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Discover everything you need to know about Israel

Hire in Israel at a glance

Here ares some key facts regarding hiring in Israel

Israeli New Shekel
GDP growth
GDP world share
Payroll frequency
Working hours
43 hours/week

Overview in Israel

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Israel is a historically rich country located in the Middle East, bordered by the Mediterranean Sea. It features a diverse geography ranging from fertile plains and rugged highlands to the vast Negev desert, and experiences a Mediterranean climate.

Historically, the area has been central to various civilizations and empires, with the modern State of Israel established in 1948 following the Zionist movement. This has led to ongoing regional conflicts, particularly the Israeli-Palestinian issue.

Economically, Israel is a high-tech hub with significant contributions from technology, pharmaceuticals, and finance sectors. Despite its small size, it has a dynamic global economic presence. The workforce is growing, partly due to immigration, and is relatively young with a median age of around 30. The country also shows a high female labor force participation rate.

Culturally, Israel's workforce values direct communication, informal interactions, and places importance on building strong interpersonal relationships. Work-life balance is increasingly prioritized, especially among the younger generations.

Israel continues to innovate with significant growth in high-tech, cleantech, biotechnology, and cybersecurity. Traditional sectors like agriculture and tourism also play crucial roles in its economy. The country faces challenges such as integrating its diverse population and managing resources sustainably.

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Employer of Record in Israel

Rivermate is a global Employer of Record company that helps you hire employees in Israel without the need to set up a legal entity. We act as the Employer of Record for your employees in Israel, taking care of all the legal and compliance aspects of employment, so you can focus on growing your business.

How does it work?

When you hire employees in Israel through Rivermate, we become the legal employer of your staff. This means that we take on all the responsibilities of an employer, while you retain the day-to-day management of your employees.

You as the company maintain the direct relationshiop with the employee, you allocate them the work and manage their performance.
Rivermate takes care of the local payrolling of the employee, the contracts, HR, benefits and compliance.

Responsibilities of an Employer of Record

As an Employer of Record in Israel, Rivermate is responsible for:

  • Creating and managing the employment contracts
  • Running the monthly payroll
  • Providing local and global benefits
  • Ensuring 100% local compliance
  • Providing local HR support

Responsibilities of the company that hires the employee

As the company that hires the employee through the Employer of Record, you are responsible for:

  • Day-to-day management of the employee
  • Work assignments
  • Performance management
  • Training and development

Taxes in Israel

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In Israel, employers are required to contribute to National Insurance (NI) on behalf of their employees, with rates depending on the employee's monthly income. For incomes up to ILS 7,522, the rate is 3.55%, and for amounts above this threshold, the rate increases to 7.6%. Employers may also contribute to pension and disability insurance, with total contributions for these not exceeding 7.5% of the employee's salary.

Health insurance contributions are not employer-mandated but are covered by employee contributions and government subsidies. Mandatory deductions from employee salaries include income tax, NI contributions, and health insurance, with optional deductions for pension, union dues, and employee savings plans.

Value-added tax (VAT) in Israel is set at 17%, applicable to most goods and services, with certain services like banking and education being exempt or zero-rated. Businesses exceeding a turnover of ILS 99,893 must register for VAT and are responsible for charging VAT on taxable supplies and can claim input tax credits.

Israel offers various tax incentives to encourage investment, including reduced corporate tax rates and grants under the Encouragement of Capital Investments Law, benefits for large multinational companies under the Strategic Investment Program, and tax deductions for individuals investing in R&D startups through the Angel Investors Law. Additional incentives include reduced tax rates on IP income and tax credits for donations.

Leave in Israel

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In Israel, employees are entitled to paid annual vacation leave, with the number of days increasing based on the length of service. Initially, employees working a five-day week receive a minimum of 12 working days of leave per year, which increases to 17 days after five years, and up to 23 days after nine years. Unused vacation leave can accumulate but is capped at four years' worth, and employees are compensated for unused days if their employment is terminated.

Israel also observes a variety of public holidays reflecting its Jewish heritage and the religious diversity of its population. Major Jewish holidays include Rosh Hashanah, Yom Kippur, Passover, Shavuot, Sukkot, and Simchat Torah. National holidays such as Yom HaShoah, Yom HaZikaron, and Yom HaAtzmaut commemorate significant historical and cultural events. Minority religious holidays like Eid al-Fitr and Christmas are also recognized.

Additionally, Israeli labor law provides for various other types of leave, including sick leave, maternity and paternity leave, and military service leave. Parental leave is available but unpaid, and personal leave policies may vary by employer. These entitlements ensure that employees have support during different life situations.

Benefits in Israel

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Israel's employment law ensures a robust benefits system for workers, encompassing paid leave, social security, insurance, and additional perks aimed at enhancing financial security and work-life balance.

