ILS 6,443.85, a 3.3% increase over the previous rate of ILS 6,247.67. The National Insurance Institute sets the statutory hourly minimum at ILS 35.40, calculated on a 182-hour month, which is the basis defined by the Minimum Wage Law. Employers that run payroll on a 186-hour month arrive at a slightly lower hourly figure of about ILS 34.64, so the calculation basis should always be stated rather than a single hourly number applied blindly.
Working hours and rest
Israeli law regulates working hours, rest periods, and overtime. These rules feed directly into how you set a schedule and how you calculate pay for additional hours, so they belong in the compensation conversation from the start.
Pregnancy and employment protections
Employees are protected in connection with pregnancy, childbirth, and certain other circumstances. Under the Women’s Employment Law, an employer may need a permit before dismissing a covered employee or cutting the scope of their role.
Severance and termination
Severance depends on how the employment ends and how long the person worked. Under Israel’s Severance Pay Law, the right generally requires a minimum continuous period of employment and a termination that the law covers. Severance should be calculated alongside amounts already paid into pension or severance funds, not treated as a standalone payroll line.
Types of Guaranteed Benefits in Israel
Israeli employees receive several statutory benefits. The exact entitlement depends on tenure, employment status, working arrangements, and the circumstances of the employment.
Minimum wage
The statutory minimum is ILS 6,443.85 per month from April 1, 2026, with an hourly minimum of ILS 35.40 on a 182-hour month.
Annual leave
Paid annual leave increases with length of service, so leave should be calculated against each employee’s tenure rather than applied as one flat allowance. Under the standard framework, the statutory entitlement begins at 16 calendar days for the first five years and rises over time, reaching 28 calendar days from the fourteenth year onward. Because the Israeli calculation counts weekly rest days, this calendar-day figure should not be compared directly against a five-day-workweek vacation policy without checking the underlying math. Employers can offer more leave as part of a package.
Sick leave
Employees accrue 1.5 sick days per month, up to a 90-day cap. The statutory pay schedule is graduated: the first day is unpaid, the second and third days are paid at 50%, and from the fourth day the employee receives 100% of regular pay. An employer can improve on this, for example by paying full salary from day one.
Public holidays
Employees hold statutory holiday rights, and the treatment can vary with the employee’s religion and work schedule. Apply the rules that fit the individual rather than assuming a single holiday calendar covers everyone.
Maternity and parental leave
Maternity and parental rights depend on eligibility, including the employee’s National Insurance contribution history. The National Insurance Institute pays a maternity allowance for 15 weeks to employees who meet the full contribution requirement, and 8 weeks to those who meet a shorter one. Job-protected maternity leave itself can run up to 26 weeks for employees with at least a year of service, of which the paid portion is the allowance period. Fathers can receive an allowance under the applicable conditions. The key point for employers: the leave entitlement and the period the National Insurance Institute actually pays a benefit are two separate things.
Pension contributions
A mandatory pension arrangement is a core part of Israeli compensation, and both employer and employee contribute. Factor these contributions into the true cost of employment rather than treating pay and pension as separate exercises.
Annual bonus
Israel does not impose a universal statutory annual bonus. Eligible employees do receive dmei havra’ah, or convalescence pay, once they meet the service requirement. This is a statutory benefit calculated on an official per-day rate that is updated periodically, and it should never be described as a performance or year-end bonus.
Employee Benefits for Expatriates
Hiring someone from outside Israel starts with one question: what is the employee’s residency and employment status? That answer drives payroll and social-insurance treatment.
National Insurance rules differ for foreign residents and certain foreign-worker categories, and the National Insurance Institute publishes separate rates for them. Establish the status before you calculate any deductions or employer obligations. An expatriate contract should also spell out salary, working hours, leave, insurance, relocation support, and any additional benefits, and it should clearly separate discretionary benefits from statutory ones. Managing this without a local entity is exactly what an employer of record in Israel is built for.
How Are Employee Benefits Taxed in Israel?
