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How to Hire Employees in Israel: Key Insights and Best Practices

Israel is well known as a country with a developed and utterly free-market-based economy. The industrial manufacturer and technical sectors contribute most to its success. The nation has seen several multinational companies such as Merck, Pfizer, and Genpact opening branches here. 

The domains of education, science, and technology have grown considerably over the years and boosted employment rates as a result. The growth of Israel’s hi-tech sector has made it a top pick for employers. 

As of 2021, Israel is the 30th largest economy globally in the context of nominal Gross Domestic Product. Its GDP stands at USD 402.64 billion for FY 2020. Its economy is anticipating growth over and above the 2021-2022 figures, post-recovery from the pandemic. 

Israel is home to many startups and is ranked only second after the USA. It is widely known as the startup nation of the world. While Israel is a small country having limited resources, the country stands out as a highly competitive economy offering valuable employment resources.

Its market economy is among the most resilient and is also technologically advanced. It comes with a concentration of talent and an innovative workforce that helped further cement its position as the ideal investment hub. The country is famous for its entrepreneurial spirit and latest technologies.

Read up further to learn how to recruit employees in Israel.

Things to Know Before Hiring in Israel

Before hiring employees and completing the formalities for recruitment and selection in Israel, you must understand a few vital pointers-   

  • Global companies looking at recruitment and selection in Israel must understand the regulations around all local employment norms. 
  • Check the tax structures and exemptions associated with each industry in Israel.
  • As per Israeli law, workplace discrimination based on age, sex, gender, disability, personal choice, religion, or/and political opinions is strictly prohibited. 

Employment contract

  • Israeli laws do not require any employment contract in writing. Any oral agreement is deemed legally binding. However, laws for notice to employees and job candidates oblige an employer to provide an employee with notice via a stipulated form.
  • While a written contract is not mandated by law, drafting up a written contract in the employee’s local language is suggested. The contract needs to include compensation specified in shekel. 
  • Foreign Employees Law requires foreign employee employment contracts to be specified in writing and in a language the employee understands.
  • These applicable collective bargaining agreement provisions may be implied in the employment contract.

Probation 

  • Employees can enter a mutual probationary period of one to 12 months as the relevant contract stipulates.

Termination and notice period

  • As per the Advance Notice for Dismissal and Resignation Law, employers and employees must provide a notice of termination before dismissal. 
  • The length of the notice period is decided upon as per the employment duration, with it being a maximum of thirty calendar days.

When you plan to follow the hiring process in Israel, you must understand related local employment laws. These laws apply to the recruitment process in Israel.

  1. Complying with the anti-discrimination laws: Israeli law prohibits any hiring or employment-related discrimination of any kind based on age, race, gender, nationality, religion, orientation, political views, disabilities, family-related status, pregnancy, or parenthood status. 
  2. Use local language and local currency: Remember that employers must provide compensation or any monetary amounts in Israeli shekels. You must also put up all vital documents, such as offer letters and employment contracts in Hebrew, to aid new employee understanding while reducing the risk of miscommunications.
  3. Give priority to comprehensive onboarding: Employees find themselves most productive when a company takes time in their training. Consider beginning with the basics, such as setting up employee accounts and workspaces. Next, orientation sessions are recommended. 

Working hours and breaks

When hiring staff in Israel, take note of the working hours and breaks.

  • Israel’s work week comprises 42 hours, ranging from Sunday to Thursday.
  • A non-Jewish employee can choose between Friday, Saturday, and Sunday as a holiday for each week. 
  • Jewish employees must not work on Saturdays unless an employer is open and holds a special permit. 
  • Overtime gets compensated at 125% of the standard pay for the first couple of hours and 150% for hours after that.

Payroll

  • Salaries are paid monthly via cash, cheques, or electronic bank transfers.

Minimum wage

  • Israel’s national minimum wage is fixed at 5400 ILs (USD 1524.562) per month. This takes into account 12 payments made every year.

Bonuses

  • A 13th-month payment is not legally mandated in Israel. 
  • An employee stands entitled to Recreation Payment post one year of service. This payment is made between July to September, and this amount is determined as per law, per employment years.

Maternity & paternity leaves

  • A woman employed for a year within an organization gets 26 weeks of maternity leave.
  • This is divided into 15 weeks of paid leave and 11 weeks of unpaid leave.
  • From the seventh week of maternity leave, fathers may take paternity leave instead of the mother to facilitate her return to work. Newer provisions to modify this are currently being worked upon.

Annual leave

The annual leave policy works as per the specifics in Israel-

  • 1st four years of employment: 14 days
  • In 5th year of employment: 16 days
  • In 6th year of employment: 18 days

Other leaves

  • Employees can get sick leave for 18 days.
  • Employees get to accrue 1.5 days as sick leave per month for each month an employee works for a total amount accepted in the workplace.
  • This mustn’t be higher than 90 days in total.

Holidays for employees             

Official public holidays in Israel are listed below –

  1. Rosh Hashana
  2. Yom Kippur
  3. The first day of Sukkot
  4. Simchat Torah
  5. The first and seventh days of Pessach
  6. Shavuot
  7. Yom Ha’atzmaut (Independence Day)

Employees get shortened working hours for the middle stretches of the Pessach and Sukkot. Some even take these days off.

