The state of Israel has a comprehensive set of regulations and labor laws to guarantee that anyone legally employed in Israel is fairly compensated. In order to employ someone in Israel he must have a valid Work Visa. Any employee that receives an Israeli Work Visa and is employed in Israel must be compensated according to Israeli law.
All employees receive a range of benefits in addition to salary, including, sick days, vacation days, national health insurance, social security, severance pay, pension and transportation.
Mandatory benefits for employees in Israel include:
Sick Days
All employees are entitled to 1.5 days of sick leave for each calendar month of employment at their current place of work. A maximum of 90 sick days can be accumulated. When sick days are used, compensation is as outlined in this table.
Vacation Days
All employees are allotted 12 vacation days during the first year of employment, not including mandated holidays. Vacation days increase with seniority according to the law. Mandated holidays include Jewish holidays about 10 to 15 days per year according to the Jewish calendar.
The Company may choose to grant its employees more than 12 days of vacation per year but not less.
Social Security and National Health Insurance
Employees are obligated to make monthly payments for National Health Insurance, which are deducted from the salary. Employers and employees each contribute a percentage of the employee’s monthly salary to Social Security according to the law. Percentages can be found in the chart below.
For the portion up to 5,944 ₪ – For the portion between 5,944 ₪ and 43,370 ₪
Severance Pay
Employers are obligated to deposit an additional 8.33% of the employee’s monthly salary into a severance fund. Employees are entitled to choose this fund. Payment is made to the employee at the time of termination, unless there is termination by cause.
Termination Notice
The length of notice is determined by the length of employment. During the first six months one day of notice is accumulated for each month of employment; in addition to the 6 days accumulated, 2.5 days of notice are accumulated for each month of employment from the sixth month to the end of the first year. Following the first year termination requires a 30 day notice.
It is customary to grant 30 day notice for any employees in senior positions after completion of the agreed probation period.
Pension Fund
All employees are entitled to choose a pension fund of his/her preference, to which employer will contribute 6.5% (or up to 7.5% if the employee will choose a certain program which includes a disability insurance) and employee will contribute 6% (or 7%, up to his choice) of the monthly salary.
Transportation
Employers are obligated to pay for the transportation of all employees, up to 22.6 NIS per day (from February 2016), according to the distance between the employee’s residence and the office.
Recreation Payment
Following the first year of employment all employees are entitled to a Recreation Payment. The payment is made between July and September. Amounts are determined by law, updated annually and correspond to the number of years of employment.
Income Taxes
All employees are subject to income taxes. Income taxes are a retention tax, automatically withheld each month. Taxes are a percentage of income based on the income bracket, according to the chart.
Senior employees often enjoy additional benefits. These benefits are customary but not mandated by law.
Advance Study Fund
An Advance Study Fund is often provided to employees in senior positions due to the attractive tax benefits. Employers place up to 7.5% of the monthly salary into the fund, with employees contributing 2.5% of the monthly salary. Contributions are tax-free up to a gross monthly salary of 15,712 NIS.
(Employers do not typically make contributions above the tax free ceiling.) Employees may not use the fund for the first six years.
Mobile Phone
Senior employees may receive a mobile phone from their employer. Employers would pay monthly service fees. The employer may also provide a handset.
Conclusions
Including the full scope of social benefits and mandatory payments described above, the employer’s expenditure/cost can be 15-30% more than the employee’s gross salary.
Labor laws and tax laws in Israel are complex, frequently updated and subject to change. Negotiations and agreements must be made with full knowledge of the law and cautious anticipation of changes. It is highly recommended that employers consult with a lawyer or expert that is thoroughly informed concerning these issues.
*The content in this document is intended for informational purposes only and does not constitute legal advice or replace consultation.
