Israel's economy, driven by industry and services, excels in high-tech sectors, manufacturing, and agriculture. Despite limited natural resources, Israel has developed a profitable natural gas industry and is self-sufficient in agriculture. Renowned for its production of chemicals, pharmaceuticals, and military equipment, Israel stands out in the global market. Notably, its high-tech industries and R&D, particularly in Artificial Intelligence, position Israel as a leader in innovation. Tel Aviv, often called the Silicon Valley of the Middle East, exemplifies the country's dynamic startup ecosystem. This guide offers strategies for effectively hiring in Israel's thriving market.

What you need to know before hiring employees in Israel 

Job market in Israel

• In 2023, Israel's unemployment rate dropped to 3.35%, the lowest in recent years, indicating a robust job market and plentiful opportunities for talent acquisition.
• The average monthly wage in February 2023 was 12,454 Israeli shekels (around 3,400 USD), with notable wage variations across different sectors, reflecting diverse talent pools.
• Employees in the information and communication sector earned nearly 29,872 shekels (around 8,796 USD), showcasing the sector's lucrative opportunities, while the education sector averaged 8,925 shekels (around 2,443 USD).
• In 2021, Israeli workers logged an average of 1,753 hours annually, surpassing the OECD average of 1,716 hours, highlighting a dedicated and hardworking workforce, especially in the private sector.
• The gender pay gap stood at 24.32% in 2019, higher than the OECD average of 11.6%, emphasizing the need for targeted strategies to promote pay equity and attract diverse talent.

Israel Hiring Trends

For 2024, the hiring trends in Israel reflect a stable and resilient economic environment, driven by several key factors:

• Israel's unemployment rate decreased to 3.35% in 2023, its lowest in recent years, indicating a robust and dynamic labor market with ample opportunities for recruiting talent.
• In February 2023, the average monthly wage was over 12,454 Israeli shekels (approximately 3,400 USD), showcasing competitive compensation standards across various sectors.
• Israeli workers averaged 1,753 hours annually, exceeding the OECD average and reflecting a strong work ethic, particularly in the private sector.
• The gender pay gap remains a critical issue, with a 24.32% disparity, substantially higher than the OECD average of 11.6%, highlighting the need for initiatives to promote gender pay equity.
• Overall, Israel's employment landscape is vibrant, offering substantial opportunities across various high-growth sectors.

How to hire employees from Israel 

1. Set up an entity in the country

Establishing a local entity in Israel, such as a Private Company (Ltd.) or a Foreign Branch, involves registering with the Israeli Registrar of Companies and obtaining a company number and VAT registration. Professional guidance can simplify this complex process, ensuring compliance and efficient business operations in Israel.

2. Hire independent contractors

Hiring independent contractors in Israel offers flexibility and cost-efficiency for specialized projects. Comprehensive agreements outlining project details and compliance with Israeli labor laws are crucial to avoid misclassification. Contractors manage their own tax and social security contributions, simplifying payroll for the hiring organization.

3. Partner with an EOR in the country

Partnering with an Employer of Record (EOR) in Israel streamlines employee management, handling legal, payroll, taxation, and HR tasks. This is ideal for testing the market or quick talent integration without establishing a local entity, ensuring compliance with Israeli regulations and reducing administrative burdens

Employment Laws You Must Know Before Hiring in Israel 

Compliance risk while hiring in Israel 

Compliance risks while hiring in Israel include navigating complex labor laws, ensuring accurate worker classification, adhering to social security and health insurance contribution requirements, and complying with wage and hour regulations. Failure to meet these obligations can result in legal penalties, financial liabilities, and reputational damage, making it crucial for businesses to ensure full regulatory compliance.

Key Aspects of Israel  Labor Law:

Employment Contract

In Israel, employment contracts must clearly outline the terms and conditions of employment. Employees working more than 8 hours per week and employed for over a month are entitled to a written statement within 30 days of starting work. This statement should include details such as job description, salary, working hours, and benefits. Additionally, Israel's labor laws mandate compliance with national regulations, including the Minimum Wage Law and annual leave entitlements. It is recommended to provide a comprehensive written employment contract to all employees to ensure clarity and legal compliance, protecting both the employer and the employee.

