Israel Country Facts

We provide comprehensive information regarding, Culture, Work life, Taxation, Visa’s & immigration, Labour Law, recruiting in your country of choice and employment contracts.

Global Expansion Made Easy for You

Expanding into Israel generally comes with challenges, however, partnering with us and using Employer of Record (EOR) eliminates the frustrations you could encounter.

Israel Visas, Work Permits and Migration

Israel’s hi-tech, competitive, and fast-moving economy has carved itself a reputation for being the place for new companies to excel. The ‘Start-up Nation’, as it is known, is an increasingly attractive proposition for international companies, with an excellent strategic location on the eastern coast of the Mediterranean and southwest corner of Asia with proximity to African markets.

Expanding into a new country or hiring a workforce abroad can lead your business to great profits, but unfamiliar laws and regulations can counteract your company’s goals and plans.

What Types of Work Visas, and Permits for Israel are there?

Around 100 countries are visa exempt for visiting Israel for leisure or tourism. Their nationals just need to present their passports, with six months validity after duration of stay, and they will be allowed entry; at which time they may or may not have a visa-free notice stamped in their passports. This allows for short stay trips of three months.

All other activities require one type of visa or another. Before applying for a tourist visa, check to see if this is necessary.

Around 140 countries’ nationals will require a visa to enter. The Ministry of Interior (MOI) sanctions visas under the Law of Entry which permits foreigners to access Israel for tourism, business, study, education, work, and residency. These visas should be applied for through a local embassy or consulate in the home country or country of residence.

In 2022, Israel is to introduce an e-Visa. This will simplify the process and allow those foreigners who wish to visit for tourism, business purposes or transit, to apply online. Now a Visitor Visa (B2) is required for short stays (90 days).

Those with a proven Jewish birth right can apply for immigration under the Law of Return (Aliyah).

Main Categories of Visas

Israel has four long-term A-Visas and two B-Visas for limited stays. There are also immigration visas. Visas allow people to enter Israel legally for various reasons:

  • A/1 – Temporary Resident: issued to those entitled to Aliyah
  • A/2 – Student Visa
  • A/3 – Clergyman
  • A/4 – Families of visa holders of A/2 and A/3 visas
  • B/1 – Work Visa: for professionals/foreign nationals for paid work. And is a temporary residence permit. An employment/work permit is also required for most categories of the B/1 visa.
  • B/2 – Tourist/Visitor’s Visa: authorized for up to three months for tourists, visitors, business purposes or students studying Hebrew at a school or institute. Paid work is not allowed.
  • Immigration Visa: From the Jewish Agency which controls immigration (Aliyah) to Israel.

Israeli Tax Laws

Dealing with tax, payroll, and employment regulations for your staff from overseas is always a tricky process and poses complications that demand expert guidance. Israel is no exception and having experts in place will remove the demands of complying with both tax and social security regulations.

By using our PEO service, we will take care of the complicated legwork so that you can focus on your business goals. Bradford Jacobs’ dedicated specialists remove the burdens of worrying about these complications while you focus on building your business in a new territory.

We have made it our goal to keep track of the latest changes in the tax policies to always ensure complete compliance.

Overview of Taxes in Israel

  • Personal Income Tax: Taxable income up to ILS 75,480 (€20,937, US$23,692)) – 10.0%; Six further rates up to ILS 647,640 (€179,653, US$203,285) – 14% to 50% (50% rate include 3% surtax on top rate); Minimum rate applying to some passive income – 31.0%
  • Social Insurance Taxes:
    Resident employees’ contribution – Monthly income up to ILS 6,331 (€1,756, US$1,988) – 0.4%; Monthly income above ILS 6,331 – 7.0%; Up to a maximum of ILS 44,020 (€12,215, US$13,826)
    Non-resident employees’ contribution – Monthly income up to ILS 6,331 (€1,756, US$1,988) – 0.04%; Monthly income above ILS 6,331 – 0.87%; Up to a maximum of ILS 44,020 (€12,215, US$13,826).
  • Health Insurance Tax: Monthly income up to ILS 6,331 (€1,756, US$1,988) – 3.10%; Monthly income above ILS 6,331 – 5.00%; Up to a maximum of ILS 44,020 (€12,215, US$13,826). Non-residents do not pay Health Insurance Tax.
  • Corporate Income Tax (CIT): The rate of 23% applies to companies incorporated in Israel and foreign companies with a presence in Israel.
  • Capital Gains Tax (CGT): Generally applied at 25% although can be levied at 30% in certain circumstances.
  • Value Added Tax (VAT): The standard rate is 17% applied to most goods and services. Exported goods and certain services are exempt.