Paid Leave:

  • Annual Leave: Employees get a minimum of 12 days, increasing with tenure up to 28 days.
  • Public Holidays: Paid time off during national holidays.
  • Sick Leave: Accrual of approximately 1.5 days per month.
  • Maternity and Paternity Leave: Up to 26 weeks for mothers and one week for fathers.
  • Bereavement Leave: Paid leave for family deaths.

Social Security and Insurance:

  • Contributions from both employers and employees fund the National Insurance, which covers unemployment, disability, and pensions.

Additional Benefits:

  • Severance Pay: Based on salary, service length, and termination reason.
  • Health and Wellness Programs: Including supplemental health insurance and wellness activities.
  • Work-Life Balance: Flexible hours and childcare assistance.
  • Financial Benefits: Transportation allowances and meal subsidies.
  • Other Perks: Company cars, holiday gifts, and professional development opportunities.

Healthcare System:

  • Mandatory health insurance through National Health Insurance and HMOs, with optional supplemental plans provided by some employers.

Retirement Security:

  • State Pension: Mandatory contributions with benefits based on earnings and contribution history.
  • Voluntary Retirement Savings Plans: Including pension funds, provident funds, and life insurance with savings, often with employer contributions.

Employers must register employees with the National Insurance Institute and ensure proper deductions for health and social security contributions. Employees have the responsibility to contribute to the National Health Insurance and can choose their preferred HMO.

Workers Rights in Israel

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In Israel, employment termination and workplace regulations are governed by a comprehensive legal framework. The Severance Pay Law 1963 mandates severance pay for dismissed employees, calculated based on the employee's length of service and final salary, except in cases of certain disciplinary dismissals. Employers and employees must adhere to specified notice periods, which can vary based on collective agreements or individual contracts.

The Employment Equal Opportunities Law, 1988, prohibits discrimination in the workplace on various grounds including gender, race, religion, and more. Victims of discrimination can seek redress through Labor Courts, the Commissioner for Equal Employment Opportunities, or public petitions.

Work conditions are regulated under laws such as the Hours of Work and Rest Law, 1951, which sets the maximum workweek at 42 hours, mandates rest breaks, and outlines provisions for overtime pay. Employers are also required to ensure safe working conditions under the Safety at Work Law, 1970, which includes conducting risk assessments and providing personal protective equipment.

Overall, Israeli labor laws emphasize employee rights, workplace safety, and non-discrimination, with strict enforcement mechanisms to ensure compliance.

Agreements in Israel

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In Israel, employment law covers contracts for both citizens and foreign workers with valid visas, categorizing them mainly into indeterminate and fixed-term contracts. Indeterminate contracts, which are more common, do not have a set end date and can be terminated by either party with proper notice, often influenced by collective bargaining agreements. Fixed-term contracts are for a specific period and end automatically when the term expires, though they can be renewed.

Key aspects of employment contracts include mandatory written agreements within 30 days of employment commencement, detailing job roles, compensation, work hours, and benefits, all of which must comply with Israeli law. These contracts also outline termination procedures, confidentiality obligations, and may include probationary periods where terms of employment can be more flexible.

Collective agreements play a significant role, setting minimum standards for various employment conditions and can override general legal stipulations. The law also addresses confidentiality and non-compete clauses, with recent legislation imposing strict limitations on the latter to protect workers' rights while balancing the protection of trade secrets.

Remote Work in Israel

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  • Remote Work Legislation in Israel: Israel lacks specific legislation for remote work, relying instead on existing labor laws and court rulings. Employment contracts are crucial, detailing work arrangements, hours, compensation, and employer responsibilities like equipment provision and internet reimbursements.

  • Technological Infrastructure: Israel boasts a strong internet infrastructure, essential for remote work. Employers provide necessary tools like laptops and software for communication and collaboration.

  • Employer and Employee Responsibilities: Employers must assess and fulfill the needs of remote roles, while employees should maintain a suitable workspace. Developing a formal remote work policy and providing training on tools and best practices are recommended to manage legal uncertainties and ensure productivity.

  • Flexibility and Job Sharing: Flexitime and job sharing aren't specifically regulated under Israeli law but can be negotiated in employment contracts. These arrangements require clear definitions of roles and responsibilities, including equipment and internet reimbursements.

  • Data Privacy and Protection: The Protection of Privacy Act, 1981, governs personal data protection, emphasizing transparency and proportionality in data processing. Employers must safeguard data, especially in remote settings, and employees have rights to access and object to the processing of their data. Best practices include using separate devices for work, encrypting data, and strong access controls.

  • Challenges and Support: Remote work can impact work-life balance and cause isolation. Employers should support employee well-being through resources and social events. Legal and tax implications of remote work arrangements should also be considered.