Employee compensation can be subject to income tax, National Insurance, and health-insurance contributions. The treatment depends on the employee, the type of payment, and the applicable rules.
The National Insurance Institute (Bituach Leumi) administers the system. For Israeli resident salaried employees aged 18 to retirement age, the 2026 employer National Insurance rates are:
| Employer | Employee | Total | Employer | Employee | Total | |
|---|---|---|---|---|---|---|
| National insurance contributions | 4.51% | 1.04% | 5.55% | 7.6% | 7% | 14.6% |
| Health insurance contributions | – | 3.23% | 3.23% | – | 5.17% | 5.17% |
| Total | 4.51% | 4.27% | 8.78% | 7.6% | 12.17% | 19.77% |
These rates apply from January 1, 2026. ILS 51,910 is the maximum monthly income subject to National Insurance, and earnings above it are not charged. Employee National Insurance and health-insurance contributions are deducted separately, and the combined employee rate steps up between the reduced and regular income bands.
Benefits themselves are taxed according to type, so review each benefit rather than assuming that non-cash perks are automatically tax-free. For payroll, keep these lines distinct: salary and taxable compensation; employer National Insurance; employee National Insurance and health-insurance deductions; pension contributions; and benefits with their own specific treatment.
Restrictions for Benefits and Compensation in Israel
Statutory rights apply regardless of what else sits in a compensation package.
Severance pay
The right to severance pay turns on the length of continuous employment and how the employment ends. The Ministry of Labor conditions entitlement on both a minimum continuous period of work and a qualifying termination. The standard calculation is one month’s salary for each year of employment, subject to the circumstances and the applicable pension or severance arrangement. Because severance interacts with amounts already deposited into a fund, review the individual arrangement before finalizing any figure.
Notice periods
Both sides must give written advance notice, whether the employer is dismissing or the employee is resigning. The required period depends on pay structure and tenure, and is set out in the Prior Notice for Dismissal and Resignation Law (5761-2001), which applies equally to both parties. For monthly-paid employees, the statutory notice period rises with service in three stages:
| Tenure | Notice period |
|---|---|
| First 6 months | 1 day per month worked |
| 7th month through the 1st year | 6 days, plus 2.5 days for each additional month worked beyond the 6th |
| After 1 year | 1 month |
Calculate it against the employee’s actual circumstances rather than applying one period across the board, for example, an employee at 9 months of service is owed 13.5 days’ notice (6 + 2.5 × 3). Either side may pay salary in lieu of the notice period instead of having it worked out.
Protected employees
Israeli law adds protections around pregnancy, childbirth, and certain fertility-related situations. Where the Women’s Employment Law applies, an employer may need approval before carrying out a dismissal or changing the terms of employment.
How to Design an Employee Benefits Program for Employees in Israel
A strong program starts with the statutory baseline and then answers to what the company’s people actually expect.
1. Finalize the budget and goals
Set the total employment budget first. Separate mandatory costs from discretionary benefits so you can see exactly where the flexibility is.
2. Know industry standards and employee expectations
Market practice decides who wins talent. Study funds, supplementary insurance, and extra leave are common in professional and technology packages even where the law does not require them.
3. Craft a flexible compensation structure
Build the package around salary, statutory benefits, and additional benefits, and make the split clear. Employees should know which parts are guaranteed by law and which depend on company policy.
4. Communicate the package and ask for feedback
People should understand what their package includes and how each benefit works. Feedback also surfaces which benefits they value most, which sharpens the next review.
5. Analyze and publish the compensation plan
Review the package against statutory changes, market shifts, and company goals on a regular cadence. Keeping it current stops outdated rates from carrying over into new contracts, a common and avoidable compliance gap.
Supplemental Benefits for Employees in Israel
Beyond the statutory floor, employers use additional benefits to compete and retain.
Supplementary health insurance
Israel’s healthcare runs through health funds known as Kupot Holim, and employees are also covered by the statutory health-insurance system through National Insurance. Many employers add private or supplementary coverage on top.