Israel Individual Tax – Single, Married

Married couples in Israel may file joint or separate tax returns. They can expect to be taxed on their worldwide income if they reside in Israel for 183 days or more in one tax year, or a combination of 30 days in the current year and 425 days in the previous two years, although the Israel Tax Ordinance offers these parameters only as guidelines.

The tax year runs from January 1 until December 31 and returns should be filed by April 30 of the following year, or May 31 if filed online.

Israel Entity Set Up

Foreign companies planning to hire staff in Israel do not generally need to incorporate a subsidiary or branch. However, they must register with the Israeli Income Tax Ordinance (ITO) and the National Insurance Institute (NII) as an employer to withhold and remit tax and social security contributions to the authorities. They must also comply with all Israeli employment laws.

However, by partnering with us you create the possibility to bypass this process and utilize our expertise. By using our PEO service we take care of the complicated paperwork.

How to set up an Israeli Subsidiary

First, decide on the location. Different regions and cities can apply subsidiary regulations independently. Options for incorporation include limited liability, public or foreign subsidiary companies. Opening a branch or representative office are other possibilities.

The Israeli Companies Ordinance (ICO) defines a company as a corporation formed and registered in Israel according to Israeli law. To incorporate a subsidiary in Israel, the parent company must comply with Israel’s Companies Act (1999) and register with the Registrar of Companies. Further procedures include:

  • Submit application form to set up a subsidiary
  • Copy of the Articles of Association
  • Declaration of initial shareholder(s)
  • Declaration of initial director(s)
  • Registration fee of ILS 2,645 (€734, US$834)

All signatures must be certified. In Israel they must be signed in the presence of an Israeli attorney; outside Israel they must be signed in the presence of an Israeli Consul or a public notary.

The Israeli Companies Ordinance have taken steps to simplify the process. Some law offices can incorporate subsidiaries ‘in trust’ as the initial shareholder, with shares transferred to the appointed directors after incorporation.

The subsidiary must also register with the income tax and VAT departments of the Income Tax Ordinance (ITO) and National Insurance Institute (NII) to become a legal Israeli employer.

Benefits of setting up a Subsidiary in Israel

Specific advantages for a foreign company opening a subsidiary in Israel include not being responsible for the subsidiary’s debts or liabilities. The liability of the subsidiary’s shareholders is limited to their investment in shares.

The subsidiary can operate under a different company name while pursuing its own business interests. It operates under Israel’s Companies Law (1999) in the same way as local companies. It is taxed on its worldwide income and liable for the standard rate of 23% Corporate Tax on business profits, although tax incentives may apply.

Through its subsidiary, the parent company has the advantage of exploring further afield among other eastern Mediterranean, southwest Asian and North African countries.

Other benefits for a subsidiary:

  • Easier to obtain regulatory approvals, loans and finance and enter contracts with other Israeli companies
  • More impact with clients and suppliers, as subsidiaries imply more permanency than branches
  • Employees feel there is more stability and job security than from being with a branch

In the wider commercial sense opening a subsidiary makes a statement of a company’s commitment to expanding into foreign markets.

Israeli Market

Israel is a relatively young nation, created in 1948, but has quickly made its mark in the global economy. Israel is ranked as the 26th freest economy in the world, making it an attractive target for Foreign Direct Investment, and No. 2 among 14 nations grouped in the Middle East and North African region. The GDP of US$408 billion placed Israel 31st in the world in 2021.

These impressive figures add to the attraction of a highly motivated and well-educated workforce. Hi-tech, blue chip, medical and healthcare companies feature prominently in the economy.

