What Israel Compensation Laws Exist?
Foreign companies’ responsibilities when hiring in Israel stretch beyond complying with contract regulations. Workers’ rights and benefits are also strictly applied by a number of specific laws covering minimum wage, working hours, unemployment, vacations, sick leave and severance.
Negotiating contracts is tricky and complying with these requirements is essential. They cannot be ignored.
Social Security in Israel
Israel’s social security benefits for employees are funded by contributions from employers and workers, with further additions by the government in some categories.
National Insurance contributions cover old age and survivors, long term care, disability, accident and work injury, maternity, children and unemployment. All employees over 18 years old must contribute, including foreigners, and be registered with one of four health funds. Different contribution rates apply according to income. Employers must withhold employees’ contributions and remit them to the National Insurance Institute.
Monthly income up to ILS6,331 (US$1,933)
Type Employer Employee Total
National Insurance 3.55% 0.40% 3.95%
Health Levy 0.00% 3.10% 3.10%
Total 3.55% 3.50% 7.05%
Income up to ILS44,020 (US$13,446)
Type Employer Employee Total
National Insurance 7.60% 7.00% 14.60%
Health Levy 0.00% 5.00% 5.00%
Total 7.60% 12.00% 19.60%
Statutory Costs in Israel
Employers must comply with the following set costs on their company.
• Contributions are remitted to the National Insurance Institute on behalf of their employees. Depending on employees’ income these vary between 3.55% and 7.60% of salary
• Employees must receive the guaranteed national minimum wage of ILS5,300 (US$1,620), increasing to ILS5,500 (US$1,700) in 2022
• Companies must pay Corporation Tax of 23%, although companies qualifying under the Encouragement of Capital Investment Law can apply for reduced rates
What Benefits are guaranteed in Israel?
• Maternity leave payments depend on income and social security contributions and are usually paid for the entire 26 weeks of leave, although employers are legally required to pay for only 15 weeks
• Paid leave is guaranteed for 12-14 days from the first day of employment, increasing year-on-year to a maximum of 21-24 days, as stipulated by the Annual Leave Law
• Employees benefit from the Hours of Work and Rest Law which sets a maximum of 42 working hours per week, divided between four days of 8.6 hours and one day of 7.6 hours
• Employees can accrue paid sick leave at a rate of one-and-a-half days per month to a maximum of 90 days each year. From the fourth day of sickness employers pay the full salary, though are not legally required to pay salary for the first day or more than 50% for days two and three
What Restrictions exist for Compensation and Benefits in Israel?
• Unemployment benefit – To qualify employees must have worked for an Israeli company for at least 12 months or a minimum of 300 days in the previous 18 months. Claimants must have lost their job involuntarily, have registered with the Employment Office, provided a letter from the employer stating reason for dismissal and length of employment, plus monthly salary receipts from the previous 12 months. Benefit is calculated on a percentage of previous salary to a maximum of ILS442 (US$135) per day
• Maternity benefit – Mothers employed for less than 12 months with an employer are restricted to 15 weeks maternity leave, some of which is paid, whereas the entitlement is 26 weeks for having worked more than 12 months
Health Insurance and other Benefits in Israel
It is compulsory for all Israeli residents to be registered with one of the four non-profit public health funds to receive universal basic health care. Employers are required to include health insurance in employees’ benefits. Healthcare provisions in Israel are high, but supplementary insurance can still add to the options.
The healthcare system is funded by a combination of government subsidies and National Insurance contributions from employers and employees as percentage of salaries.
Benefit from our advice!
Health, retirement, maternity benefits, holidays, working hours and termination agreements are among the benefits guaranteed for Israeli and foreign employees. Guaranteeing legally-protected compensation and benefits is an essential factor of complying with Israel’s various labor and contract regulations. Bradford Jacobs will ensure compliance with these crucial requirements to avoid fines and sanctions.