Working Hours in Israel

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In Israel, the maximum legal workweek is 42 hours, translating to 182 hours per month. The daily maximum is 8.6 hours for a five-day workweek and 8 hours for a six-day workweek, with a shorter Friday. Overtime is paid at 125% of the hourly wage for the first two hours and 150% thereafter. Working on rest days or holidays incurs a compensation of 150% for all hours, with the first two hours at 175% and subsequent hours at 200%.

Employees are entitled to a 45-minute break for shifts of six hours or more, and a minimum of 36 consecutive hours of rest per week, typically Friday and Saturday. Night shifts, defined as work between 10:00 PM and 6:00 AM, should not exceed seven hours and are limited to one week out of every two, with additional compensation for the inconvenience.

Overall, Israeli labor law emphasizes fair compensation for overtime and ensures adequate rest periods, with specific provisions for night and weekend work to accommodate religious practices and worker well-being. Exceptions for extended work hours require permits from the Ministry of Labor, particularly for essential services or emergencies.

Salary in Israel

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Understanding Market Competitive Salaries in Israel

In Israel, competitive salaries are influenced by factors such as industry, experience and skills, location, company size and performance, and education. High-tech sectors generally offer higher salaries compared to traditional sectors like retail or hospitality. Salaries also vary with the cost of living, particularly higher in cities like Tel Aviv.

Resources for Determining Salaries

To gauge competitive salaries, one can refer to salary surveys, government statistics from the Israel Central Bureau of Statistics, and insights from recruitment agencies. These resources help tailor salary data to specific job titles and locations.

Minimum Wage and Benefits

As of April 1, 2023, the minimum wage in Israel is ₪5,571.75 monthly, with daily and hourly equivalents adjusted based on the workweek. This wage is set at 47.5% of the average wage, allowing for automatic adjustments when the average wage increases. All employees, including migrant workers, are entitled to this minimum wage, though enforcement can be challenging.

Employee Benefits

Mandatory benefits in Israel include contributions to social security, pension, disability, and unemployment insurance, with a minimum of 10-23 paid vacation days and eight public holidays. Employers may also offer discretionary benefits such as holiday bonuses, meal allowances, and contributions to a monthly study fund.

Payroll and Compensation

The standard payroll cycle in Israel is monthly, with salaries due by the 9th of the following month. Overtime compensation requires employers to pay 125% of the regular wage for the first two hours, and 150% thereafter. Employees also receive a recreation payment annually after one year of service, which varies based on tenure.

Termination in Israel

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  • Employee Notice Period: In Israel, employees must provide a one-month written notice when resigning, with some exceptions allowed in individual contracts, but not below the legal minimum.
  • Employer Notice Period: There is no legal requirement for employers to provide a notice period when terminating an employee.
  • Severance Pay: Employees with at least one year of service are entitled to severance pay, calculated as one month's salary per year of service, including partial years. Employers must contribute to a severance pay fund.
  • Pre-termination Considerations: Employers must allow employees the right to be heard before termination, including providing reasons and allowing access to relevant documents and legal representation.
  • Post-termination Procedures: Employers are required to pay all accrued wages, vacation pay, and other dues upon termination.

Freelancing in Israel

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Israeli labor law clearly distinguishes between employees and independent contractors, impacting control, benefits, taxes, and integration into the business. Misclassification can result in penalties for employers, such as the need to provide retroactive benefits.

  • Control: Employees experience significant oversight from employers, including work hours and methods, whereas independent contractors maintain autonomy over such aspects.
  • Benefits and Taxes: Employees receive statutory benefits and have taxes withheld by their employers. Contractors handle their own taxes and social security, often negotiating higher fees to cover these.
  • Integration: Employees are deeply integrated into a business and its core operations, unlike contractors who are engaged temporarily and may serve multiple clients.
  • Contract Structures: Contractors should have clear agreements, which can be structured as fixed-price or hourly rate contracts, defining work scope, timelines, and payment terms.
  • Negotiation Practices: Effective negotiation on rates, payment terms, and project scope is crucial for contractors to ensure fair compensation and clear expectations.
  • IP Rights and Contracts: In Israel, freelancers typically retain copyright of their creations unless transferred via a contract, which should also address moral rights and licensing.
  • Legal and Tax Advice: Contractors are advised to seek legal counsel on IP rights and manage their own tax obligations, including income tax, national insurance, health insurance, and potentially VAT.

Understanding these distinctions and legal requirements is essential for both businesses and freelancers to ensure compliance and protect their rights within the Israeli legal framework.

Health & Safety in Israel

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Israel has a robust legal framework for worker safety, spearheaded by the Ministry of Labor, Social Affairs and Social Services (MLSS). The foundational legislation, the Work Safety Ordinance (New Version), 1970 (WSO), mandates general employer obligations to ensure a safe working environment, addressing hazards like chemical exposure, fire safety, and noise. This is supported by specific regulations for particular risks, such as the Safety at Work Regulations (1984) for harmful dust and the Work at Height Regulations (2008).