Companies considering establishing a presence via a subsidiary in Israel face challenges complying with employment, tax, and company registration laws as they can vary between municipalities and regions. Plus, hiring staff from abroad poses more complications – and risks.

There are speedier and more cost-effective alternatives to launching a subsidiary, with Bradford Jacobs opening the door to a hassle-free route into Israel.

Starting a Business in Israel

Israel is in an ideal position for trading opportunities, with its strategic location on the eastern coast of the Mediterranean and southwest corner of Asia with proximity to African markets.

The structure for opening a company as a subsidiary in Israel is well-structured but demands a clear understanding of the requirements. The World Bank ranked Israel 35th globally for ‘ease of doing business’ out of 190 nations in its most recent global assessment: 28th for ease of starting a business and 26th for economic freedom. But other areas can be more problematic – Israel ranks 83rd for ease of accessing a new electricity supply and 75th when it comes to registering a property.

Foreign companies pressing ahead with plans to open a subsidiary must comply with Israel’s Companies Law (1999) and follow procedures, including:

  • Select a company name and decide on the business structure, typically a limited liability company (Ltd) operating under the Companies Law (1999). Register the name in Hebrew and English; if it matches with an Israeli company, the name of the home country should be added after the company name with the ‘Ltd’ suffix
  • Submit application form to set up a foreign company subsidiary to the Registrar for Companies
  • Provide Copy of the Articles of Association
  • Provide declaration of initial shareholder(s) and initial director(s)
  • Pay registration fee of ILS 2,645 (€734, US$834)
  • Notarize Hebrew translations of the Incorporation Certificate, Articles of Association and Status Certificate proving the parent company operates in its home country

Further procedures are involved before being able to operate with staff, such as:

  • Complying with the provisions of the Income Tax Ordinance, for both nationals and non-residents covering wages, dividends, assets
  • Registering with the National Insurance Institute for remitting social security contributions
  • Filing annual tax returns on a calendar year basis
  • Remitting withheld taxes by the 15th of the following month’s deadline
  • Creating employment contracts
  • Creating pay slips, which under Israeli accountancy rules must be divided into various sections
  • Salaries must be paid by the ninth of the following month
  • Calculating monthly salary and tax contributions and completing the monthly Form 102, verifying calculations before then submitting the year-end Form 126 to the authorities

Expanding into Israel

Opening a business in any overseas territory brings issues. Moving staff across the world means lengthy processes to obtain visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination, and severance?

Drawing up an international expansion blueprint is not enough. Your business plan will have to answer all these questions.

Israel welcomes foreign investment, but the employment market is complicated by its mix of legislation and collective agreements affecting employee benefits and entitlements. There are other questions too: where will you find distributors, manufacturers, and offices?

There is a simple alternative. By partnering with a Professional Employer Organisation (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in Israel.

Israeli Business Facts

  • Capital city – Jerusalem is recognized by Israel, but Tel Aviv is more internationally acknowledged
  • Population – around 9 million
  • Four geographical regions – Coastal plain of the Mediterranean; north and central hill regions; Great Rift Valley (Jordan Valley) and the Negev
  • Official languages – Hebrew and Arabic
  • Economy and world ranking – Ranked 26th for economic freedom, GDP US$408 billion – world ranking 2021, 31st.
  • Leading sectors by revenue – High-end technology; manufacturing; diamonds and metals; agriculture; tourism and transportation
  • Main exports – Hi-tech and electrical equipment; cut diamonds, pearls, and precious metals; chemicals and pharmaceuticals; electrical, medical, and optical appliances; sound and TV equipment and computers
  • Main imports – Machinery, equipment, and computers; electrical machinery; cars and vehicle parts; diamonds, gems, and metals; mineral fuel and oil
  • Main trading partners – US, UK, China, Honk Kong, EU, and India
  • Government – Republic based on multi-party parliamentary democracy
  • Currency – Israeli Shekel (ILS)

Advantages and Challenges of the Israeli Market

Advantages of the Israeli Market include:

