Israel is a country in the Middle East region and bordered by Lebanon, Syria, Jordan, Egypt, the West Bank, and the Gaza Strip. The country’s government is located in the proclaimed capital of Jerusalem (although both Israel and Palestine claim Jerusalem as their capital).

Most countries maintain their embassies in Tel Aviv, and the city is considered the economic and technological center of the country. There are many holy sites within its borders, so Israel regularly receives visitors of the Abrahamic religions coming to see its rich history.

Types of Contracts

• Employment can be offered on a full-time or part-time basis.
• Employment contracts can either be indefinite or fixed-term.

Fixed-term contracts have no minimum duration. If extended for a second term, the employee is regarded as a "regular" worker. In the event of termination, the employee is entitled to a hearing period as outlined in the termination process.

Working Hours

The standard working week consists of 42 hours. Daily working hours range from 7 to 9 hours, depending on the number of days worked per week. Typically, the working week spans from Sunday to Thursday.

Employees are entitled to a minimum of 48 hours of rest per week. Rest days usually fall on Friday and Saturday, aligning with the Israeli weekend.

Overtime

All working hours above the standard weekly hours are to be paid as overtime. It must also be mutually agreed upon between the employee and the employer before commencing any overtime working hours.

Employees are entitled to overtime pay which is calculated daily as follows:

• For the first 2 overtime hours, the overtime payment is calculated at 125% of the regular wage.
• The overtime pay is calculated at 150% of the regular wage for any additional work hours during the weekly day of rest

Overtime work exceeding 4 hours per day and 16 hours per week is prohibited by law.

Minimum Wage

The monthly minimum wage in Israel is ILS 5,571 in 2024.

This is a payment intended to cover the expenses of the employee's annual health leave. This payment can be paid annually or in installments for a fixed monthly payment. The employee is entitled to this payment after 10 months of work.

In many collective agreements, the employee is entitled to a holiday gift twice a year. on Passover and the Hebrew New Year.

Probation Period

In Israeli law, probationary periods are allowed and during such a period, the employee is treated as a full-fledged employee in all respects. The duration of the probation period is typically stated in the employment contract or a collective agreement.

For employment to be legally terminated during the probation period, the employee has to go through the hearing process even if they have worked for 2 days for the employer. Employment can be terminated immediately, without notice.

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Taxes & Local Employment Costs

Employee Taxes

Taxation of individuals is imposed in graduated rates ranging up to 47%. Additionally, a 3% surtax applies on annual taxable income exceeding 721,560 Israeli shekels (ILS), resulting in a 50% maximum income tax rate.

Non-residents are taxed at the same rates as Israeli residents. The annual tax brackets are an aggregation of the monthly brackets in force during the year, which are periodically updated for inflation.

Employee social security contributions depend on their income level and are subject to a maximum ceiling set by law. Employees contribute to the National Insurance Institute - residents in Israel contribute 3.55% or 7.6% based on level of income.

Employer Taxes & Contributions

Israel's social security system is designed to provide financial assistance and support to citizens in various life situations, including retirement, disability, unemployment, and other social needs. An overview of the employer’s contributions:

• Social Security: 3.55% on the first ILS 7,522, 7.6% on income between ILS 7,522 and ILS 49,030
• Pension: 6.5%
• Severance Pay: 8.33%
• Annual Leave: 4.65%
• Holiday Gift: ILS 34.5
• Travel: ILS 225
• Recovery: ILS 174
• Additional Pay: 3.49% (paid to employees working on an hourly basis, starting after 3 months of work)
• State Guarantee Fund: 0.5%

Annual Leave (Vacation)

Employees working a 5-day week are entitled to annual leave based on their years of service. During the first 5 years of service, employees receive a minimum of 12 working days of annual leave.

From the 6th to the 9th year of service, the entitlement increases to 17 working days. After the 9th year, the maximum entitlement reaches 23 working days. Payment for annual leave is calculated at the employee's regular salary pay rate.

Employees must use at least 7 consecutive days of vacation each year and exhaust all vacation days by the year's end. Any unused vacation days are carried over and accumulated. Accrued vacation days are compensated to the employee at the end of the period, based on the average salary of the last 3 months.

Sick Leave

Sick leave is accrued at a rate of one and a half sick days for each month of employment up to a maximum of 90 days. days per month.

