Employer of Record in Israel

Hire, Onboard and Pay Employees in Israel Quickly and Efficiently

Israel at a glance

CURRENCY
Israeli Shekel (ILS)
public/bank holidays
9 days
capital
Jerusalem
Language
Hebrew; Arabic
date format
DD/MM/YYYY
tax year
1 January- 31 December
Payroll frequency
Monthly
gdp
$509.90B USD (2023)
Working Hours
42 hours per week.

Israel, often called the “Startup Nation”, is a global hub for technology, innovation, and entrepreneurship. With the highest number of startups per capita in the world and major R&D centers for global tech giants like Google, Microsoft, Intel, and Apple, Israel has established itself as a leading destination for high-tech talent. Tel Aviv is at the heart of this ecosystem, while cities like Haifa, Jerusalem, and Be’er Sheva are hubs for biotech, fintech, defense, and cybersecurity.

The country offers a highly skilled, English-proficient workforce, with expertise in engineering, software development, life sciences, and advanced manufacturing. Institutions such as the Technion – Israel Institute of Technology and the Hebrew University of Jerusalem produce graduates who are highly sought after worldwide. Israel’s innovation-driven economy is further supported by significant government investment in R&D and a culture of resilience and adaptability.

However, Israel’s employment landscape is also complex. Labor laws provide extensive employee protections, payroll compliance requires precise handling of income tax and national insurance (Bituach Leumi), and benefits such as pensions and severance contributions are mandatory. Setting up a local entity requires navigating multiple regulatory layers and can delay market entry.

Many global companies overcome these challenges by partnering with an Employer of Record (EOR) in Israel. With Gloroots as your EOR partner, you can hire top Israeli talent quickly and compliantly without setting up a local entity. Gloroots manages contracts, payroll, benefits, and compliance—so you can focus on scaling in one of the world’s most innovative economies.

What are the key facts about Israel’s economy and workforce?

Israel has transformed into a global innovation hub, with a GDP exceeding USD 520 billion and one of the highest R&D expenditures as a percentage of GDP worldwide. Its economy is driven by technology, defense, life sciences, and financial services, supported by strong government incentives for innovation and entrepreneurship.

The country is home to over 6,000 active startups, many of which scale globally or get acquired by multinational corporations. Tel Aviv consistently ranks among the top global startup ecosystems, while Haifa, Jerusalem, and Be’er Sheva serve as centers for biotech, aerospace, and cybersecurity research. Global companies such as Intel, Nvidia, Amazon, and Google operate large-scale R&D facilities in Israel.

Israel’s workforce is highly skilled and internationally oriented. More than 50% of adults hold tertiary education, and universities like the Technion, Tel Aviv University, and the Weizmann Institute of Science are recognized worldwide for excellence in science and engineering. English proficiency is strong, making cross-border collaboration seamless.

However, employers must account for Israel’s complex labor market, characterized by mandatory benefits (pension, severance pay, national insurance), detailed tax structures, and evolving labor protections.

IndicatorDetails
GDP (2024 est.)~USD 520 billion
GDP per capita~USD 52,000
Workforce size~4.5 million
Median age~30.5 years
Population under 35~45%
LanguagesHebrew (official), Arabic; English widely spoken in business
Higher education attainment50%+ of adults hold tertiary education
Top talent hubsTel Aviv, Haifa, Jerusalem, Be’er Sheva
Key industriesTechnology, Cybersecurity, Defense, Life Sciences, Financial Services

What is the work culture and talent pool like in Israel?

Israel’s work culture is shaped by its entrepreneurial mindset, informality, and adaptability. Unlike more hierarchical European work environments, Israeli workplaces tend to be flat, direct, and collaborative. Decision-making is fast-paced, with employees encouraged to challenge ideas and propose innovative solutions—a cultural trait often referred to as “chutzpah”.

Work-life balance is important, though the high-tech sector can demand long hours during critical phases of product development. Many employees value flexible arrangements, hybrid work, and family-oriented policies.

The Israeli talent pool is highly concentrated in STEM and R&D fields, with globally recognized expertise in cybersecurity, AI, biotech, and defense technologies. Military service also contributes to professional development, as units like 8200 (Israel Defense Forces’ elite intelligence unit) produce highly skilled tech professionals who later drive innovation in the private sector.

Key hiring hubs include Tel Aviv (technology, finance, startups), Haifa (aerospace, biotech, R&D), Jerusalem (academia, healthcare, research), and Be’er Sheva (cybersecurity and defense). With English widely used in business and over half of adults holding tertiary education, Israel provides employers access to a globally competitive, innovation-driven workforce.

