Israel is a promising country for investors and foreigners seeking to expand their operations within the region. It has been ranked 35th in the Ease of Doing Business Index by the World Bank and ranked 12th place in the most number of start-up businesses in the world. In turn, the labor market in the country remains to have an increasing trajectory, to meet the demand of their developing business sector.
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There are no payroll taxes apart from employer’s national insurance contribution as below:
Income tax is levied annually as follows:
More information on income taxes levied can be found here.
The national minimum wage set by law is ILS 5300 per month.
Workers are paid monthly depending on the employer.
13th month salary
The Israeli regulation requires a yearly recreational pay for employees working longer than 12 months. This payment is done after the 12 month in July or August.
The standard working hours in Israel are 42 hours a week from Sunday to Thursday. It is generally from 8:30am to 4:00pm.
Israel has a fair policy of overtime pay. The first two hours of overtime, employers pay you 1.25 of your hourly wage. For every hour after that, employers pay you 1.5 of your hourly wage.
There are a total of 9 public holidays in Israel. The list of public holidays can be found here.
In Israel, an employee who has been working for a year with the same employer is entitled to leave in the manner below:
Under the Israelian law, employees won’t receive any salary on the first day of absence. On the second and third day, the employee is entitled to receive half of his/her daily wage and from the fourth day onwards, the employee is expected to receive the full wage as if he/she was not absent from work. If a parent of a child with disabilities needs to take time off from work to take care of his/her child, he is entitled to full wages starting from the first day of absence.
Employed working mothers who have worked for less than a year with an employer are given a maternity benefit of 15 weeks. Maternity Benefits of 26 weeks are given to mothers who have worked for more than a year with an employer. In case of multiple births, a female employee is entitled to three weeks of additional leave for each additional baby after the first.
The spouse of the employee who has just given birth to a child is entitled to a leave of 7 days of leave during the same time as the mother’s maternity leave.
Employees are entitled to receive full wages in their absence in case where they need to fulfill their obligations of mourning in accordance with their religion for upto 7 calendar days.
The law requires either party to give notice before terminating the contract. It may also be terminated when the person retires at the age of 65. If an employer terminates the contract of employment without giving prior notice, he/she is entitled to provide for one month full wages to the other party.
The statutory notice period of discharge and resignation in Israel is as follows:
Under the Severance Pay Law, the discharged employee is entitled to severance pay of one month’s salary for each year worked.
Probation periods in Israel range from one to twelve months depending on the terms of the contract.
Employers are required to pay for their employees’ national social contributions and health insurance contributions. They are expected to file regular reports for this to the National Insurance Institute. Failure to do so will subject employers to fines and linkages. You may check their website for more information.
The standard VAT rate for Israel in 2021 is 17%