Payment during sick leave varies based on the duration of the absence:

• On the 1st day of sick leave, the employee is not entitled to pay.
• On the 2nd and 3rd day of sickness, the employee receives 50% of their regular pay.
• From the 4th day onwards, the employee is entitled to 100% of their regular pay.

Upon return from sick leave, the employee must provide a medical certificate issued by a medical professional.

Special Circumstances

Under the Sick Pay Law amendment, employees suffering from specific conditions such as malignant diseases (e.g., cancer) or requiring regular dialysis treatments are eligible for full sick pay (100%) from the first day of absence.

This special sick pay provision is applicable if the employee is on leave to receive care or undergo periodic examinations related to the specified condition. The maximum duration for full sick pay under these circumstances is 90 days.

Employees must provide a medical certificate from a medical professional confirming the necessity of treatment or examination due to the specified condition.

Maternity Leave

Female employees are entitled to 26 weeks of maternity leave after completing 1 year of service within an organization. Those with less than 1 year of service are entitled to 15 weeks of maternity leave.

If the employee is eligible, Israel’s social security system compensates for maternity leave, generally providing 15 weeks of fully paid leave (provided she worked for at least 12 months) and 11 weeks of unpaid leave.

Leave Timing and Flexibility:

• Maternity leave can be taken up to 7 weeks before the predicted due date of the child, with the remainder taken after the birth.
• In the case of multiple or complicated births, the maternity leave entitlement can be extended by 3 weeks.
• In the unfortunate event of a mother losing her child after birth, she may take unpaid maternity leave for up to 60 days after the birth.

Flexibility for Returning to Work:

• From the 7th week of leave, the mother has the option to return to work.
• The remaining maternity leave period can be transferred to the spouse if desired.

Paternity Leave

Following a partner going into labor and up to 24 hours following the birth, an employee is entitled to paternity leave. The paternity leave period extends for up to 5 days.

During the paternity leave:

• The first 3 days are paid from the employee's accrued annual vacation.
• The remaining 2 days are deducted from the employee's accrued sick leave.

Bereavement Leave

If an employee in Israel experiences the unfortunate loss of an immediate family member, they are granted up to 7 calendar days of paid leave to mourn. This period, known as bereavement leave, is fully compensated by the employer once the employee has been with the company for at least 3 months.

Public Holidays

• Municipal Election Day - Moveable Tuesday, every 6 years
• Passover (Pesach) Eve - Moveable, between March-April (half working day)
• Passover (Pesach) - Moveable, between March-April
• Seventh Day of Passover (Pesach) Eve - Moveable, usually April (half working day)
• Seventh Day of Passover (Pesach) - Moveable, usually April
• Independence Day Eve - Moveable, between April-May (half working day)
• Independence Day - Moveable, between April-May
• Shavuot Eve - Moveable, between May-June (half working day)
• Shavuot - Moveable, between May-June
• New Year (Rosh Hashanah) Eve - between September-October (half working day)
• New Year (Rosh Hashanah) - between September-October
• New Year (Rosh Hashanah) - between September-October
• Yom Kippur Eve - between September-October
• Yom Kippur - between September-October
• Sukkot Eve - between September-October (half working day)
• Sukkot - between September-October
• Simchat Torah - between September-October (half working day)
• Simchat Torah - between September-October

Termination Process

Employers are allowed to exercise their right to terminate an employee’s employment in good faith, in compliance with applicable law (such as employment contracts and collective bargaining agreements).

To start a termination process, the employer has to provide the employee a hearing invitation with the reasons for the intended termination. The hearing is conducted by the employee’s manager, and the employee gets an opportunity to express their viewpoint regarding the intention to terminate. After the hearing, the employer considers the arguments seriously and in good faith. The decision is then communicated in writing, preferable in person and within 48 hours of the hearing.

Notice Period

An employee with a seniority of 1 year or more is entitled to 1 month's notice. An employee with seniority of less than a year of work is entitled to 1 day of advance notice for each of the first 6 months of work, and 2.5 days for each additional full month of work (parts of a month are not taken into account).

The employer can provide a payment to the employee for the notice period in advance and terminate the employee's work immediately (after the hearing and final decision).

Statutory Payments

Redundancy compensation is statutory. It is deposited into the employee's pension fund in advance each month in the amount of 1/12 of the monthly payment. Unused vacation days are also paid out with the final salary.

While a 13th-month salary payment is not legally mandated, employees are entitled to a “Recreation Payment” after one year at their companies. The bonus is usually paid between July and September, and the amount depends on the number of years of employment.