IndicatorDetails
Workforce size~4.5 million
Median age~30.5 years
Population under 35~45%
LanguagesHebrew, Arabic (official); English widely used in business
English proficiencyHigh (especially in tech, academia, and multinational sectors)
Higher education/STEM graduates50%+ of adults with tertiary education; strong STEM pipeline
Top talent hubsTel Aviv, Haifa, Jerusalem, Be’er Sheva
Key industriesTechnology, Cybersecurity, Defense, Biotech, Finance

Q. What is the process of setting up an entity in Israel?

Foreign companies can establish a local presence in Israel by creating either a Private Limited Company (Ltd.), a Branch Office, or a Representative Office. The most common structure for employers is the Ltd., which offers limited liability and flexibility for operations.

Steps to Set Up an Entity in Israel

  1. Choose Legal Structure
    • Private Limited Company (Ltd.) – Most common for hiring employees.
    • Branch Office – Extension of a foreign company; less common.
    • Representative Office – Limited to non-commercial activities.
  2. Company Registration
    • File incorporation documents with the Israeli Companies Registrar.
    • Documents must include Articles of Association and details of shareholders and directors.
  3. Appoint Directors & Shareholders
    • At least one shareholder and one director required (can be non-resident).
  4. Registered Office
    • A physical address in Israel is mandatory.
  5. Tax Registration
    • Register with the Israeli Tax Authority for corporate tax and VAT.
    • Register with the National Insurance Institute (Bituach Leumi) for social security contributions.
  6. Bank Account Setup
    • Required for payroll and operational activities.
  7. Ongoing Compliance
    • Annual financial statements, corporate tax filings, and reporting obligations to the Registrar and Tax Authority.

Timeframe: ~4–8 weeks.
Challenges: High compliance requirements, local payroll registration, and strict adherence to Israeli labor law.

By contrast, Gloroots as an Employer of Record (EOR) allows companies to hire employees in Israel within 1–2 weeks without establishing a local entity. Gloroots manages payroll, contracts, and compliance, letting you focus on scaling your team.

Direct Entity vs. Gloroots EOR in Israel

AspectDirect Entity SetupGloroots EOR
Setup Time4–8 weeks1–2 weeks
Legal StructureLtd., branch, or representative office requiredNo entity setup needed
Directors & ShareholdersAt least one shareholder and director requiredNot required
Registered OfficeMandatory physical addressNot required
Tax & Social Security RegistrationMust register with Tax Authority and Bituach LeumiGloroots handles [payroll compliance](https://www.gloroots.com/blog/payroll-management)
Bank AccountMandatory for payroll and operationsNot required
Ongoing ComplianceAnnual returns, corporate tax filings, auditsGloroots manages all [global compliance](https://www.gloroots.com/global-compliance)
Best Use CaseLong-term, large-scale operationsRapid market entry, testing, or scaling

Q. What are the main benefits of using Gloroots as an Employer of Record in Israel vs. setting up your own entity?

While Israel offers access to one of the world’s most skilled and innovative workforces, direct entity setup requires navigating complex incorporation procedures, tax registrations, and strict labor law compliance. Setting up a private limited company or branch can take months and requires ongoing administrative oversight.

Gloroots as an Employer of Record (EOR) provides a faster, more flexible solution:

  • Hire in 1–2 weeks instead of waiting 4–8 weeks for incorporation.
  • Avoid entity setup, shareholder/director appointments, and local bank accounts.
  • Gain compliant employment contracts aligned with Israeli labor laws.
  • Ensure correct handling of payroll, taxes, and mandatory contributions to Bituach Leumi (National Insurance).
  • Benefit from transparent monthly EOR pricing without unpredictable legal or compliance costs.
  • Scale your workforce flexibly—hire one specialist or a full team without committing to long-term infrastructure.

This makes Gloroots ideal for companies expanding into Israel for the first time, testing market opportunities, or scaling quickly while minimizing compliance risks.

Direct Entity vs. Gloroots EOR in Israel

AspectDirect Entity SetupGloroots EOR
Time to Hire4–8 weeks (incorporation + registrations)1–2 weeks (via Gloroots platform)
Entity RequirementsLtd. or branch required; directors/shareholders mandatoryNo entity required
ContractsEmployer drafts under Israeli labor lawGloroots issues fully compliant contracts
Payroll & ContributionsEmployer registers with Tax Authority & Bituach LeumiGloroots manages payroll, tax, and social security compliance
Ongoing ComplianceAnnual returns, audits, corporate filingsGloroots covers [global compliance](https://www.gloroots.com/global-compliance)
FlexibilityBest for permanent, large-scale presenceIdeal for fast scaling or pilot hires
Cost PredictabilityVariable HR, legal, and compliance feesTransparent monthly [EOR fees](https://www.gloroots.com/blog/employer-of-record-cost)

Q. What are the key employment laws in Israel that employers should know?

Employment in Israel is governed by a combination of statutes, case law, and collective agreements. Employers must comply with the Labor Laws of Israel and mandatory employee benefits requirements.

