Bradford Jacobs’ worldwide Employer of Record (EOR) resources provide the complete payroll platform for your company’s expansion into Israel. Our payroll and employment specialists guide you through the complications of Israeli taxation and employment laws and regulations and administer every requirement directly from our payroll platforms to the relevant authorities.
We supply customized payroll solutions to meet your specific requirements. At Bradford Jacobs we recognize each business faces unique challenges and we bring tailor-made answers for every question.
What Israeli Payroll Options are available for Companies?
Remote Payroll – Where an international non-resident company handles the payroll for its employees based in Israel.
Local Payroll Administration – An international, non-resident corporation appoints an in-country Employer of Record (EOR) to handle payroll for their employees based in Israel. The EOR take responsibility for complying with all tax and payroll regulations and updates, covering income, real estate, VAT, purchase, corporation, land appreciation, customs and stamp duty taxes as codified by the Israel Tax Authority.
Internal Payroll – A foreign-owned, non-resident entity sets up its own payroll organization in Israel for their employees based there, either locals or staff migrated overseas from the home country. This involves prohibitive levels of incorporation, registration and compliance with Israeli laws – in addition to setting up a payroll system.
Outsourced Payroll – Where an EOR such as Bradford Jacobs handle all aspects of the foreign company’s payroll and tax obligations in Israel by complying with all regulations of the relevant authorities.
Payroll Services in Israel
Paying staff in Israel, either locals or foreigners, requires faultless knowledge of the nation’s laws and regulations. Outsourced payroll services in Israel will deal with the following:
• Complying with the provisions of the Income Tax Ordinance, for both nationals and non-residents covering wages, dividends, assets
• Registering with the Social Security Authority for remitting contributions to the National Insurance Institute
• Filing annual tax returns on a calendar year basis
• Remitting withheld taxes by the 15th of the following month
• Creating employment contracts
• Calculating monthly salary and tax and contributions to be remitted
• Creating pay slips, which under Israeli accountancy rules must be divided into various sections
• Salaries must be paid by the ninth of the following month
Outsource your Israeli Payroll
Checking the above list emphasizes why the vast majority of foreign companies expanding into Israel hand their payroll to Employer of Record (EOR) providers such as Bradford Jacobs. By outsourcing payroll, your company complies with tax and social security regulations without risking admin nightmares and penalties for late or incomplete filing. You focus on your company’s growth and goals without any concerns over payroll management. If you have questions, we have the answers. Call Bradford Jacobs now.
What is required to set up Payroll in Israel?
Before a subsidiary can run payroll in Israel, the company must meet various considerations relating to setting up the entity. These include:
• Select a company name and decide on the type, typically a limited liability company (Ltd) operating under the Companies Law (1999). Register the name in Hebrew and English; if it matches with an Israeli company, the name of the home country should be added after the company name
• The company must provide a local office address
• No minimum share capital required
• Appoint company director, not necessarily a local
• Minimum of one shareholder, which can be an individual or a company
• Register of shareholders must be publicly available
• Company must hold an annual meeting, prepare and submit financial reports
Documents for registering a foreign company can be deposited at the Tel-Aviv District Office. Documentation includes:
• Validated Incorporation Certificate from parent company’s home country
• Notarized Hebrew translations of the Incorporation Certificate, Articles of Association and Status Certificate proving the parent company operates in its home country
• Power of Attorney authorizing an Israeli citizen to act on the company’s behalf and receive court documents
• List of directors including passport numbers (foreigners) and Israeli ID numbers (locals)
• Proof of payment of all registration fees
Now able to operate payroll, the company must register with the Income Tax Ordinance office for both Israelis and foreigners, and register with the Social Security Authority to be able to remit payments to the National Insurance Institute.
Cut through the ‘Red Tape’
Time-consuming and non-productive administration can be deleted from your ‘to do’ list by engaging Bradford Jacobs to handle all the red tape in registering new employees on the payroll of your company, without the costly requirements of establishing a subsidiary in Israel. Contact Bradford Jacobs now.
What Entitlement/Termination Requirements are included in Israeli Payroll?
• Minimum Wage – This is ILS5,300 ($1,620) per month, expected to reach ILS 5,500 ($1,680) by the end of 2021 and into 2022
• Sickness Benefit – Employees are allowed one-and-a-half days of paid sick leave per month, building to a maximum of 90 days annually. Employers generally pay full salary, but are not legally required to pay any for the first day and only 50% for days two and three
• Working Hours – These are spread from Sunday to Thursday, though some Israelis work till noon on a Friday. Employees must have 36 hours unbroken rest, usually on a Friday and Saturday. Since April 2018 the Hours of Work and Rest Law stipulates a maximum of 8.6 hours four days a week and 7.6 on the remaining day (nominated by the employer) totalling 42 hours per week
• Holidays – The Annual Leave Law provides for a statutory minimum of 12-14 days’ paid leave from day one of employment, increasing annually to a maximum of 21-24 days depending on seniority
• Maternity/Paternity Leave – Maternity allowance is based on income and social security contributions and made in one payment to the mother’s bank account. Leave totals 26 weeks and employers usually pay for the entire period, although only legally required to do so for 15 weeks. A mother may end her leave after six weeks with her spouse taking the remainder
• Discrimination – Israel’s Equal Opportunities Law protects employees against discrimination on the grounds of gender, sexual orientation, sexual harassment, pregnancy, age, nationality or race, religious beliefs, country of origin or political views. Each category is protect by various laws
• Termination – The Notice of Discharge and Resignation Law requires both parties must give notice of dismissal or resignation. Employers can terminate employment when giving notice with the minimum payment of one month’s salary. However, employers cannot dismiss pregnant employees, those expecting to adopt children, having fertility treatment or on maternity/paternity leave
• Severance – Maximum severance payments are determined by a combination of salary, seniority, family and cost of living allowances and any other wage components but do not include 13th month salary payments in the calculation. Any shortfall in severance from the employer is covered by the National Insurance Institute
Israel 13th/14th Month Salary
Many Israeli employers pay a 13th month salary on the basis that there are 52 weeks in the year but only 12 calendar months. A pay slip is issued as normal.
What Taxation Rules exist for Payroll in Israel?
• Employees (including resident foreigners) whose taxes and social security contributions are deducted at source by their employer need not file a tax return, which otherwise is due by April 30 of the following year
• Individual tax residents must file a tax return if their salary exceeds ILS649,000 ($198,000) and they pay surtax, regardless of deductions taken at source
• Individual tax returns must be filed if rental or foreign income or foreign pension income exceeds ILS337,000 ($102,000)
• Married couples can file separate or joint tax returns
• Remitted deductions and contributions must be paid by the 15th of the following month
• All Israeli residents pay tax on their worldwide income
• Accounts are regulated by the Israeli Accounting Standards Council and accounts must include a balance sheet, income statement, cash flow account and owning company’s equity account
Stress Free Global Expansion
Employer of Record (EOR) solutions take care of every step of the complex processes for international companies expanding into Israel and every new territory worldwide. Registration, tax laws, social security payments and dealing with the relevant authorities are potentially hazardous barriers to your expansion. Bradford Jacobs are on call every step of the way to ensure your company clears every hurdle to establishing a successful presence in Israel.