Working Hours

In Israel, the standard working hours are 42 hours per week, with employees typically working 7 to 9 hours a day depending on the number of workdays per week. Employees are entitled to at least 48 hours of rest each week, usually taken on Friday and Saturday, resulting in a workweek from Sunday to Thursday.

It is illegal for an employee to be required to work more than 12 hours a day or 16 overtime hours in a week.

Overtime

All hours worked beyond the standard weekly hours in Israel must be compensated as overtime, as regulated by the employment contract or collective agreements. This arrangement must be mutually agreed upon by both the employee and the employer before any overtime work begins.

The workweek is capped at 42 hours, spread over 5 or 6 days, with each day not exceeding 9 hours of work.

Employees are entitled to overtime pay, calculated daily as follows:

• For the first two overtime hours, the pay rate is 125% of the regular wage.
• For any additional hours, the pay rate is 150% of the regular wage, including work during the weekly day of rest.
• Some companies provide a global monthly amount as compensation for overtime work.

Minimum Wage

The monthly minimum wage in Israel is set at 5,880 ILS as of April 1, 2024. It is scheduled to increase to 6,000 ILS next year.

Payroll laws in Israel  

In Israel, the payroll cycle is typically monthly. Employers must ensure that all employees receive their salary payments at least once a month, with salaries being disbursed no later than the 9th of the following month.

Employment benefits in Israel 

Leave Policies in Israel 

Paid Time Off:

In Israel, employees working a 5-day week are entitled to a minimum of 12 working days of annual leave during their first five years of service. This entitlement increases to 17 working days from the sixth to the ninth year, and thereafter to a maximum of 23 working days.

Annual leave payments are calculated at the regular salary pay rate.

Public Holidays:

There are 18 national holidays in Israel.

Sick Days:

In Israel, employees accrue sick leave at 1.5 days per month, up to 90 days. Payment varies: the first day is unpaid, the second and third days are at 50%, and from the fourth day onwards at 100%. A medical certificate is required upon return. Under an amendment, employees with cancer or requiring dialysis receive full pay from day one for related treatments or examinations, up to 90 days, with appropriate medical certification.

Maternity Leave:

In Israel, female employees with at least one year of service are entitled to 26 weeks of maternity leave, with up to seven weeks pre-birth. Social security covers 15 weeks of paid leave, with the remaining 11 weeks unpaid. Employees with less than one year get 15 weeks. Maternity leave extends by three weeks for multiple or complicated births. Mothers can transfer leave to their spouse from the seventh week. In cases of child loss, 60 days of unpaid leave are granted.

Paternity Leave:

In Israel, following a partner going into labor and up to 24 hours after the birth, an employee is entitled to up to five days of paternity leave. The first three days of this leave are paid from the employee's accrued annual vacation, while the remaining two days are deducted from their accrued sick leave.

Public Health Insurance 

In Israel , public health insurance is primarily managed through EsSalud (Social Health Insurance), funded by payroll contributions from employers and employees. This system provides a broad range of healthcare services, including medical, surgical, pharmaceutical, and hospital care for employees and their dependents. Additionally, Israel  offers the Comprehensive Health Insurance Scheme (SIS), aimed at the uninsured population, particularly those who are poor or extremely poor. SIS ensures access to various preventive and curative services, making healthcare more inclusive. Both systems play crucial roles in ensuring that a significant portion of the Israel vian population has access to necessary medical services.

Filing tax in Israel 

Income Tax:

In Israel, employee payroll contributions include social security, health insurance, and pension fund contributions, totaling up to 21.1%. Income tax rates are progressive, starting at 10% for lower incomes and reaching up to 50% for the highest income bracket.

Other Tax and Social Security Contributions:

In Israel, employers must contribute to social security, severance pay, and pension funds, resulting in a total employment cost of up to 21.78%. These contributions are a significant part of the overall expense of employing staff in Israel.

Business culture in Israel  

Business culture in Israel is unique, and understanding its nuances can significantly enhance professional interactions and operations.