Key Employment Law Provisions in Israel

  • Employment Contracts
    • Written employment agreements are required.
    • Must include job description, salary, benefits, working hours, and termination terms.
  • Working Hours
    • Standard workweek: 42 hours (typically Sunday–Thursday).
    • Daily maximum: 8.6 hours (5-day week) or 9 hours (6-day week).
  • Overtime
    • Paid at 125% for the first 2 hours.
    • Paid at 150% for additional hours.
  • Minimum Wage (2024)
    • NIS 5,880/month (~USD 1,570).
    • Hourly minimum: NIS 32.3 (~USD 8.65).
  • Annual Leave
    • Employees are entitled to 12–14 days annually at minimum, increasing with tenure.
    • Public holidays: 9–10 days depending on the calendar year.
  • Sick Leave
    • 1.5 days accrued per month (up to 90 days).
    • First day unpaid; second & third days at 50%; thereafter at 100%.
  • Maternity Leave
    • 26 weeks, of which 15 are paid by National Insurance.
    • Fathers may take part of the leave in certain cases.
  • Paternity Leave
    • Short leave for birth attendance; extended leave only if transferred from the mother.
  • Mandatory Benefits
    • Pension contributions: Employer 6.5% + severance 6% + employee 6% (deducted from salary).
    • Severance Pay: One month’s salary per year of service, unless forfeited for cause.
    • Bituach Leumi (National Insurance): Covers healthcare, unemployment, maternity, and disability benefits.

Direct Entity vs. Gloroots EOR in Israel (Employment Laws)

AspectDirect Entity SetupGloroots EOR
ContractsEmployer drafts contracts under Israeli lawGloroots issues compliant contracts aligned with local requirements
Working HoursEmployer monitors compliance with 42-hour weekGloroots embeds compliance into HR workflows
Overtime PayEmployer must calculate and pay 125–150% ratesGloroots manages overtime calculations in payroll
Minimum WageEmployer must track and adjust annuallyGloroots ensures compliance with updated wage levels
Annual Leave & HolidaysEmployer tracks accruals and holiday calendarsGloroots automates leave accruals and payroll integration
Sick LeaveEmployer applies phased payment rulesGloroots manages sick leave compliance seamlessly
Maternity & Paternity LeaveEmployer administers leave and National Insurance claimsGloroots handles benefits administration end-to-end
Pensions & SeveranceEmployer manages pension enrollment and severance accrualsGloroots ensures pension contributions and severance compliance

Q. What are the risks of misclassification in Israel?

In Israel, distinguishing correctly between an employee and an independent contractor is crucial. Misclassification—treating a worker as a contractor when they should be an employee—can result in significant financial liabilities and legal disputes.

Criteria for Worker Classification in Israel

Courts and authorities apply a “Substance Over Form” test, looking at the reality of the relationship rather than the contract label. Key factors include:

  • Control: Does the company dictate how, when, and where the work is done?
  • Integration: Is the worker embedded in the organization’s structure?
  • Tools & Risk: Does the company provide equipment and bear financial risk, or does the worker?
  • Exclusivity: Does the worker serve multiple clients or just one?
  • Payment Method: Is the worker paid a salary-like monthly fee or per project?

Penalties for Misclassification

  • Retroactive Benefits: Employer may owe pension contributions, severance, and paid leave.
  • Tax & Social Security Liabilities: Back payment of income tax and Bituach Leumi (National Insurance) contributions, plus penalties.
  • Fines & Interest: Authorities may impose fines and interest on unpaid amounts.
  • Legal Claims: Reclassified workers may sue for wrongful termination, benefits, and damages.

How Gloroots Reduces Risk

Gloroots ensures proper classification by issuing compliant employment contracts for employees and managing contractors through a contractor management framework. If a contractor engagement carries risk of reclassification, we guide employers toward the correct arrangement under our EOR model.