  • Growth Factors: Israel is recognized as a highly innovative nation, especially in manufacturing and hi-tech sectors. Research and development has also driven economic growth
  • Location: Excellent geographic position at eastern end of the Mediterranean, in the southwest corner of Asia with close proximity to North African markets
  • Business Access: The Israeli Investment Promotions Agency, part of the Ministry of Economy and Industry, provides an entry point for investors
  • Incentives: The Foreign Direct Investment (FDI) system offers tax breaks and other financial incentives
  • Trade: As an Associate member of the European Union, Israel has a free trade agreement with the economic bloc of 27 nations
  • Workforce: Highly educated and skilled, motivated workers

Challenges of the Israeli Market include:

  • Expenditure: High living standards come with a high cost of living
  • Consumers: A small population creates a relatively restricted internal market for goods and services
  • Social: The mixed Jewish, Muslim, and Christian population can make integration difficult for incoming staff
  • Employment: The tendency to promote ‘in house’ can make it hard for incoming foreigners to progress through the company hierarchy
  • Security: In an historically volatile region, safety is a potential issue for some companies planning expansion into Israel as their ‘stepping stone’ to the region

Limited Company / Subsidiary or Branch in Israel?

International companies targeting Israel for expansion will generally choose a private limited liability subsidiary. Subsidiaries can have a totally different name from the parent company, pursue different business activities and form their own contracts. Branches, in comparison, are an extension of the parent company and are not a separate legal entity. Subsidiaries and branches have differences in how they are registered and operate.

Israeli Contracts

Companies hiring staff for expanding operations into Israel must ensure contracts and agreements with their employees fit into a framework of employment rules. Laws and regulations provide employees with minimum entitlements, which can be extended by Collective Bargaining Agreements (CBAs) authorized by the Ministry of Economy, in addition to their individual contracts. Where different levels of entitlement apply to employees, the most beneficial always takes precedence. The Enforcement Unit of the Ministry of Economy or federal or state authorities oversee employment laws that safeguard rights and entitlements of employees.

There is no legal requirement for employment agreements to be in a formal written contract.

However, within 30 days of starting work, the employee is given either a written contract or a ‘notice’ highlighting such as responsibilities, scope of work, entitlements and working conditions, disciplinary procedures, termination, and severance payments. In addition to the notification, employees on an oral agreement must still be given written confirmation of any changes to their work schedule or other aspects of their role.

Main contract types are:

  • Indefinite, Open-ended Employment Contracts: The most common type of contract runs without a specified end date. The Notice of Discharge and Resignation Law requires both parties must give notice of dismissal or resignation. All employers and employees are subject to the laws on termination, which is permitted on reasonable grounds, excluding discrimination, if correct procedures are followed.
  • Fixed-term Employment Contracts: These are for a specified period or are attached to a specific project. Termination of the contract by the employer before the agreed period entitles the employee to the balance of the salary that would have been paid for the full term.
  • Probationary Periods: Trial periods are allowed, during which the probationer must be treated the same as a full-time employee. The probation can be between one and 12 months according to the contract or relevant collective agreement. The required notice period is one day for each month worked up to six months, then two-and-a-half days for each additional month up to 12 months.
  • Collective Bargaining Agreements (CBAs): The Collective Agreements Law is the main legislation governing CBAs. They set out minimum terms and entitlements for workers, such as wages, sick leave, maternity benefits, paid vacations, and notice periods. Collective agreements can apply to specific sectors or companies, or generally with a wider scope. General collective agreements can be extended by the Ministry of Economy to wider groups of employers and employees. Where workers are covered by contracts, collective agreements, and statutory minimums the most beneficial for the employee always applies.

Employees are permitted to establish a union in their workplace if none exists, with the general rule there should be one ‘bargaining unit’ of at least one third of the workforce.

Employee Benefits

Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in Israel might not all be familiar to you yet. By using our PEO and Employer of Record (EOR) service we can provide compliant labor contracts for employees in Israel, including local benefits.

When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few. In Israel, benefits are guaranteed by national legislation as well as collective agreements with trade unions or workers’ councils.

Benefits and entitlements for employees in Israel are based on a framework of laws and regulations detailing minimum statutory allowances for specific aspects of employment. Individual contracts, collective bargaining and trade union agreements also come into play – and it is always the one which is most beneficial to the employee that applies.

