Overview

Capital
Jerusalem
Currency
New Shekel
Date Format
dd/mm/yyyy

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Taxes

Employer
8.33% - Severance Pay
10.95% - Social Security and Health Insurance
6.50% - Pension Fund
2.50% - Disability Insurance
Employee
15.50% - Social Security and Health Insurance
6.00% - Pension Fund
10.00% - Up to 6,220
14.00% - 6,220 - 8,920
20.00% - 8,920 - 14,320
31.00% - 14,320 - 19,990
35.00% - 19,990 - 41,410
47.00% - 41,410 - 53,333
50.00% - Over 53,333

Minimum Wage

General

The minimum wage is 5,300 NIS per month.

Working Hours

General

A full work week in Israel consists of 42 hours. The workweek is Sunday-Thursday.  

Overtime

In general, the first 2 hours of overtime are paid at a rate of 125% of the regular pay, and 150% after that.

It is common practice in Israel to include a clause in the employment agreement that sets forth an arrangement with the employee by which the employee receives a predetermined overtime pay reflecting an estimated amount of overtime hours such employee is expected to work per month, in average (“Global Overtime Payment”). The said estimated number of overtime hours should be specified in the employment agreement (“Overtime Quota”).

VAT

General

17% standard rate.

Mandatory Benefits

Pension Fund

The employer contributes 6.5% for the pension fund and up to 2.5% for disability fund. The employee contributes contributes 6% for the pension fund.

Social Security

Employees are obligated to make monthly payments for national health insurance, which are deducted from the salary by the employer. Employers and employees each contribute a percentage of the employee’s monthly salary to social security according to the law.

Payroll

Payroll Cycle

A wage payable on a monthly basis shall be paid no later than the 9th day of the following month.

Termination

Termination Process

In Israel, the labor court’s rulings regarding the termination of an employee are strict. An employer is not able to terminate an employee without prior notice. The employer must give the employee an invitation letter him to a hearing and must include the reasons according to which the employer is considering the termination of the employee's employment with details of the grievances.  The employer is required to provide the employee with at least 2 days to prepare (weekends and holidays are not included).  The employee is entitled to represent himself or can have a lawyer or other representation in the hearing.   

During the hearing, the employer should only refer to the arguments which were included under the invitation and must allow the employee to counter. It is the duty of the employer to listen and consider the employee’s counterclaims before making a final decision on terminating the employee.  In addition, the hearing must be documented and if the employee requests, a copy must be provided to them. 

Once the employee completes his/her arguments, the hearing is done, and the person conducting the hearing informs the employee that the employer will now consider all that the employee said and reach a decision with regard to the employee. The employer is not allowed to deliver any decision right after the hearing session ends or during the hearing session itself.

Following the hearing, the employer may not immediately dismiss the employee, but must provide for ample time to deliberate and consider the employee's case as presented at the hearing.

A decision should be delivered to the employee (preferably in a personal meeting) following a reasonable time from the date of the hearing (while taking in consideration the scope of the employees claims as were raised during the hearing). The decision should be in writing and should include reference to the employee's arguments during the hearing session and the company's response to them.

If the termination process is not followed accurately, a labor court may rule that the employee be reinstated or be provided by a compensation from the employer. 

Advance Notice

If the employer chooses to terminate the employee after the hearing, the employer must provide written notice to the employee which must include the date of dismissal.

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.

Severance Pay

Under the Section 14 Arrangement, the employer is required to carry out monthly contributions equivalent to 8.33% of the employee’s monthly salary payment towards the severance pay component, and the accrued mount is to be released to the employee upon termination, even if the employee resigns without circumstances that would entitle the employee to severance pay if he was not subjected to the Section 14 Arrangement.

The amount of severance pay depends on the number of years the employee has been employed.  One months’ salary for every year worked is paid as severance.  If the employer contributed every month 8.33% to Severance pay, then he won’t need to pay severance in termination.