Banner CTA: Use the Misclassification Risk Calculator

Direct Entity vs. Gloroots EOR: Misclassification in Israel

AspectDirect Entity SetupGloroots EOR
Worker ClassificationEmployer decides; full liability if incorrectGloroots ensures correct classification under Israeli law
Tax & Social Security RiskEmployer liable for unpaid Bituach Leumi + taxesGloroots manages all payroll deductions & contributions
Retroactive BenefitsEmployer may owe pensions, severance, leaveGloroots ensures mandatory benefits are included
PenaltiesEmployer may face fines, interest, and lawsuitsGloroots shields employers from compliance penalties
Administrative BurdenEmployer must handle audits and court disputesGloroots manages [global compliance](https://www.gloroots.com/global-compliance)

Q. How does an EOR help you run payroll in Israel?

Running payroll in Israel involves complex calculations across income tax, social security (Bituach Leumi), pension contributions, and severance accruals. Employers are legally responsible for withholding and remitting all payments to the relevant authorities. Mistakes can lead to heavy penalties and employee claims.

Payroll Compliance in Israel

  • Income Tax (Mas Hachnasa)
    • Progressive system with monthly withholding by employer.
    • Employers apply tax credits (e.g., for dependents, residency) when calculating final withholdings.
  • National Insurance (Bituach Leumi) & Health Tax
    • Mandatory contributions cover healthcare, unemployment, disability, maternity, and other benefits.
    • Split between employer and employee contributions.
  • Pension Contributions (mandatory for all employees):
    • Employer: 6.5% (pension) + 6% (severance).
    • Employee: 6% (deducted from salary).
  • Severance Pay Accruals
    • Employers must accrue one month’s salary per year of service, unless severance is already funded through pension contributions.
  • Payslips
    • Employers must issue monthly payslips showing gross pay, deductions, and net pay in Hebrew.
  • Reporting & Deadlines
    • Contributions and withholdings must be paid monthly to the Tax Authority and Bituach Leumi.
    • Employers must submit annual employee income summaries.

How Gloroots Supports Payroll in Israel

Gloroots manages payroll end-to-end:

  • Calculates and withholds income tax, social security, and pension contributions.
  • Administers severance accruals.
  • Issues compliant Hebrew payslips.
  • Submits monthly and annual filings to the Tax Authority and Bituach Leumi.
  • Ensures full compliance with Israeli employment and tax law.

This ensures employees are paid accurately and on time, while employers stay fully compliant.

Direct Entity vs. Gloroots EOR: Payroll in Israel

AspectDirect Entity SetupGloroots EOR
Payroll SetupEmployer registers with Tax Authority & Bituach LeumiGloroots provides immediate payroll compliance
Income TaxEmployer calculates progressive withholdingsGloroots automates tax calculations & remittance
Social Security (Bituach Leumi)Employer calculates contributions monthlyGloroots manages contributions & filings
Pension & SeveranceEmployer must enroll employees & manage accrualsGloroots integrates pensions & severance into payroll
PayslipsEmployer issues payslips in HebrewGloroots provides compliant Hebrew payslips
ReportingEmployer files monthly & annual reportsGloroots files reports on your behalf
Compliance RiskHigh—errors can lead to penalties from Tax AuthorityLow—Gloroots ensures [payroll compliance](https://www.gloroots.com/blog/payroll-management)
Cost PredictabilityVariable accounting & HR costsTransparent monthly [EOR fees](https://www.gloroots.com/blog/employer-of-record-cost)

Q. How does tax compliance work in Israel?

Israel’s tax system combines progressive income tax, national insurance (Bituach Leumi), and mandatory employer/employee contributions. Employers must calculate withholdings monthly, remit them to authorities, and provide annual tax summaries to employees.

Income Tax Rates (2024)

  • Up to NIS 81,480: 10%
  • NIS 81,481 – 116,760: 14%
  • NIS 116,761 – 187,440: 20%
  • NIS 187,441 – 260,520: 31%
  • NIS 260,521 – 542,160: 35%
  • NIS 542,161 – 698,280: 47%
  • Above NIS 698,281: 50%

Employers apply tax credits (nekudot zikui), such as residency or dependent allowances, when calculating monthly withholding.

National Insurance (Bituach Leumi) & Health Contributions

  • Employer Contributions:
    • 3.55% on income up to NIS 7,122/month.
    • 7.6% on income above NIS 7,122/month.
  • Employee Contributions:
    • 3.5% on income up to NIS 7,122/month.
    • 12% on income above NIS 7,122/month.

These fund healthcare, unemployment, pensions, maternity benefits, and disability coverage.

Mandatory Pension Contributions

  • Employer: 6.5% (pension) + 6% (severance).
  • Employee: 6% (deducted).
  • Contributions are deposited monthly into an approved pension fund.

Employer Obligations

  • Register with the Tax Authority and Bituach Leumi.
  • Withhold and remit income tax, national insurance, and pension contributions monthly.
  • File annual employee income summaries (Form 106).
  • Provide employees with compliant payslips showing all deductions.