Minimum guaranteed benefits, either from legislation or collective agreements, include such as:

  • Minimum wages
  • Paid vacations
  • Working hours
  • Termination, notice periods and severance
  • Sick leave
  • Maternity allowances and benefits

The responsibilities of foreign companies reach further than simply complying with tax, social security, and payroll regulations, however. Failure to comply with specific regulations applying to benefits and entitlements runs the risk of fines and sanctions. It is vital that employers have a firm grasp of what is guaranteed for their employees, as this will affect the employer-employee relationship

What Compensation Laws exist in Israel?

The employer-employee relationship in Israel is based on contracts (which do not necessarily have to be in writing), collective and trade union agreements. Underpinning these is a framework of statutory and mandatory legislation.

Individual laws include such areas as Minimum Wages, Equal Pay for Men and Women, Hours of Work and Rest, Sick Leave, Women in Employment, Dismissal and Resignation, Severance Pay, Protection of Privacy, Equal Opportunities and Annual Leave.

Incoming foreign companies hiring employees in Israel must meet their obligations to employees regarding benefits. The ‘highest minimum’ always applies – whether from contracts, legislation, or collective agreements.

Therefore, the requirement for employers to respect employees’ rights stretches further than simply complying with tax and payroll procedures.

Drawing up contracts is tricky enough, but in Israel as elsewhere it is vital for employers to be up to speed with responsibilities to their staff over benefits, compensation, and minimum requirements. Do not take the risk of paying penalties for ignoring these responsibilities.

Compensation, entitlements, and benefits include:

  • National Minimum Wage: The minimum for 2021 is ILS 5,300 (€1,497, US$1,680) per month or an hourly rate of ILS 29 (€8.20, US$9.20), with planned increases until 2025. In 2022 the monthly minimum is set for of ILS 5,400 (€1,525, US$1,713) rising to ILS 6,000 (€1,696, US$1,903) by December 2025.
  • Sickness Benefit: Employees absent from work due to illness are entitled to sickness benefit at the rate of 50% of their pay for the second and third day of incapacity and 100% thereafter, subject to presenting a doctor’s medical certificate. Leave entitlement equates to a day-and-a-half for each month worked in a year. If contracts or collective agreements in their sector provide for better allowances, they apply. Individuals can accrue a maximum 90 days paid sick leave over five years, paid partly by the employer and from the social security contributions.
  • Working Hours and Breaks: A regular 42-hour five-day working week comprises four 8.6-hour days and one at 7.6 hours. Employees on a six-day week work four days at eight hours, one seven-hour day and three hours on a Friday. Approved collective agreements can allow four nine-hour days (including a 45-minute break) and one eight-hour day; but they cannot exceed 10 hours per day, including breaks, or 45 a week. The Hours of Work and Rest Law stipulates that after six hours’ work there should be an unpaid meal break of 45 minutes including at least 30 minutes unbroken rest. Employees may take time to pray in accordance with religious requirements. In a break of more than 30 minutes an employee may leave the place of work. Daily rest must be at least eight hours between workdays; weekly rest is generally not less than 36 continuous hours. If certain employment conditions, make this untenable then continuous rest must not be less than 25 hours.
  • Overtime: Employees receive 125% of their normal hourly rate for working the first two extra hours and 150% after that. Working on a Saturday or holiday entitles employees to 150% of the usual hourly rate plus a vacation day.
  • Termination: The Notice of Discharge and Resignation Law requires both parties to give notice of dismissal or resignation. All employers and employees are subject to the laws on termination, which is permitted on reasonable grounds, excluding discrimination, if correct procedures are followed. Terminations are restricted or prohibited in some situations: Pregnant women (after six months employment); women within the first 60 days after returning to work following maternity leave; employees on fertility treatment, or individuals on maternity or paternity leave. In these cases, dismissal is permitted only with permission from the Ministry of Economy.
  • Severance: The Advance Notice for Dismissal and Resignation Law (2001) sets statutory severance of one months’ salary for each year of service, after working for at least 12 months. A substantial portion is generally covered by employers’ monthly contributions of 8.33% of the employee’s salary towards the severance portion of the insurance or provident fund. Where an employee does not receive his full entitlement or none from their employer, the balance is made up by the National Insurance Institute.
  • Notice Periods: One day for each month during the first six months of employment, with additional 2.5 days for subsequent months up to completing one year’s service. Full-time employees are entitled to a minimum 30 days’ notice after completing one year, which is usually included in employment contracts. Payment in lieu of notices or equivalent salary is permitted, as is gardening leave on full salary and benefits.