• Israeli business culture values straightforward and candid communication, fostering clear and efficient interactions.
• Innovation and risk-taking are highly regarded, with a strong emphasis on creativity and problem-solving.
• Personal connections and networking play a crucial role in building business relationships and opportunities.
• While hierarchies exist, workplaces are often informal, with open-door policies and approachable management.
• Despite a driven work ethic, maintaining a balance between professional and personal life is important, with a focus on family time and cultural observances.

Top sectors to hire from in Israel 

Education Sector

In 2021, Israel's education sector employed 498,500 people, making it the country's largest employer. This sector is poised for growth due to the projected doubling of student enrollment by 2060. Despite this, challenges such as wage dissatisfaction and high resignation rates have led to ongoing labor disputes.

Human Health Sector

The human health and social work sector, employing 456,600 people in 2021, is Israel's second-largest employment sector. With mandatory health insurance and a structured healthcare system, this sector provides competitive wages and substantial employment opportunities, reflecting its critical role in the economy.

High-Tech Sector

High-tech is a major driver of Israel’s economy, employing over 182,000 people in computer programming and consultancy alone in 2021. This sector also includes 82,000 employees in electronics and optical manufacturing. Israel's vibrant startup ecosystem and significant funding, totaling 25.6 billion USD in 2021, highlight its importance and growth potential.

Top cities to hire from Israel 

When looking at the best cities in Israel for recruiting talent, these urban centers are notable for their economic dynamism, prominent educational institutions, and specialized industry strengths:

1. Tel Aviv

As Israel’s business and tech hub, Tel Aviv offers a vibrant ecosystem for startups and multinational companies. It is home to a large pool of talent in technology, finance, and creative industries, making it an ideal city for hiring skilled professionals.

2. Jerusalem

Jerusalem, Israel’s capital, provides diverse hiring opportunities, particularly in public administration, education, and healthcare. The city's rich history and cultural significance attract a highly educated workforce

3. Haifa

Haifa, known for its strong industrial and high-tech sectors, is a key city for hiring in engineering, research, and development. The city’s universities and tech parks contribute to a highly skilled labor force.

4. Beer Sheva

Beer Sheva has emerged as a significant center for cybersecurity and technology, supported by the presence of Ben-Gurion University and the Advanced Technologies Park. It is an excellent location for hiring IT and security professionals.

5. Herzliya

Herzliya is a prominent location for multinational corporations and startups, particularly in the tech and biotech sectors. The city’s proximity to Tel Aviv and its business-friendly environment make it an attractive hiring location.

Hire in Israel  compliantly with Gloroots

Gloroots, as an Employer of Record (EOR) in Israel, provides a streamlined solution for businesses looking to enter and expand in the Israeli market. Our EOR platform ensures rapid candidate onboarding and swift operational setup, all while complying with local and international regulations. Gloroots simplifies payroll, benefits administration, and tax obligations, eliminating the need for a local entity. This service enables companies to efficiently manage a remote workforce in Israel. For more information on how Gloroots can support your recruitment needs in Israel, please contact us.

Frequently Asked Questions 

What are the key employment laws I need to know when hiring in Israel?

When hiring in Israel, it's essential to understand key employment laws, including those related to minimum wage, working hours, overtime pay, and mandatory benefits such as social security and health insurance contributions. Employers must also provide written employment contracts and comply with anti-discrimination laws. Familiarity with the Sick Pay Law and maternity leave regulations is also crucial to ensure full compliance.

Can I hire independent contractors in Israel, and what should I consider?

Yes, hiring independent contractors in Israel is possible. It's important to draft clear agreements outlining the scope of work, compensation, and obligations to avoid misclassification. Contractors are responsible for their own taxes and social security contributions. Ensuring the contracts meet Israeli labor laws and correctly classify the worker can prevent legal and financial complications.

What are the benefits of using an Employer of Record (EOR) in Israel?

Using an EOR in Israel simplifies the hiring process by managing legal responsibilities, payroll, taxation, and HR tasks. This is particularly beneficial for companies without a local presence, allowing them to focus on core operations while ensuring compliance with Israeli regulations. An EOR facilitates quick onboarding, compliance with local laws, and reduces administrative burdens, making market entry and workforce management more efficient.