How Gloroots Ensures Compliance

Gloroots simplifies tax compliance by:

  • Calculating and withholding income tax, national insurance, and pensions.
  • Remitting contributions to the Tax Authority and Bituach Leumi.
  • Issuing compliant payslips and annual summaries.
  • Embedding updates to tax brackets and contribution rates automatically.

This ensures full compliance while reducing administrative burden and risk.

Direct Entity vs. Gloroots EOR: Tax Compliance in Israel

AspectDirect Entity SetupGloroots EOR
Income Tax WithholdingEmployer calculates and remits monthlyGloroots automates withholding and remittance
National Insurance (Bituach Leumi)Employer calculates employer + employee ratesGloroots manages calculations and filings
Pension ContributionsEmployer enrolls employees and deposits fundsGloroots integrates pension compliance into payroll
Annual ReportingEmployer issues Form 106 and tax summariesGloroots provides compliant reporting
Compliance RiskHigh—errors can trigger audits, penalties, and back paymentsLow—Gloroots ensures [global compliance](https://www.gloroots.com/global-compliance)
Cost PredictabilityVariable—tax advisors and payroll admin requiredTransparent monthly [EOR fees](https://www.gloroots.com/blog/employer-of-record-cost)

Q. What benefits and entitlements do employees in Israel receive?

Israel has a comprehensive framework of mandatory employee benefits, designed to protect workers and ensure financial security. Employers must comply with statutory requirements while also offering competitive perks to attract top talent in Israel’s highly competitive labor market.

Statutory Benefits

  • Annual Leave
    • Minimum 12–14 days per year, depending on tenure.
    • Increases with seniority (up to 28 days).
  • Public Holidays
    • 9–10 days annually, depending on the Jewish calendar.
  • Sick Leave
    • Accrues at 1.5 days per month (up to 90 days).
    • Day 1: unpaid; Days 2–3: 50% pay; Day 4 onward: 100% pay.
  • Maternity Leave
    • 26 weeks, of which 15 weeks are paid via National Insurance.
    • Fathers may transfer part of leave in specific cases.
  • Paternity Leave
    • Short leave around childbirth; extended leave possible if transferred from mother.
  • Pension Contributions (Mandatory)
    • Employer: 6.5% (pension) + 6% (severance).
    • Employee: 6% (deducted).
  • Severance Pay
    • One month’s salary per year of service, unless forfeited for cause.
  • National Insurance (Bituach Leumi)
    • Provides health insurance, unemployment, disability, maternity, and pension protections.

Common Market Benefits

To remain competitive, employers in Israel often provide:

  • Supplementary Health Insurance (beyond public coverage).
  • Meal Allowances or meal cards.
  • Company Car or Transport Allowance (common in tech and pharma).
  • Education/Training Stipends for upskilling.
  • Equity/Stock Options, especially in startups.
  • Wellness Benefits such as gym memberships or mental health support.

Gloroots ensures employees in Israel receive both mandatory entitlements and locally competitive benefits packages. Learn more in our guide to global employee benefits.

Direct Entity vs. Gloroots EOR: Benefits & Entitlements in Israel

AspectDirect Entity SetupGloroots EOR
Annual LeaveEmployer tracks accruals & seniorityGloroots automates accruals and payroll integration
Sick LeaveEmployer applies phased payment rulesGloroots ensures correct sick leave payments
Maternity & Paternity LeaveEmployer files with Bituach Leumi for allowancesGloroots manages benefits and payroll compliance
Pension & SeveranceEmployer enrolls employees in funds and manages accrualsGloroots integrates pensions & severance into payroll
Public HolidaysEmployer accounts for holidays based on Hebrew calendarGloroots ensures correct holiday pay application
Market BenefitsEmployer researches and negotiates perks independentlyGloroots benchmarks and administers competitive packages
Compliance RiskHigh—errors in benefits trigger employee claimsLow—Gloroots ensures [global compliance](https://www.gloroots.com/global-compliance)

Q. What’s involved in hiring and onboarding employees in Israel?

Hiring in Israel requires compliance with labor laws, payroll registration, and mandatory benefits contributions. Employers must ensure employment contracts, tax registration, and social insurance enrollment are completed before work begins.

Hiring Process

  1. Job Posting & Recruitment
    • Employers must follow Israel’s Equal Opportunities Law, which prohibits discrimination based on gender, age, religion, ethnicity, or sexual orientation.
  2. Employment Contracts
    • Written contracts are mandatory.
    • Must include role, salary, benefits, working hours, probation, and termination terms.
  3. Probation Periods
    • Typically 3–6 months, depending on role and contract.
    • During probation, termination is easier but must still comply with due process.
  4. Background Checks
    • Permitted with employee consent, but limited to role relevance.