Employers are required to implement Safety Management Programs (SMPs) in workplaces with 50 or more employees, focusing on risk assessments, hazard control, and emergency procedures. They must also provide safety training and maintain equipment.

Workers have rights to a safe environment, can refuse unsafe work, and must be informed about workplace hazards and safety measures. The Israel Institute for Occupational Safety and Hygiene (IIOSH) supports these efforts by promoting safety awareness and providing training.

Inspections are conducted by the Labour Inspection Department (LID) using a risk-based approach, with criteria set by the WSO. The frequency of inspections varies with the risk level of the workplace. Actions following inspections can range from improvement notices to fines or work stoppages.

In case of workplace accidents, the Accidents and Occupational Diseases (Notification) Ordinance (1945) requires immediate reporting. Investigations depend on the accident's severity and can lead to identifying safety violations and determining employer liability. Workers suffering from work-related injuries or illnesses may seek compensation through the National Insurance Law (1953), covering medical expenses and loss of income.

Dispute Resolution in Israel

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Israel's labor dispute resolution system includes specialized labor courts and arbitration panels. The system comprises five regional labor courts and a National Labor Court, handling individual and collective labor disputes, as well as social security matters. Labor courts offer a formal process where evidence is presented and binding decisions are made, subject to appeal at the National Labor Court.

Arbitration serves as an alternative, especially for collective disputes, where arbitrators issue binding decisions enforceable by courts. Typical cases in labor courts involve issues like unfair dismissal, wage disputes, and discrimination, while arbitration frequently addresses collective agreement disputes and industrial issues.

The system is supported by various government agencies conducting audits and inspections to enforce labor and social regulations, with non-compliance resulting in fines, penalties, or criminal charges. Compliance audits are crucial for maintaining fair labor practices and safe working conditions.

Whistleblower protections are in place to safeguard employees reporting misconduct, with legal frameworks protecting against retaliation. However, whistleblowers may face challenges in proving retaliatory actions by employers.

Israel adheres to core international labor standards, evidenced by its ratification of all eight fundamental ILO conventions, which influence its domestic labor legislation. These conventions cover rights related to unionization, collective bargaining, forced labor, child labor, equal remuneration, and non-discrimination in employment. Despite this, some areas, like rights for domestic and migrant workers, remain less addressed, highlighting the need for ongoing focus on labor law enforcement and implementation.

Cultural Considerations in Israel

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Israeli workplaces are characterized by a dynamic communication style that includes directness, passion, and a situational approach to formality. Israelis are known for being upfront and honest in their communication, often using lively debates to foster idea exchange. Non-verbal cues such as hand gestures and facial expressions play a significant role in conveying messages.

In negotiations, Israelis are direct and assertive, valuing quick movement to business discussions and expecting a considerable amount of bargaining. Cultural nuances, such as the focus on short-term gains or long-term relationships, vary among different ethnic groups within Israel.

The business structure in Israel combines hierarchy with a collaborative twist, promoting a flexible and open communication environment. Decision-making processes emphasize efficiency but also value team input. Leadership styles in Israeli businesses blend directive and participative approaches, fostering a culture of innovation and mutual support.

Religious and national holidays significantly impact business operations, with observances like Shabbat and High Holy Days leading to early closures and reduced business hours. Planning around these holidays is crucial for smooth business operations, and understanding these cultural elements is key to successful interactions and negotiations in Israeli workplaces.

Frequently Asked Questions for Employer of Record services in Israel

What is the timeline for setting up a company in Israel?

Setting up a company in Israel involves several steps and can take a varying amount of time depending on the efficiency of the processes and the preparedness of the business owner. Here is a detailed timeline for setting up a company in Israel:

  1. Choosing a Company Name and Structure (1-2 days):

    • Decide on the type of company (e.g., private limited company, public company, etc.).
    • Choose a unique company name and check its availability with the Registrar of Companies.
  2. Preparation of Incorporation Documents (3-5 days):

    • Draft the Articles of Association.
    • Prepare other necessary documents such as the declaration of the initial shareholders and directors.
  3. Submission to the Registrar of Companies (1-2 days):

    • Submit the incorporation documents to the Registrar of Companies.
    • Pay the registration fee.
  4. Approval and Issuance of Certificate of Incorporation (7-14 days):

    • The Registrar reviews the documents.
    • Upon approval, the Certificate of Incorporation is issued.
  5. Registering for Tax Purposes (7-14 days):

    • Register with the Israel Tax Authority for corporate tax, VAT, and social security.
    • Obtain a company tax number.
  6. Opening a Bank Account (7-10 days):

    • Open a corporate bank account in Israel.
    • Deposit the initial share capital as required.
  7. Registering for Social Security and Health Insurance (7-14 days):

    • Register with the National Insurance Institute for social security and health insurance purposes.
  8. Additional Licenses and Permits (Varies):

    • Depending on the nature of the business, additional licenses or permits may be required, which can take additional time.