Transport benefits
Transport costs can form part of a package where they apply, with the treatment and amount set by the employee’s circumstances and the relevant rules.
Dmei havra’ah
Dmei havra’ah, or convalescence pay, is a statutory benefit for eligible employees. It is calculated on the employee’s entitlement and an official per-day rate, and it sits apart from any discretionary bonus.
Keren hishtalmut
A keren hishtalmut, or study fund, is a well-known supplementary benefit, especially in professional and technology packages. It is not universal, and where an employer offers one, the contribution split and tax treatment should be documented clearly.
How Multiplier Can Help With Benefits Management in Israel
Hiring in Israel means running local payroll and meeting statutory requirements while holding to your own compensation policy.
Multiplier’s Employer of Record service lets you employ people in Israel without setting up a local entity. It covers payroll, statutory benefits administration, National Insurance contributions, and the rest of the employment process, giving you a single point of administration while you keep managing the work itself.
Explore Israel Employer of Record services
Hire and Manage Benefits in Israel With Multiplier
Multiplier’s EOR manages payroll, statutory benefits, National Insurance contributions, and employment administration for your team in Israel, with no local entity required.
FAQs
What are the mandatory employee benefits in Israel?
Mandatory benefits include statutory minimum pay, National Insurance contributions, paid annual leave, sick leave, mandatory pension contributions, and maternity and parental rights. Additions such as a keren hishtalmut, supplementary health insurance, or extra paid leave are common but not universally required by law.
What is the minimum wage in Israel in 2026?
From April 1, 2026, the minimum monthly wage is ILS 6,443.85. The National Insurance Institute sets the hourly minimum at ILS 35.40 on a 182-hour month.
Is severance pay mandatory in Israel?
Employees who meet the statutory conditions are entitled to severance when their employment ends. The framework generally requires a minimum period of continuous employment and a qualifying termination. The standard calculation is one month's salary per year of employment, though the actual figure depends on the circumstances and the employee's pension or severance arrangement.
What is the National Insurance contribution rate for employers in Israel?
For Israeli resident salaried employees aged 18 to retirement age, employers pay 4.51% on monthly earnings up to ILS 7,703 and 7.6% on earnings above that, up to ILS 51,910, effective January 1, 2026. Employee National Insurance and health-insurance contributions are separate.
How much sick leave are employees entitled to in Israel?
Employees accrue 1.5 sick days per month, up to a 90-day cap. Sick pay is unpaid on the first day, 50% of regular pay on the second and third days, and 100% from the fourth day onward.
How much annual leave are employees entitled to in Israel?
Statutory annual leave rises with service, beginning at 16 calendar days for the first five years and reaching 28 calendar days from the fourteenth year. Employers can provide more.
What is the statutory notice period for terminating an employee in Israel?
Both employers and resigning employees must give written advance notice. The period depends on pay structure and tenure, and for monthly-paid employees it reaches one month after the first year of employment.
How much maternity and paternity leave is available in Israel?
The National Insurance Institute pays a maternity allowance for 15 weeks with a full contribution history, or 8 weeks with a shorter one, and job-protected leave can extend to 26 weeks for longer-serving employees. Fathers can qualify for an allowance under set conditions. Treat the leave entitlement and the paid-benefit period as separate concepts.
Employees get a few paid days off from their employer around the birth, and can also claim a paternity allowance from the National Insurance Institute by taking over part of the mother's paid leave, with those days coming out of her 15-week entitlement rather than adding to it.
How much annual bonus are employees entitled to in Israel?
There is no general statutory annual bonus. Eligible employees do receive dmei havra'ah, or convalescence pay, once they meet the service requirement. It is a statutory benefit, not a discretionary year-end bonus.
How can an Employer of Record help manage employee benefits in Israel?
An Employer of Record employs workers on your behalf without a local entity, handling payroll, statutory benefits, National Insurance contributions, leave administration, and other local processes.