Onboarding Requirements

  • Tax Registration: Employees must complete a Form 101 for the Israeli Tax Authority to assign tax credits.
  • National Insurance (Bituach Leumi): Mandatory registration for all employees, covering healthcare, pensions, unemployment, and disability.
  • Pension & Severance: Enrollment in an approved pension fund is mandatory from day one of employment.
  • Payroll Setup: Employer must withhold taxes, Bituach Leumi contributions, and pension deductions monthly.
  • Employee Handbook & Policies: While not legally required, many companies provide handbooks covering workplace rights, leave entitlements, and benefits.

How Gloroots Supports Hiring & Onboarding

Gloroots handles the hiring and onboarding process end-to-end by:

  • Drafting compliant employment contracts.
  • Registering employees for taxes and national insurance.
  • Ensuring pension and severance contributions are set up correctly.
  • Integrating payroll, benefits, and leave entitlements from day one.

This enables you to onboard employees in Israel within 1–2 weeks, without entity setup.

Direct Entity vs. Gloroots EOR: Hiring & Onboarding in Israel

AspectDirect Entity SetupGloroots EOR
ContractsEmployer drafts contracts; risk of errorsGloroots issues compliant contracts under Israeli law
ProbationEmployer sets probation termsGloroots integrates legal probation rules
Tax RegistrationEmployer collects Form 101 and registers with Tax AuthorityGloroots manages employee tax setup
Bituach LeumiEmployer registers employees manuallyGloroots ensures automatic registration
Pension & SeveranceEmployer must enroll employees in a pension fundGloroots integrates pension & severance compliance into payroll
Onboarding Time3–6 weeks with entity setup & registration1–2 weeks via Gloroots

Q. How do you successfully manage a workforce in Israel?

Managing employees in Israel requires balancing formal labor protections with a work culture that values direct communication, innovation, and flexibility. Employers must comply with statutory benefits and labor laws while adapting to the country’s dynamic and entrepreneurial workforce.

Best Practices for Workforce Management in Israel

  1. Direct Communication & Flat Hierarchies
    • Israeli workplaces are known for informality and open dialogue.
    • Employees expect to challenge ideas, contribute suggestions, and engage in collaborative decision-making.
  2. Innovation-Driven Culture
    • Many employees come from elite military units that emphasize problem-solving, teamwork, and resilience.
    • This contributes to Israel’s global reputation for innovation, especially in tech and defense.
  3. Work-Life Balance
    • While the tech sector can demand long hours, Israeli employees value flexible schedules and family-oriented policies.
    • The official workweek runs Sunday through Thursday, with Friday–Saturday reserved for rest and religious observance.
  4. Compliance with Mandatory Benefits
    • Employers must ensure pension, severance, and Bituach Leumi contributions are processed monthly.
    • Sick leave, maternity leave, and annual leave must be tracked accurately.
  5. Employee Engagement & Retention
    • Israeli workers place a high value on professional development and equity incentives.
    • Offering stock options, training programs, and supplemental health insurance is key to retaining top talent.
  6. Union Presence
    • While less common in tech, unions such as the Histadrut still play a role in certain industries (healthcare, manufacturing, transport).

How Gloroots Supports Workforce Management in Israel

Gloroots enables seamless workforce management by:

  • Embedding mandatory benefits and payroll compliance into HR workflows.
  • Benchmarking competitive benefit packages.
  • Managing leave, pensions, and severance accruals automatically.
  • Providing HR support tailored to Israel’s unique work culture.

This ensures employers can focus on building strong, innovative teams while Gloroots safeguards compliance.

Q. What are the key steps and requirements in terminating employees in Israel?

Termination in Israel is strictly regulated, and employers must demonstrate fairness, provide due notice, and comply with severance obligations. Courts and labor tribunals closely scrutinize dismissals, making compliance essential.

Termination Process

  • Just Cause Requirement: Employers must provide valid reasons (e.g., performance, redundancy, misconduct).
  • Hearing Requirement (Shimu’a): Before dismissal, employers must invite the employee to a hearing, present reasons, and allow the employee to respond.
  • Written Termination Notice: Required after the hearing process.

Notice Periods

  • 0–6 months of service: 1 day per month of employment.
  • 7–12 months of service: 2.5 days per month.
  • After 1 year: 1 month.

Severance Pay

  • Employees with 1+ years of service are entitled to one month’s salary per year of employment.
  • Employers may offset severance against pension contributions if structured properly.

Probationary Period

  • Typically 3–6 months.
  • Termination is easier but still requires a hearing and written notice.