Social Security in Israel

Israel’s social security benefits for employees are funded by contributions from employers and workers, with further additions by the government in some categories. National Insurance Institute contributions cover old age and survivors, long term care, disability, accident and work injury, maternity, childcare and unemployment. All employees over 18 years old must contribute, including foreigners, and be registered with one of four health funds. Different contribution rates apply according to income. Employers must withhold employees’ contributions and remit them to the National Insurance Institute (NII).

Deductions apply to both employers and employees. Resident employees contribute 0.4% of their income up to ILS 6,331 (€1,756, US$1,988) per month and 7% above that up to a maximum of ILS 44,020 (€12,215, US$13,826).

Employers contribute 3.55% and 7.6% of the resident employee’s salary within the same monthly income limits. Non-resident employees contribute 0.04% and 0.87% in the same income parameters and employers of non-resident employees contribute 0.59% and 2.65%.

Statutory Employer Costs in Israel

  • Corporate Income Tax (CIT): Employers face the statutory liability of Corporate Tax at the rate of 23%, applying to companies incorporated in Israel and foreign companies with a presence in the country. Resident entities are liable for taxation on their worldwide income, with non-resident companies liable only on their Israel-sourced income. There are no local taxes on corporate income.
  • National Minimum Wage: Employers must comply with the statutory requirement of paying minimum wages to their employees. The minimum an employee can be paid in 2021 is ILS 5,300 (€1,497, US$1,680) per month or an hourly rate of ILS 29 (€8.20, US$9.20), with planned increments until 2025.
    In November 2021, the Finance Ministry, Bank of Israel, Israel’s national trade union, (Histadrut) and the Manufacturers’ Association announced a monthly minimum of ILS 5,400 (€1,525, US$1,713) for 2022 rising to ILS 6,000 (€1,696, US$1,903) by December 2025.

Israeli Top Talent

Israel’s vibrant economy makes it a prime target for international investment – and a well-educated and highly motivated workforce is at the heart of Israel’s economic growth.

International companies moving into the Israeli economy must tap into this rich source of talent but taking the first step can be a daunting prospect. This is the perfect occasion to bring in a specialist to oversee the process for you.

Bradford Jacobs’ benchmark platforms as a Professional Employer Organisation (PEO) have worldwide reach and include a total understanding of the challenging complexity and potential of the Israeli economy and employment market. You can trust Bradford Jacobs to put the brightest talent in place for your company.

The Recruitment Process in Israel

Networking and market knowledge are key to recruiting in Israel, where it is estimated around half of upcoming positions are never advertised. Expats planning to relocate can find the transition particularly difficult without some knowledge of Hebrew, while employment agencies tend to represent only those job-searchers already based in Israel.

Aliyah organizations can assist foreigners with proven Jewish heritage to find work in the country, as they are automatically considered Israeli citizens through the ‘right to return’.

Incoming foreigners will need to be highly qualified for their targeted sectors as employers tend to favor Israeli applicants from the intensely competitive employment market. Accountants, medical and healthcare professionals, software engineers and IT specialists vie for the most sought-after positions.

