PEO Services in Israel

A co-employment model for companies that want to share the employer relationship in Israel rather than hand it over entirely. Worth knowing up front: true PEO co-employment is far less established in Israel than in the US, so we will tell you honestly whether PEO or an EOR genuinely fits, and place you with the right vetted partner.

  • Independent advice
  • Vetted partners
  • Honest positioning

What a PEO does in Israel

A Professional Employer Organisation works on a co-employment model. You and the PEO partner share the legal employer responsibilities for your Israeli staff: you keep direction and day-to-day control, while the partner administers payroll, income tax, Bituach Leumi, the mandatory pension and severance fund, and HR compliance under a shared arrangement.

01

Shared employer role

You and the PEO partner share the legal employer responsibilities. You keep direction and control; they handle payroll, income tax, Bituach Leumi, the mandatory pension and severance fund, and HR administration.

02

More direct control

PEO suits companies that want to retain more direct control of the employment relationship than a full EOR arrangement allows. In Israel, true co-employment is uncommon, so EOR is usually the better fit.

03

Honest recommendation

For most companies hiring in Israel, EOR is simpler. We will tell you honestly whether PEO genuinely fits your structure, or whether EOR serves you better.

How PEO works in Israel, step by step

From assessing the fit to a compliant co-employment arrangement.

01 – Assess the fit

We map your structure, headcount, and how much control you want to keep, and give you a straight answer on whether PEO or EOR serves you better. No product push.

02 – Set up co-employment

If PEO fits, we place you with a vetted Israeli partner and structure the shared employer arrangement correctly.

03 – Onboard your people

Compliant Israeli employment terms, with the administrative employer functions handled by the partner.

04 – Payroll & compliance

Income tax, Bituach Leumi, the mandatory pension and severance fund, and statutory filings handled monthly, while you keep day-to-day direction.

What PEO in Israel costs

As with EOR, two parts: the statutory cost of employment (bracketed under Bituach Leumi, plus the mandatory pension and severance fund) and the partner service fee.

Employer Bituach Leumi & pension

4.51% up to NIS 7,703/month and 7.6% above it (to a NIS 51,910/month ceiling), plus a separate mandatory 6.5% pension and 6-8.33% severance-fund contribution, all administered under the shared employer arrangement.

Minimum wage (2026)

NIS 6,443.85 per month from 1 April 2026, one national rate with no regional variation to track.

Income tax (employee)

A seven-bracket progressive scale from 10% to 47%, plus a 3% surtax above NIS 721,560/year, withheld at source as part of the shared payroll administration.

PEO partner fee

A service fee for the co-employment administration. Under a shared employer arrangement, Israel’s Bituach Leumi bracket split and mandatory pension/severance fund still have to be administered correctly by someone. We benchmark across our vetted network, typically 15 to 25% below going direct.

Why arrange it through Bradford Jacobs

Why companies arrange Israeli PEO through us rather than going direct to a single provider.

We tell you if PEO fits your needs

We are independent: we assess what you actually need, place you with the right vetted partner, secure pricing you will not get going direct, and stay on your side to escalate or renegotiate. You get advice, not a product pitch.

  • Independent advice
  • Vetted partners only
  • On your side at renewal

Pricing you can’t get direct

Israel’s two-tier Bituach Leumi bracket, plus the mandatory pension and severance fund, is easy for an unfamiliar co-employment quote to under-price. We benchmark across our vetted network for rates typically 15 to 25% below going direct, and renegotiate for you at renewal.

  • 15-25% below direct
  • Network benchmarking
  • Renegotiated for you

Straight to the top when it matters

When something needs resolving, and in global employment it sometimes does, you come to us. We escalate directly, past the helpdesk, to people who can actually move it.

  • Direct escalation
  • No support queues
  • Named account contact

Two decades of placements

Two decades placing and managing employment arrangements across global markets, with the local knowledge that prevents costly Israeli compliance mistakes.

  • Co-employment expertise
  • Honest fit advice
  • Right structure

We flex as your structure changes

PEO, EOR, and your own entity sit on a spectrum, and the right point shifts as you grow. We advise on the path and manage the moves, EOR to PEO, or either to your own Israeli Ltd, as your Israeli presence develops.

  • EOR, PEO or entity
  • Transitions managed
  • Right fit as you grow

The employer duties an Israeli PEO shoulders

Whichever model you use, the underlying Israeli rules are the same. Under a PEO arrangement, the administrative employer functions are handled for you.

Working time, leave & contracts

Compliant Israeli employment contracts and working-time rules (42-hour standard week, statutory overtime premiums, annual leave from 12 working days a year). Income tax, Bituach Leumi, and the mandatory pension and severance fund withheld and filed correctly. Statutory benefits, notice, and severance applied properly.

Statutory protections & exits

A lawful pre-dismissal hearing (shimu’a), statutory notice, and the protections Israeli employees carry against dismissal during pregnancy, parental leave, or reserve duty, all handled under the shared arrangement. The value is the same as with EOR: the compliance is handled by people who do it daily. The difference is simply how much of the employer role you keep.

What a PEO arrangement covers

The co-employment administration covers all of this, under one transparent fee.

Compliant contract

A compliant Israeli employment contract, issued and maintained for you.

Payroll & filings

Monthly payroll run, with income tax and Bituach Leumi calculated, withheld, and filed each month.

Statutory benefits

All statutory benefits administered: annual leave, sick pay, parental leave, notice and severance.

Compliance & support

Ongoing HR compliance and a single point of contact, for the life of the engagement.

Your questions answered

Straight answers on how PEO co-employment works in Israel.

What is the difference between PEO and EOR in Israel?

With an EOR, the partner is the sole legal employer of your Israeli staff. With a PEO, you and the partner share the employer relationship, you keep more direct control, they handle the administration. In Israel, true co-employment is uncommon, so EOR is the usual route; PEO suits specific structures.

For most companies, EOR is simpler and faster, especially with no Israeli entity. PEO fits when you want to share rather than outsource the employer role, or have a structure that calls for it. We assess your situation and give you a straight recommendation.

It depends on the structure. Some co-employment arrangements assume or work alongside your own Israeli entity. If you have no entity and want none, EOR is usually the cleaner route. We will confirm which applies to you.

The administrative employer functions, payroll, income tax, Bituach Leumi, the mandatory pension and severance fund, statutory benefits, and statutory filings, are handled by the partner. We make sure the arrangement is structured so responsibilities are clear and Israeli law is met.

The statutory employer cost (Bituach Leumi at 4.51%/7.6% depending on bracket, plus the mandatory 6.5% pension and 6-8.33% severance fund) plus a partner service fee for the co-employment administration. We benchmark across our network for pricing typically 15 to 25% below going direct.

Yes. These models sit on a spectrum and the right one changes as you grow. We advise on the path and manage transitions, EOR to PEO, or either to your own Israeli Ltd, as your Israeli presence develops.

Not sure whether PEO or EOR is right for Israel?

Tell us your structure and headcount and we will give you an honest recommendation, usually within a day, plus pricing you will not get direct. No product push, just the right fit.

Tax and labour data verified July 2026 (Bituach Leumi / National Insurance Institute, Israel Tax Authority, PwC). Figures change; we confirm the current position when we scope your hire.