Offboarding Requirements

  • Final payroll including salary, unused vacation, and severance (if applicable).
  • Pension and insurance fund settlements.
  • Tax Authority and Bituach Leumi updates.
  • Return of company assets and revocation of system access.

Protected Employees

  • Pregnant employees, employees on military reserve duty, and certain union members cannot be dismissed without Ministry of Labor approval.

How Gloroots Simplifies Termination

Gloroots manages compliant termination procedures, ensures correct severance calculations, files required updates with authorities, and handles final payroll—minimizing legal risk.

Direct Entity vs. Gloroots EOR: Termination & Offboarding in Israel

AspectDirect Entity SetupGloroots EOR
Grounds for TerminationEmployer must demonstrate valid reasonGloroots ensures dismissals follow Israeli law
Hearing (Shimu’a)Employer conducts hearing and documents processGloroots manages fair hearing requirements
Notice PeriodsEmployer applies statutory notice based on tenureGloroots integrates notice rules into contracts
Severance PayEmployer calculates one month per year of serviceGloroots manages severance compliance & pension offsets
ProbationEmployer must still conduct hearing and give noticeGloroots ensures probation dismissals are compliant
Protected EmployeesEmployer must obtain Ministry approvalGloroots manages protected employee compliance
Offboarding DocsEmployer issues tax, pension, and employment documentsGloroots provides compliant offboarding paperwork
Compliance RiskHigh—wrongful dismissal claims are commonLow—Gloroots reduces litigation risk

Q. What is the offboarding process in Israel?

Offboarding in Israel must be conducted carefully to comply with labor law and ensure all employee entitlements are settled. Failure to follow correct procedures can lead to legal disputes, wrongful dismissal claims, or financial penalties.

Step-by-Step Offboarding in Israel

  1. Termination Confirmation
    • Conduct mandatory hearing (Shimu’a) before issuing dismissal.
    • Provide written termination notice, stating reasons and effective date.
  2. Final Payroll
    • Pay outstanding salary, unused vacation, overtime, and bonuses.
    • Calculate and pay severance entitlement (1 month’s salary per year of service, where applicable).
  3. Pension & Severance Funds
    • Transfer accrued pension contributions to employee’s fund.
    • Settle severance payments (if not already offset via pension fund).
  4. Social Security & Tax Filings
    • Notify Bituach Leumi (National Insurance) and the Tax Authority of termination.
    • Issue annual tax forms and final withholding summaries.
  5. Mandatory Exit Documents
    • Provide written confirmation of employment duration and termination.
    • Settlement documents for pension and severance accounts.
    • Final payslip showing all deductions and contributions.
  6. Return of Company Assets
    • Recover laptops, phones, access cards, and other property.
    • Revoke system and account access.
  7. Exit Interview (Optional)
    • Many employers conduct interviews for feedback and knowledge transfer, especially in startups and high-tech.

How Gloroots Simplifies Offboarding

Gloroots manages the entire offboarding process:

  • Conducting compliant termination procedures.
  • Calculating and reconciling severance, vacation, and final payroll.
  • Handling pension settlements and authority filings.
  • Ensuring employees receive all required documents.

This ensures a legally compliant, low-risk, and professional exit process for employees and employers.

Q. What costs and financial planning do you need with an Employer of Record in Israel?

Hiring in Israel requires careful planning, as mandatory benefits and employer contributions significantly increase the total cost of employment beyond base salaries. Employers should budget for an additional 25–35% on top of gross salary to cover social security, pensions, and statutory benefits.

Typical Employer Costs in Israel

  • Gross Salaries
    • Competitive, especially in high-demand fields like tech, cybersecurity, and biotech.
  • Employer Contributions
    • National Insurance (Bituach Leumi): 3.55–7.6% of gross salary.
    • Pension Contributions: 6.5% (pension) + 6% (severance accrual).
  • Severance Pay
    • One month’s salary per year of service, unless already funded via pension.
  • Paid Leave
    • 12–28 days annual leave, plus 9–10 public holidays.
  • Sick Leave
    • 1.5 days accrued per month, paid according to statutory schedule.
  • Supplementary Benefits (common in competitive industries):
    • Private health insurance, meal allowances, company cars, training stipends, stock options.
  • Other Costs
    • Recruitment fees, HR administration, payroll management, and compliance services.

Financial Advantages of Using Gloroots EOR

Gloroots consolidates all statutory and administrative costs into a transparent monthly fee per employee. This eliminates:

  • The need for entity setup and legal advisors.
  • Complex Bituach Leumi and pension administration.
  • Variable compliance, payroll, and HR costs.