Procedures include:

  • The candidate must have a job offer and work permit before applying for a B1 Work Visa. It is a criminal offence to work without one
  • Complying with the provisions of the Income Tax Ordinance, for both nationals and non-residents covering wages, dividends, assets
  • Registering with the social security for remitting contributions to the National Insurance Institute
  • Filing annual tax returns on a calendar year basis
  • Remitting withheld taxes by the 15th of the following month’s deadline
  • Creating employment contracts
  • Calculating monthly salary and tax contributions to be remitted
  • Creating pay slips, which under Israeli accountancy rules must be divided into various sections
  • Salaries must be paid by the ninth of the following month

Legal Checks on Employees in Israel

  • Scope: Screening an applicant’s employment and educational background are allowed with the individual’s permission. Other checks are subject to restrictions.
  • Discrimination: Israel’s Equal Opportunities Law protects employees and those applying for jobs against discrimination on the grounds of gender, sexual orientation, sexual harassment, pregnancy, age, nationality or race, religious beliefs, country of origin or political views. Each category is protected by various laws and such questions should not be part of the interview process.
  • References: Checks on educational and employment background are common, but they can be made only with the permission of the applicant.
  • Criminal Records: Such screening is permitted for government and security positions. Employers providing services to children, the disabled or mentally ill need police confirmation that prospective employees have not been convicted of a sex offence.
  • Credit Checks: These can be carried out only with the applicant’s permission, provided such information is directly relevant to the position being applied for.
  • Immigration and work permit compliance checks.

Basic Facts on Hiring in Israel

Companies hiring staff for international expansion into Israel must comply with a framework of laws and regulations on employment and taxation. Statutes and regulations provide employees with minimum entitlements, which can be extended by Collective Bargaining Agreements (CBAs) authorized by the Ministry of Economy, in addition to individual contracts. Where more than one level of entitlement applies to employees, the most beneficial always takes effect. The Enforcement Unit of the Ministry of Economy or federal or state authorities oversee employment laws.

Companies moving their operations into Israel must comply with various requirements on hiring. These include:

  • Oral contracts are legally binding and do not have to be written, except in the case of foreign workers. Under the Foreign Employees’ Law their contracts must be in writing, in a language they understand
  • Employment contracts are not enforceable if they do not meet statutory minimums
  • New employees can request a written contract; existing employees on verbal agreements can request written confirmation of changes in their work practices
  • Oral or written agreements should cover location and responsibilities, entitlements and working conditions, disciplinary procedures, termination, and severance payments
  • A contract should be presented or agreed within 30 days of starting work. Employees on an oral contract must be given a written ‘notification’ of the essential points in this period
  • Employers should check prospective new employees are not restricted by a ‘non-compete’ clause with their previous employer
  • Members of employee labor organizations and Collective Bargaining Agreements are likely to receive more protection

After hiring and onboarding, employers must be aware of other considerations:

Minimum standards apply to such as sick leave, minimum wages, working hours, maternity allowances, paid vacations, termination, and severance, notice periods and social insurance payments. Other rules regulate workplace discrimination.

To hire employees, companies must register with the tax authorities as an employer, although it is not generally a legal requirement to set up a subsidiary. However, companies that decide to set up a subsidiary must follow procedures:

  • Select a company name and decide on the business structure, typically a limited liability company (Ltd) operating under the Companies Law (1999). Register the name in Hebrew and English; if it matches with an Israeli company, the name of the home country should be added after the company name
  • The company must provide a local office address
  • No minimum share capital required
  • Appoint company director, not necessarily a local
  • Minimum of one shareholder, which can be an individual or a company
  • Register of shareholders must be publicly available
  • Company must hold an annual meeting, prepare, and submit financial reports

Documents for registering a foreign company can be deposited at the Tel-Aviv District Office.

Documentation includes:

  • Validated Incorporation Certificate from parent company’s home country
  • Notarized Hebrew translations of the Incorporation Certificate, Articles of Association and Status Certificate proving the parent company operates in its home country
  • Power of Attorney authorizing an Israeli citizen to act on the company’s behalf and receive court documents
  • List of directors including passport numbers (foreigners) and Israeli ID numbers (locals)
  • Proof of payment of all registration fees

Now able to operate payroll, the company must register both Israelis and foreigners with the Income Tax Ordinance office and register with the Social Security authority to be able to remit payments to the National Insurance Institute.

Work Culture

To succeed in business in Israel, it is vital for both employers and employees to have a strong understanding of the business culture.

Israel’s renowned ‘Start-up’ economy is making the nation an increasingly strong magnet for international investment and attracting top of the range talent to fill key roles, particularly in the leading fields of hi-tech, medical, and healthcare sectors.