Total Estimated Time: The entire process of setting up a company in Israel can take approximately 4 to 8 weeks, assuming there are no significant delays or complications.

Using an Employer of Record (EOR) like Rivermate can significantly streamline this process. An EOR can handle many of these administrative tasks, ensuring compliance with local laws and regulations, and allowing the business to focus on its core activities. This can be particularly beneficial for companies looking to establish a presence in Israel without the need to navigate the complexities of local bureaucracy themselves.

Who handles the filing and payment of employees' taxes and social insurance contributions when using an Employer of Record in Israel?

When using an Employer of Record (EOR) in Israel, the EOR handles the filing and payment of employees' taxes and social insurance contributions. This includes the calculation, withholding, and remittance of income tax, National Insurance Institute (NII) contributions, and health insurance premiums on behalf of the employees. The EOR ensures compliance with Israeli tax laws and regulations, thereby relieving the client company of the administrative burden and complexities associated with payroll and tax compliance in Israel. This allows the client company to focus on its core business activities while ensuring that all legal and regulatory requirements are met.

What options are available for hiring a worker in Israel?

In Israel, employers have several options for hiring workers, each with its own set of legal, administrative, and financial considerations. Here are the primary options available:

  1. Direct Employment:

    • Local Entity: To hire employees directly, a company must establish a legal entity in Israel. This involves registering with the Israeli Registrar of Companies, obtaining a business license, and complying with local tax and labor laws.
    • Compliance: Employers must adhere to Israeli labor laws, which include regulations on minimum wage, working hours, social benefits, and termination procedures. They must also handle payroll, tax withholdings, and social security contributions.
  2. Independent Contractors:

    • Freelancers: Companies can hire independent contractors or freelancers. This option provides flexibility and can be cost-effective, but it comes with risks. Misclassification of employees as contractors can lead to legal and financial penalties.
    • Contracts: It's crucial to have clear, written contracts outlining the scope of work, payment terms, and other conditions to avoid disputes and ensure compliance with Israeli laws.
  3. Temporary Staffing Agencies:

    • Staffing Firms: Employers can use local staffing agencies to hire temporary or contract workers. These agencies handle the administrative and legal aspects of employment, including payroll and compliance with labor laws.
    • Flexibility: This option provides flexibility for short-term projects or fluctuating workloads without the long-term commitment of direct employment.
  4. Employer of Record (EOR) Services:

    • Rivermate and Similar Providers: An EOR like Rivermate can simplify the process of hiring in Israel. The EOR acts as the legal employer, handling all employment-related responsibilities, including payroll, tax compliance, benefits administration, and adherence to local labor laws.
    • Benefits:
      • Compliance: Ensures full compliance with Israeli employment laws, reducing the risk of legal issues.
      • Speed: Enables faster hiring without the need to establish a local entity.
      • Cost-Effective: Reduces administrative overhead and costs associated with setting up and maintaining a local entity.
      • Focus: Allows companies to focus on their core business activities while the EOR manages HR and administrative tasks.
  5. Professional Employer Organization (PEO):

    • Co-Employment: A PEO provides HR services and shares employment responsibilities with the client company. This includes payroll, benefits, compliance, and risk management.
    • Local Expertise: PEOs offer local expertise and can help navigate the complexities of Israeli labor laws and regulations.

Each of these options has its advantages and potential drawbacks, depending on the specific needs and circumstances of the employer. For companies looking to expand into Israel without the complexities of establishing a local entity, using an Employer of Record like Rivermate can be a particularly attractive solution. It provides a compliant, efficient, and cost-effective way to hire and manage employees in Israel.

What are the costs associated with employing someone in Israel?

Employing someone in Israel involves several costs that employers need to consider. These costs can be broadly categorized into direct salary expenses, mandatory benefits, and additional employment-related costs. Here’s a detailed breakdown:

  1. Gross Salary: This is the base salary agreed upon between the employer and the employee. It is subject to negotiation and varies depending on the industry, role, and experience of the employee.

  2. Social Security Contributions (Bituach Leumi): Employers in Israel are required to contribute to the National Insurance Institute (Bituach Leumi) on behalf of their employees. The rates are approximately 3.55% for the first part of the salary (up to 60% of the average wage) and 7.6% for the remaining part of the salary.

  3. Health Insurance: Employers must also contribute to health insurance, which is part of the social security system. The rates are included in the social security contributions mentioned above.