Social security

  • Israeli residents get universal health coverage via the National Insurance Institute, so employers are not held responsible for offering health insurance to employees. 
  • Some companies might offer supplemental insurance if they decide to.
  • Many companies also offer retirement pensions for employees. Few employees pay a provident fund via a bank or an insurance company.

Employer Payroll Contributions

20.88% to 24.33% Total Employment Cost

3.55%

Social security on the first 6,331 ILS

7.60%

Social security on the difference between the 6,331 ILS to the maximum of 45,075 ILS

8.33%

Severance pay

6.50%

Pension fund

2.50%

Disability insurance

Employee Payroll Contributions

9.5% to 16.78%Total Employee Cost

0.40%

Social security (on the first 6,331 ILS)

7.00%

Social security on the difference between the 6,331 ILS to the maximum of 45,075 ILS

3.10%

Health insurance (on first 6,331 ILS)

5.00%

Health insurance (on the difference between 6,331 ILS to the maximum 45,075 ILS)

6.00%

Pension fund

Taxes

  • Employees and employers pay a share of social security. Your company is responsible for paying 15% of monthly contributions that payroll covers, along with an additional 2% monthly amount. Employers in challenging or even dangerous industries need to pay more.
  • Companies submit all employee income tax payments by deducting the taxed amounts from salary to the Egyptian Tax Department.
  • A company will be subject to corporate tax at 22.5% on the net profits without any additional taxes imposed. 

Income in Shekels

Tax rate in %

0 – 75,480

10%

75,480 – 108,360

14%

108,360 – 173,880

20%

173,880 – 241,680

31%

241,680 – 502,920

35%

502,920 – 647,640

47%

Above 647,640

50%

The Cost of Hiring an Employee in Israel

The recruitment fees in Israel vary as per the recruitment process in Israel.

You must ensure to account for the following costs in Israel-

  1. Company registration related-procedures
  2. Job and opening advertisements
  3. Partnership with the recruitment agency
  4. Applicant management-related software
  5. Interview travel costs
  6. Background check costs
  7. Compensation and payroll

What Does a Company Need to Hire Employees in Israel?

The process of hiring and management of employees depends on an employer’s business. Take a look at the must-haves to hire employees in Israel-

  1. Compilation of a company’s directors and corresponding passport numbers
  2. Completing the form for granting power of attorney to an Israeli representative
  3. Providing name, address details, and identification of some other representative who’d be responsible for receiving all legal communications for a company
  4. Drafting and notarizing all formal articles for incorporation, along with the Hebrew translation
  5. Obtaining a signed certificate for company incorporation from the country of origin
  6. Obtaining Hebrew translation of the certificate of company incorporation
  7. Procuring status approval documents from the country of origin and getting its Hebrew translation
  8. Paying the registration fee amounting to NIS 2,614 and providing proof of such payment

Various options for Hiring Employees in Israel

  • Once you make up your mind about recruitment in Israel, you can approach a reputed global EOR service provider to partner as an Employer of Record (EOR). Multiplier is a reliable name that helps to handle all logistics without you needing to set up an entity in the country directly.
  • You can also set up a dedicated HR department to hire employees in Israel. 

The Steps to Hiring in Israel

The basic steps for a hiring process in Israel are:

Step 1- Advertising for jobs

  • Begin a hiring process in Israel by advertising openings via leading job portals and social media.
  • Detail all mandatory requirements, including the job description and responsibilities.
  • This helps shortlist suitable candidates for the open roles.

Step 2-Telephonic interaction

  • Contact prospects via a telephone call.

  • A telephonic interaction allows employers to understand candidate profiles per the open job post.  

Step 3- Interviews

  • A hiring manager prepares an interview questionnaire, and then a hiring panel helps adjudge the candidate’s potential in an interview.

Step 4-Reference checks

  • After written consent from candidates, employers can conduct checks in the categories-
  • Employment
  • Payment
  • Criminal and credit history
  • Employers must ensure a lack of discriminatory practices and keep a secure file for every employee.

Step 5-Final offer

  • The hiring process in Israel comes to a wrap after salary negotiation, and the offer is accepted.

Let Multiplier be Your EOR Platform in Israel

Recruiting employees is not an easy deal. You have to start advertising jobs, and hiring someone involves meeting many requirements.

You can collaborate with a PEO-EOR platform such as Multiplier to ease such hiring processes. Experts here ensure that the recruitment process in Israel remains easy and not too taxing. We offer Saas-based Employer of Record solutions for hiring talent. Multiplier helps you skim through the local laws and work with the management to conclude the hiring process in Israel. 

Frequently Asked Questions

A standard work week in Israel is from Sunday to Thursday.

Agreements involving compensation from an employer after the end of the employment period and throughout a non-compete period are legally enforceable.

VAT at 17% is required in the country on total costs of employment except when a team member doesn’t have a business in Israel and if there will not be any interaction with an Israeli customer base or clients.

Need help hiring in Israel?

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