Israel is a high-income country with an advanced, innovative market economy and a well-educated workforce. As you pursue growth opportunities in Israel, your company will need to consider how it can optimise hiring practices for success there.
We’ve developed this guide as a resource on what types of regulations exist within the local labour markets so that it may help empower those seeking new international partnerships while still adhering strictly to all relevant laws!
Before you begin, your company will need insider knowledge of contracts, termination, payroll taxes, working hours, benefits, and the job market in Israel overall.
How to hire in Israel
Labour laws in Israel are stringent, and it is crucial to have an employment contract with all the appropriate clauses. You must know how these regulations apply in case any doubt remains about what your rights may or may not include under local law (Israeli Labour Law).
For example, specific contracts can only be legally terminated with cause, while others receive more than two weeks’ notice depending on their start-up length. Therefore, it is essential to ensure this information is clear from day one.
Severance is typically equal to one month’s salary per year of employment.
How do payroll and taxes work in Israel?
Israel has a national insurance program in which all employees must participate. It means they can enjoy many benefits, including unemployment protection and maternity leave, among others things!
As it currently stands, there are two rates for taxation: one at 19%, which applies if you’re over 18 years old or younger than retirement age, while another lower rate exists at 7%. The 3/5ths share goes towards employee payouts compared to what employers contribute (3%).
The corporate tax rate in Israel is currently 23%. Technology companies pay lower rates, with some seeing no taxation for dividends they distribute to their shareholders. Employees must also contribute towards national healthcare coverage through an additional 5% premium or a reduced 3%, depending on your choice.
Employers do not furnish funds specifically designated towards this purpose themselves but instead rely upon employees paying into it directly as part of wages received.
What are the minimum wages and working hours in Israel?
The current minimum wage in Israel is ILS 5,300 per month. The daily wages for an employee working five days each week come out to be around 244 Israeli Shekels (US$70).
For those who work six continuous hours every day at their job – 43 or 45 weeklong shifts – the hourly rate will vary depending on what period you look back into when adjusting these numbers. However, they can only exceed ISL 29/hour if otherwise negotiated between employer and employee.
By law, Jewish employees generally have the sabbath, or Shabbat, as one of their rest days. Non-Jewish employees can take their rest days on Friday or Saturday, or both. Shabbat falls on Saturday.
What are the types of leave in Israel?
The country of Israel has a rich culture and History. Employees deserve time with their families, friends or loved ones on holidays to enjoy the excellent food from Judaism’s culinary traditions.
The country’s eight legal and national holidays are Rosh Hashana, Yom Kippur, The first day of Sukkot, Simchat Torah, The first and seventh days of Pessach, Shavuot, Yom Ha’atzmaut (Independence Day). The Jewish festival of Passover and the ensuing Sukkot often result in many employees taking time off. Employees can enjoy up to six days of paid vacation annually, even if they do not take any holidays or weekends away from work!
The law requires that all staff who have been working at their jobs for one full year must be entitled to an unpaid leave entitlement – this includes both Jews following strictly kosher dietary laws as well those observing Shabbat (the weekly day of rest).
Additional types of leave employees receive in Israel include the following:
- Sick leave: Employees who are ill and cannot work are entitled to sick leave if they provide documentation from a physician. The law does not require compensation for the first day of the holiday, but the employee must receive 50% compensation for the second and third days and total payment for any additional days. In practice, many employers fully compensate their employees from the first day of illness. National insurance covers these costs after the employee’s accumulated sick leave through the employer runs out.
- Maternity leave: Pregnant employees generally receive 15 weeks of paid maternity leave as long as they have worked at least 10 of the preceding 14 or 15 months of the prior 22 months. Eight weeks of paid maternity leave are possible for employees who have worked at least six of the initial 14 months.
- Parental care leave: Parents can take eight days of leave per year to care for a sick child as long as the other spouse does not do so at the same time. Single parents can take 12 days per year. Employees can also take up to six days of leave per year to care for a parent or a parent-in-law. Parental leave can extend to 60 days for specific illnesses.
- Bereavement leave: Employees can generally take seven days of leave after the death of a close family member.
Israel is a country with universal health coverage. Employees do not need to purchase their insurance.
Employers offer retirement plans that are both affordable for workers and contribute on behalf of each employee according to their level at work- from low-wage positions up through high-paying jobs!