  4. Pension Contributions: Employers are required to contribute to an employee’s pension fund. The mandatory contribution rates are typically around 6.5% of the employee’s salary for the employer’s part, and an additional 6% for severance pay (totaling 12.5%).

  5. Severance Pay (Pitzuim): In Israel, employees are entitled to severance pay upon termination, which is calculated as one month’s salary for each year of employment. This is often pre-funded through the pension contributions mentioned above.

  6. Vacation Pay: Employees are entitled to paid vacation days, which vary based on the length of employment. The minimum is typically around 12 days per year, increasing with tenure.

  7. Sick Leave: Employers must provide paid sick leave, with the first day unpaid, the second and third days at 50% of the salary, and subsequent days at 100% of the salary, up to a certain limit.

  8. Holidays: Employees are entitled to paid leave on public holidays, which include several religious and national holidays.

  9. Other Benefits: Depending on the industry and specific employment agreements, there may be additional benefits such as transportation allowances, meal vouchers, and other perks.

  10. Recruitment and Onboarding Costs: These include expenses related to hiring processes, such as advertising, recruitment agency fees, and onboarding training.

  11. Administrative Costs: Managing payroll, compliance with local labor laws, and other HR administrative tasks can incur additional costs, especially if the company does not have a local HR team.

Using an Employer of Record (EOR) like Rivermate can help manage these costs effectively. An EOR handles all the administrative and compliance aspects of employment, ensuring that all statutory contributions and benefits are correctly managed. This can save time and reduce the risk of non-compliance, which can be costly in terms of fines and legal issues. Additionally, an EOR can provide insights into local market salary benchmarks, helping employers offer competitive compensation packages.

What is HR compliance in Israel, and why is it important?

HR compliance in Israel refers to the adherence to the country's labor laws, regulations, and standards that govern the employer-employee relationship. This includes a wide range of legal requirements such as employment contracts, wages, working hours, employee benefits, termination procedures, health and safety standards, and anti-discrimination laws.

Key Aspects of HR Compliance in Israel:

  1. Employment Contracts: Israeli law mandates that employers provide written employment contracts to employees, detailing the terms and conditions of employment, including job description, salary, working hours, and other benefits.

  2. Wages and Working Hours: Employers must comply with the minimum wage laws and regulations regarding working hours, overtime pay, and rest periods. The standard workweek in Israel is 43 hours, and any work beyond this is considered overtime, which must be compensated at a higher rate.

  3. Employee Benefits: Employers are required to provide various benefits, including social security, health insurance, pension contributions, and paid leave (annual leave, sick leave, maternity/paternity leave).

  4. Termination Procedures: There are specific legal procedures for terminating employment, including notice periods, severance pay, and the requirement to provide a valid reason for termination. Unlawful termination can lead to legal disputes and financial penalties.

  5. Health and Safety: Employers must ensure a safe working environment and comply with occupational health and safety regulations to prevent workplace accidents and illnesses.

  6. Anti-Discrimination Laws: Israeli law prohibits discrimination based on race, religion, gender, age, disability, and other protected characteristics. Employers must ensure equal treatment and opportunities for all employees.

Importance of HR Compliance in Israel:

  1. Legal Protection: Compliance with HR laws protects the company from legal disputes, fines, and penalties. Non-compliance can result in costly litigation and damage to the company's reputation.

  2. Employee Satisfaction and Retention: Adhering to labor laws and providing fair treatment and benefits to employees can lead to higher job satisfaction, improved morale, and better employee retention rates.

  3. Operational Efficiency: Understanding and implementing HR compliance ensures smooth and efficient business operations. It helps in avoiding disruptions caused by legal issues or employee dissatisfaction.

  4. Reputation Management: Companies that comply with HR regulations are viewed more favorably by employees, customers, and investors. This can enhance the company's reputation and attract top talent and business opportunities.

  5. Risk Management: Proactively managing HR compliance helps in identifying and mitigating potential risks related to employment practices. This can prevent costly legal battles and ensure long-term business sustainability.

Using an Employer of Record (EOR) like Rivermate in Israel:

An Employer of Record (EOR) service like Rivermate can be highly beneficial for companies operating in Israel, especially those without a local presence or expertise in Israeli labor laws. Here’s how:

  1. Expertise in Local Laws: Rivermate has in-depth knowledge of Israeli labor laws and regulations, ensuring full compliance with all legal requirements.

  2. Administrative Efficiency: Rivermate handles all administrative tasks related to HR compliance, including payroll, tax filings, benefits administration, and employment contracts, allowing companies to focus on their core business activities.

  3. Risk Mitigation: By ensuring compliance with local laws, Rivermate helps mitigate the risk of legal disputes, fines, and penalties associated with non-compliance.

  4. Cost-Effective: Using an EOR can be more cost-effective than setting up a local entity and managing HR compliance internally, especially for small and medium-sized enterprises or companies testing the market.