Adding to the attractions is Israel’s ranking as the second ‘freest economy’ in the Middle East and North African region – beaten only by the United Arab Emirates. Israel’s location on the Mediterranean’s eastern coast, in the southwest corner of Asia with proximity to African markets, makes it an ideal launch pad for further global expansion.

A well-educated and highly motivated workforce is at the heart of Israel’s economic growth. An often-laid-back atmosphere in the business environment nevertheless exists alongside a driven attitude which can accelerate towards urgently ‘getting the job done’. Cooperation is encouraged between staff and an often loosely structured hierarchy to achieve results.

To start with, here are a few tips on taking the right steps and avoiding the pitfalls!

  • Language: Hebrew is the national language, but the business lingo is English. Make a good impression by learning some basic phrases and the correct pronunciation of your opposite number’s Hebrew name.
  • Business Environment: Conducting business is relationship-oriented and networking outside of the office or boardroom is important. Colleagues and business contacts often develop friendships.
  • Meetings: Agendas tend to be flexible, and deadlines can drift. Adaptability will play an important role in the relationship. Do not be surprised if counterparts answer their mobiles during the meeting.
  • Negotiations: Israelis are determined negotiators – but do not confuse Israelis being direct and honest with arrogance.
  • Punctuality: Being on time is valued, if not always reciprocated. It is always best to make the effort.
  • Greetings: Best to stay polite and formal with titles and surnames, until the hosts initiate first-name terms. Shaking hands is the usual greeting but if meeting a religious individual remember not to shake hands with a member of the other sex.
  • Dress Code: Office attire is typically ‘business casual’, but foreigners are best to dress formally for initial meetings.
  • Business Dining: Israelis often eat late so be ready for ‘apres business’ night life. But if organizing the meal, be aware of dietary restrictions due to religious beliefs.
  • Behavior: Although Israelis generally are not precious about personal space, religious individuals may avoid physical proximity and rely on eye contact.

Israel Minimum Wage

The Minimum wage is the lowest salary or wage that an employee can be paid for their work. In 2021, the minimum is ILS 5,300 (€1,497, US$1,680) per month or an hourly rate of ILS 29 (€8.20, US$9.20), with planned increments until 2025.

In November 2021, the Finance Ministry, Bank of Israel, Israel’s National Trade Union (Histadrut) and the Manufacturers’ Association announced a monthly minimum of ILS 5,400 (€1,525, US$1,713) for 2022 rising to ILS 6,000 (€1,696, US$1,903) by December 2025.

Probation Periods in Israel

Probationary or trial periods are not mandatory in Israel but are permitted by law. The worker should still be considered and treated as any full-time employee with regards to salary and employment rights and probationary periods, generally between one and 12 months, can be written into the employment contract along with notice period.
If the employee is dismissed unfairly, compensation of between one- and two-months’ salary can be awarded.

Working Hours in Israel

Normal hours total 42 over a working week from Sunday till Thursday, with four days at 8.6 hours and the remaining day for 7.6 hours. Employees on a six-day week work four days at eight hours, one seven-hour day and three on a Friday.

Approved collective agreements can allow four nine-hour days (including a 45-minute break) and one eight-hour day; but they cannot exceed 10 hours per day, including breaks, or 45 a week.

According to the Hours of Work and Rest Law, after six hours’ work there should be an unpaid meal break of 45 minutes including at least 30 minutes unbroken rest. Employees may take time to pray in accordance with religious requirements. In a break of more than 30 minutes an employee may leave the place of work.

Daily rest must be at least eight hours between workdays; weekly rest is generally not less than 36 continuous hours. If certain employment conditions, make this untenable then continuous rest must not be less than 25 hours.

Overtime in Israel

Employers are legally required to pay employees overtime when the hours exceed the ‘normal working hours. Employees receive 125% of their normal hourly rate for working the first two extra hours and 150% after that. Working on a Saturday or holiday employees are entitled to 150% of the usual hourly rate plus a vacation day. Employees can work up to 12 hours a day and up to 16 hours overtime a week; more than this is illegal. Overtime should be agreed between both parties.

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