In the past decade, employment rates in Israel have declined steadily, but Temporary Workers are filling most of those gaps. The overall labour force participation rate is about 72%. Women are catching up with men now that they’ve reached a close second place behind them at 74% workforce participation for Israeli residents aged 15-64 compared to 71%.
What are the costs of hiring in Israel?
Hiring someone in Israel can be costly, depending on how you want to compensate and offer benefits. If your goal is high retention rates with happy employees that stay around for years rather than just months or quarters before they leave due elsewhere, more attractive offers and competitive salaries will increase costs.
A few direct and indirect costs your company should consider include company registration procedures, job advertisements, partnerships with recruitment agencies, applicant-management software, interview travels, background checks, compensation, benefits, payroll, taxes and any bonuses provided.
To help you get started on your hiring journey, here are a few best practices that should be adhered to. It will help you ensure compliance with the law and attract and retain talented workers!
- Comply with anti-discrimination laws: Israeli law prohibits hiring and employment discrimination based on protected characteristics such as age, gender, race, nationality, religion, sexual orientation, country of origin, political beliefs, disability, family status, or pregnancy or parenthood status. Your company cannot consider these factors in hiring decisions and should limit these topics in interviews to avoid even the appearance of bias. The law also prohibits companies from requesting or discriminating based on an employee’s military profile.
- Use the local language and currency: Remember to provide all compensation figures and other monetary amounts in Israeli new shekels rather than your home country’s currency. You should also put essential documents, including offer letters and employment contracts, in Hebrew to aid your new employees’ understanding, reduce the risk of miscommunication, and bolster the documents’ usefulness in court.
- Prioritise comprehensive onboarding: Your new employees will become productive much more quickly if your company takes the time to train them and make them feel welcome. Consider starting with the basics, such as setting them up with the accounts and workspaces they need. Then proceed to orientation sessions that help them meet their teammates and learn about your company’s culture and goals. Give your new employees plenty of opportunities to ask questions and express their thoughts on what they’ve learned.
What is required to hire in Israel?
When hiring new employees in Israel, having a legal framework for your company is crucial. One standard option is establishing an independent local subsidiary that remains under the control of the parent entity.
There are many types of entities, including private limited liability companies (LLCs), public corporations or branches. They all offer protection from liability but vary on other factors, such as ease of use and familiarity.
If you decide to set up an LLC subsidiary, be prepared to complete a list of required tasks that will enable you to register formally with Israel’s Register of Companies:
- Compiling a list of the company’s directors and their passport numbers
- Completing a form granting power of attorney to an Israeli representative
- Providing the name, address, and identification of another representative responsible for receiving legal communications for the company
- Drafting and notarising formal articles of incorporation, along with a Hebrew translation
- Obtaining a signed certificate of company incorporation from your country of origin
- Obtaining a Hebrew translation of the certificate of incorporation
- Procuring a status approval document from your country of origin and getting a Hebrew translation
- Paying the registration fee of NIS 2,614 and providing proof of payment
To complete the subsidiary set-up, your company must register with the NII and the Israel Tax Authority.
Establishing a subsidiary comes at the cost of time, money and effort. It can take weeks or even months to set up, but we can help avoid all this hassle thanks to our Employer of Record solution, where we handle all aspects for employers undertaking a Global Expansion!
How to hire remote employees in Israel
As a company with an international presence, you likely rely heavily on remote hiring to build your teams worldwide. Remote technology can make this process simpler and more effective for employers and employees looking at jobs from all over the world!
Here are some tips when doing so:
- Streamline scheduling – You can give applicants the best possible experience by making remote interview scheduling easy and convenient. Consider using software like Chat Bot or Zoom to let that interesting choose from a few times when they would be available, giving everyone more control over their schedule while improving customer service in general!
- Develop a backup plan – When you’ve scheduled an interview with one of your top applicants, only to have technical difficulties arise at the time of the meeting. If something happens (and who knows what could go wrong), be sure to communicate backup plans, so they know how things will work if this happens!
- Provide a clear and efficient timeline – compassion is vital when hiring someone. You must take the time necessary to get to know your candidates and make an informed decision while keeping things moving as quickly as possible so no one gets left behind in this fast-paced world of work! Be compassionate but ensure strict deadlines because we want everyone involved – especially remote workers who might not always understand how long processes can take (or even worse: think they’re ready!)
With Bradford Jacobs, you can enjoy seamless remote talent sourcing. We attract, find, engage, and onboard the best employees for your business needs, no matter their location. If you want to attract and hire top global talent, contact us today.