  5. Scalability: Rivermate provides the flexibility to scale operations up or down quickly, without the complexities of hiring and terminating employees directly.

In summary, HR compliance in Israel is crucial for legal protection, employee satisfaction, operational efficiency, reputation management, and risk mitigation. Utilizing an Employer of Record like Rivermate can simplify compliance, reduce administrative burdens, and ensure that companies meet all legal requirements while focusing on their strategic goals.

Is it possible to hire independent contractors in Israel?

Yes, it is possible to hire independent contractors in Israel. However, there are several important considerations to keep in mind to ensure compliance with Israeli labor laws and regulations.

  1. Classification: One of the primary concerns when hiring independent contractors in Israel is the correct classification of the worker. Misclassification can lead to significant legal and financial repercussions. Israeli labor courts may reclassify an independent contractor as an employee if the nature of the work relationship resembles that of an employer-employee relationship. Factors considered include the degree of control over the worker, the integration of the worker into the company, and the level of independence in performing tasks.

  2. Contracts: It is crucial to have a well-drafted contract that clearly outlines the terms of the engagement, including the scope of work, payment terms, duration, and the nature of the relationship. This contract should emphasize the contractor's independence and lack of entitlement to employee benefits.

  3. Taxation: Independent contractors in Israel are responsible for their own tax filings, including income tax, National Insurance Institute (Bituach Leumi) contributions, and VAT if applicable. Employers must ensure that contractors are aware of their tax obligations and that payments are made in compliance with Israeli tax laws.

  4. Benefits and Protections: Unlike employees, independent contractors are not entitled to statutory benefits such as paid leave, severance pay, or social security contributions. This distinction must be clear to avoid any potential claims for employee benefits.

  5. Intellectual Property: When engaging independent contractors, it is important to address intellectual property rights in the contract. Typically, the contractor should agree to assign any intellectual property created during the engagement to the hiring company.

  6. Dispute Resolution: Including a dispute resolution clause in the contract can help manage any potential conflicts that may arise. This can specify the preferred method of resolution, such as arbitration or mediation, and the applicable jurisdiction.

Using an Employer of Record (EOR) service like Rivermate can simplify the process of hiring independent contractors in Israel. An EOR can help ensure compliance with local laws, manage payroll and tax obligations, and provide guidance on best practices for engaging contractors. This can mitigate risks associated with misclassification and other legal issues, allowing companies to focus on their core business activities.

How does Rivermate, as an Employer of Record in Israel, ensure HR compliance?

Rivermate, as an Employer of Record (EOR) in Israel, ensures HR compliance through a comprehensive understanding and application of local labor laws and regulations. Here are several ways Rivermate achieves this:

  1. Local Expertise: Rivermate employs local HR professionals who are well-versed in Israeli labor laws, including the Employment Law, Wage Protection Law, and the Annual Leave Law. This local expertise ensures that all employment practices are compliant with national regulations.

  2. Employment Contracts: Rivermate prepares and manages employment contracts that adhere to Israeli legal requirements. These contracts include necessary details such as job descriptions, salary, benefits, working hours, and termination conditions, ensuring they meet the standards set by Israeli law.

  3. Payroll Management: Rivermate handles payroll processing in compliance with Israeli regulations, including accurate calculation of wages, taxes, and social security contributions. They ensure timely and correct payments to employees, avoiding legal penalties and ensuring employee satisfaction.

  4. Tax Compliance: Rivermate ensures that all tax obligations are met, including income tax, National Insurance Institute (Bituach Leumi) contributions, and health insurance payments. They stay updated on any changes in tax laws to ensure ongoing compliance.

  5. Employee Benefits: Rivermate manages statutory benefits such as pension contributions, severance pay, and annual leave entitlements. They ensure that these benefits are provided in accordance with Israeli laws, which helps in maintaining compliance and employee morale.

  6. Labor Relations: Rivermate assists in managing labor relations, including handling disputes and ensuring compliance with collective bargaining agreements if applicable. They provide guidance on fair treatment and non-discrimination policies, which are crucial for legal compliance.

  7. Health and Safety Regulations: Rivermate ensures that workplace health and safety standards are met according to Israeli regulations. They provide guidance on maintaining a safe work environment and managing occupational health requirements.

  8. Termination Procedures: Rivermate manages employee terminations in compliance with Israeli laws, ensuring that proper notice periods are given and severance payments are made as required. They handle the legal aspects of termination to minimize the risk of disputes and legal action.

  9. Continuous Monitoring and Updates: Rivermate continuously monitors changes in Israeli labor laws and regulations. They update their practices and policies accordingly to ensure ongoing compliance, reducing the risk of legal issues for their clients.