With Gloroots, you gain predictable budgeting, faster hiring, and minimized compliance risk.

See our guide on EOR fees.

Direct Entity vs. Gloroots EOR: Costs in Israel

Cost AspectDirect Entity SetupGloroots EOR
Entity Setup4–8 weeks + legal & registration feesNo setup costs
Employer Contributions3.55–7.6% Bituach Leumi + 12.5% pensions & severanceGloroots calculates & remits contributions
Severance PayEmployer accrues or pays at terminationGloroots manages severance accruals & payouts
Paid LeaveEmployer tracks accruals & manages holiday payGloroots automates leave & payroll adjustments
Sick LeaveEmployer applies statutory phased paymentsGloroots integrates sick leave compliance into payroll
Supplementary BenefitsEmployer negotiates independentlyGloroots benchmarks & administers competitive perks
HR & Payroll AdminEmployer manages internally or outsourcesIncluded in Gloroots’ EOR fee
Cost PredictabilityVariable & unpredictableTransparent monthly per-employee pricing

Q. What challenges might you face, and how do you solve them using EOR in Israel?

Israel offers access to a world-class innovation ecosystem and highly skilled workforce, but employers face several compliance and operational challenges when hiring directly.

Key Challenges of Hiring in Israel

  1. Complex Payroll & Benefits Administration
    • Employers must calculate progressive income tax, Bituach Leumi, health tax, pension, and severance monthly.
    • Errors can lead to fines and employee claims.
  2. Mandatory Benefits Compliance
    • Pension and severance contributions are compulsory from day one.
    • Employers must register employees in approved pension funds and remit monthly payments.
  3. Termination Regulations
    • Dismissals require a hearing (Shimu’a), written notice, and severance pay for employees with 1+ years of service.
    • Non-compliance often results in wrongful dismissal claims.
  4. Talent Competition
    • Israel’s tech and biotech industries are extremely competitive.
    • Employers must offer attractive benefits, equity, and flexible work to secure top talent.
  5. Entity Setup Delays
    • Setting up a company takes 4–8 weeks and requires registration with the Companies Registrar, Tax Authority, and Bituach Leumi.

How Gloroots EOR Solves These Challenges

Gloroots eliminates these barriers by acting as your legal Employer of Record in Israel:

  • Manages payroll, taxes, and benefits under Israeli law.
  • Ensures compliance with mandatory pension, severance, and Bituach Leumi contributions.
  • Handles compliant terminations and severance payouts.
  • Benchmarks and administers competitive benefits packages.
  • Enables hiring in 1–2 weeks without entity setup.

This allows you to focus on building innovative teams while Gloroots ensures seamless compliance and cost predictability.

Direct Entity vs. Gloroots EOR: Challenges & Solutions in Israel

ChallengeDirect Entity SetupGloroots EOR
Payroll & Tax ComplexityEmployer calculates income tax, Bituach Leumi, pensions manuallyGloroots automates [payroll compliance](https://www.gloroots.com/blog/payroll-management)
Mandatory BenefitsEmployer must enroll employees in pension funds and remit contributionsGloroots integrates pensions & severance into payroll
Termination ComplianceEmployer must conduct hearing & calculate severance correctlyGloroots manages compliant terminations
Talent CompetitionEmployer must independently design benefits & perksGloroots benchmarks & administers [employee benefits](https://www.gloroots.com/blog/global-employee-benefits)
Entity Setup4–8 weeks + registration with Tax Authority & Bituach LeumiNo entity required; hire in 1–2 weeks
Cost PredictabilityVariable HR, legal, and compliance costsTransparent monthly [EOR fees](https://www.gloroots.com/blog/employer-of-record-cost)

Conclusion

Israel is one of the world’s most dynamic talent markets—renowned for its startup culture, cutting-edge innovation, and highly skilled workforce. From Tel Aviv’s booming tech ecosystem to Haifa’s biotech research hubs and Jerusalem’s academic excellence, the country provides employers with access to top-tier professionals across industries.

At the same time, hiring in Israel directly requires navigating complex payroll, tax, and benefits compliance, strict termination rules, and significant entity setup requirements. These obligations can delay hiring and expose companies to compliance risks.

Gloroots makes hiring in Israel simple. As your Employer of Record (EOR), we manage contracts, payroll, employee benefits, immigration, and compliance with Israeli labor laws—so you can onboard employees in as little as 1–2 weeks, without establishing a local entity.

Whether you’re building your first Israeli team or scaling operations across multiple hubs, Gloroots ensures you remain compliant, cost-efficient, and competitive in a demanding market.

The easiest and most compliant way to hire in Israel? Partner with Gloroots.

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