By leveraging Rivermate's services, companies can confidently expand their operations in Israel, knowing that their HR practices are fully compliant with local laws and regulations. This allows businesses to focus on their core activities while minimizing the risks associated with non-compliance.

Do employees receive all their rights and benefits when employed through an Employer of Record in Israel?

Yes, employees in Israel receive all their rights and benefits when employed through an Employer of Record (EOR) like Rivermate. An EOR ensures compliance with local labor laws and regulations, which is crucial in a country like Israel where employment laws are comprehensive and employee rights are strongly protected.

Here are some key aspects of how an EOR like Rivermate ensures that employees receive their rights and benefits in Israel:

  1. Compliance with Labor Laws: Israel has stringent labor laws that cover various aspects of employment, including minimum wage, working hours, overtime, and termination procedures. An EOR ensures that all these legal requirements are met, thereby protecting the rights of the employees.

  2. Social Security and Health Insurance: In Israel, employers are required to contribute to the National Insurance Institute (Bituach Leumi), which provides social security benefits such as unemployment insurance, maternity leave, and pensions. An EOR handles these contributions, ensuring that employees receive their entitled benefits.

  3. Paid Leave: Israeli law mandates paid leave, including annual leave, sick leave, and public holidays. An EOR ensures that employees receive the correct amount of paid leave as per the legal requirements.

  4. Severance Pay: Employees in Israel are entitled to severance pay if they are terminated after one year of employment. An EOR manages these payments in compliance with local laws, ensuring that employees receive their due compensation.

  5. Employment Contracts: An EOR provides legally compliant employment contracts that outline the terms and conditions of employment, including salary, benefits, and job responsibilities. This transparency helps in safeguarding employee rights.

  6. Tax Compliance: An EOR manages payroll and ensures that all taxes are correctly withheld and reported to the Israeli tax authorities. This includes income tax, social security contributions, and health insurance premiums.

  7. Workplace Safety and Anti-Discrimination: Israeli labor laws include provisions for workplace safety and anti-discrimination. An EOR ensures that these regulations are adhered to, providing a safe and equitable working environment for employees.

By using an EOR like Rivermate, companies can ensure that their employees in Israel receive all their legal rights and benefits, while also simplifying the complexities of local compliance and administrative tasks. This not only protects the employees but also mitigates the risk of legal issues for the employer.

What legal responsibilities does a company have when using an Employer of Record service like Rivermate in Israel?

When a company uses an Employer of Record (EOR) service like Rivermate in Israel, the EOR assumes many of the legal responsibilities associated with employment. However, the company still has certain obligations and should be aware of the following key points:

  1. Compliance with Local Labor Laws: The EOR ensures that all employment practices comply with Israeli labor laws, including minimum wage, working hours, overtime, and statutory benefits. This includes adherence to the Annual Leave Law, the Hours of Work and Rest Law, and the Employment of Women Law, among others.

  2. Employment Contracts: The EOR is responsible for drafting and maintaining employment contracts that comply with Israeli regulations. These contracts must include specific terms such as job description, salary, working hours, and termination conditions.

  3. Payroll and Taxation: The EOR handles payroll processing, ensuring that employees are paid accurately and on time. They also manage the withholding and remittance of income tax, National Insurance Institute (Bituach Leumi) contributions, and health insurance premiums, which are mandatory in Israel.

  4. Employee Benefits: The EOR administers statutory benefits such as pension contributions, severance pay, and vacation entitlements. In Israel, employers are required to contribute to a pension fund for their employees, and the EOR ensures compliance with these regulations.

  5. Work Permits and Visas: If the company employs foreign nationals, the EOR assists with obtaining the necessary work permits and visas, ensuring compliance with Israeli immigration laws.

  6. Termination and Severance: The EOR manages the termination process in accordance with Israeli labor laws, which include specific procedures and notice periods. They also handle the calculation and payment of severance pay, which is mandatory under certain conditions.

  7. Health and Safety: The EOR ensures that workplace health and safety standards are met, in compliance with the Safety at Work Ordinance and other relevant regulations.

  8. Employee Relations: The EOR manages employee relations, including handling grievances, disputes, and disciplinary actions in accordance with Israeli labor laws.

  9. Data Protection: The EOR ensures compliance with data protection regulations, including the Protection of Privacy Law, which governs the handling of personal data in Israel.

While the EOR takes on these responsibilities, the company must still:

  • Maintain Oversight: The company should maintain oversight of the EOR’s activities to ensure that they are meeting all legal and contractual obligations.
  • Strategic Decisions: The company retains control over strategic decisions related to the employee’s role, performance, and career development.
  • Communication: The company should maintain clear communication with the EOR to ensure that all employment practices align with the company’s policies and culture.

By using an EOR like Rivermate in Israel, companies can mitigate the risks associated with non-compliance and focus on their core business activities, while ensuring that their employment practices adhere to local laws and regulations.

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