To succeed in business in Israel, it is vital for both employers and employees to have a strong understanding of the business culture.
As a global PEO (Professional Employment Organization) it is our goal to be familiar and updated with the business culture in the country we work with and in. By sharing our knowledge about Israeli work culture, we want to support your global expansion plans. Therefore, we will address all the aspects of the work culture in Israel to start your expansion well-informed.
Work Culture in Israel
Israel’s renowned ‘Start-up’ economy is making the nation an increasingly strong magnet for international investment and attracting top of the range talent to fill key roles, particularly in the leading fields of hi-tech, medical, and healthcare sectors.
Adding to the attractions is Israel’s ranking as the second ‘freest economy’ in the Middle East and North African region – beaten only by the United Arab Emirates. Israel’s location on the Mediterranean’s eastern coast, in the southwest corner of Asia with close proximity to African markets, makes it an ideal launch pad for further expansion.
A well-educated and highly motivated workforce is at the heart of Israel’s economic growth. An often-laid-back atmosphere in the business environment nevertheless exists alongside a driven attitude which can accelerate towards urgently ‘getting the job done’. Cooperation is encouraged between staff and an often loosely structured hierarchy to achieve results.
To start with, here are a few tips on taking the right steps and avoiding the pitfalls!
- Language: Hebrew is the national language, but the business lingo is English. Make a good impression by learning some basic phrases and the correct pronunciation of your opposite number’s Hebrew name.
- Business Environment: Conducting business is relationship-oriented and networking outside of the office or boardroom is important. Colleagues and business contacts often develop friendships.
- Meetings: Agendas tend to be flexible, and deadlines can drift. Adaptability will play an important role in the relationship. Do not be surprised if counterparts answer their mobiles during the meeting.
- Negotiations: Israelis are determined negotiators – but do not confuse Israelis being direct and honest with arrogance.
- Punctuality: Being on time is valued, if not always reciprocated. It is always best to make the effort.
- Greetings: Best to stay polite and formal with titles and surnames, until the hosts initiate first-name terms. Shaking hands is the usual greeting but if meeting a religious individual remember not to shake hands with a member of the other sex.
- Dress Code: Office attire is typically ‘business casual’, but foreigners are best to dress formally for initial meetings.
- Business Dining: Israelis often eat late so be ready for ‘apres business’ night life. But if organizing the meal, be aware of dietary restrictions due to religious beliefs.
- Behavior: Although Israelis generally are not precious about personal space, religious individuals may avoid physical proximity and rely on eye contact.
Israel Minimum Wage
The Minimum wage is the lowest salary or wage that an employee can be paid for their work. In 2021, the minimum is ILS 5,300 (€1,497, US$1,680) per month or an hourly rate of ILS 29 (€8.20, US$9.20), with planned increments until 2025.
In November 2021, the Finance Ministry, Bank of Israel, Israel’s National Trade Union (Histadrut) and the Manufacturers’ Association announced a monthly minimum of ILS 5,400 (€1,525, US$1,713) for 2022 rising to ILS 6,000 (€1,696, US$1,903) by December 2025.
Probation Periods in Israel
Probationary or trial periods are not mandatory in Israel but are permitted by law. The worker should still be considered and treated as any full-time employee with regards to salary and employment rights and probationary periods, generally between one and 12 months, can be written into the employment contract along with notice period.
If the employee is dismissed unfairly, compensation of between one- and two-months’ salary can be awarded.
Working Hours in Israel
Normal hours total 42 over a working week from Sunday till Thursday, with four days at 8.6 hours and the remaining day for 7.6 hours. Employees on a six-day week work four days at eight hours, one seven-hour day and three on a Friday.
Approved collective agreements can allow four nine-hour days (including a 45-minute break) and one eight-hour day; but they cannot exceed 10 hours per day, including breaks, or 45 a week.
According to the Hours of Work and Rest Law, after six hours’ work there should be an unpaid meal break of 45 minutes including at least 30 minutes unbroken rest. Employees may take time to pray in accordance with religious requirements. In a break of more than 30 minutes an employee may leave the place of work.
Daily rest must be at least eight hours between workdays; weekly rest is generally not less than 36 continuous hours. If certain employment conditions make this untenable then continuous rest must not be less than 25 hours.
Overtime in Israel
Employers are legally required to pay employees overtime when the hours exceed the ‘normal working hours’. Employees receive 125% of their normal hourly rate for working the first two extra hours and 150% after that. Working on a Saturday or holiday employees are entitled to 150% of the usual hourly rate plus a vacation day. Employees can work up to 12 hours a day and up to 16 hours overtime a week; more than this is illegal. Overtime should be agreed between both parties.
Notice Periods in Israel
How long an employee has worked for his company will determine his notice period. One day for each month during the first six months of employment, with additional 2.5 days for subsequent months up to completing one year’s service.
Full-time employees are entitled to a minimum 30 days’ notice after completing one year, which is usually included in employment contracts. Payment in lieu of notice on equivalent salary is permitted, as is gardening leave on full salary and benefits.
Redundancy, Termination / Severance in Israel
The Notice of Discharge and Resignation Law requires both parties must give notice of dismissal or resignation. All employers and employees are subject to the laws on termination, which is permitted on reasonable grounds, excluding discrimination, if correct procedures are followed. Terminations are restricted or prohibited in some situations:
- Pregnant women (after six months employment)
- Women within the first 60 days after returning to work following maternity leave
- Employees on fertility treatment, or individuals on maternity or paternity leave
The above cannot be dismissed without prior approval from the Ministry of Economy. Employees must not be dismissed within 30 days of returning from military reserve duty. Employers who fail to follow procedures and allow the employee a hearing to give their case for reinstatement, risk paying 12 or even 24 months’ salary as compensation.
The Advance Notice for Dismissal and Resignation Law (2001) sets statutory severance of one months’ salary for each year of service, after working for at least 12 months.
A substantial portion is generally covered by employers’ monthly contribution of 8.33% of the employee’s salary towards the severance portion of the insurance or provident fund. Where an employee does not receive his full entitlement or none at all from their employer, the balance is made up by the National Insurance Institute.
Pension Plans in Israel
The first line of defense when it comes to old age in Israel, is the Public Pension System intended to give senior citizens a fixed monthly payment which is not dependent on peoples’ income.
It is operated through the National Insurance Institute (NII) and its social security system provided they have been insured for the requisite period of time and enough contributions have been made for them. Retirement age is 67 for men and 64 for women.
Pension rates and more details can be found at the government site.
The private pension section is divided into five parts in order to save for old age, all of which are managed by external fund and pension providers and regulated by the Capital Market Insurance Savings Division (CMISD): Old pension funds, new pension funds, new general pension funds, provident funds, and life insurance.
Public Holidays in Israel
- Passover : March /April (7 days)
- Independence Day : April 15
- Victory Day : May 9
- Pentecost : May/June (50 days after Passover)
- Fast of the Ninth of Av : Celebrated one day between July 17 – August 14
- Rosh Hashanah (Jewish New Year) : September / October – two days
- Day of Atonement (Yom Kippur) : September / October – one day
- Sukkot (Feast of Tabernacles) : September / October – 7 days (5 days after Yom Kippur)
- Simchat Torah : September / October – one day
Sick Leave in Israel
Employees absent from work due to illness are entitled to sickness benefit, subject to presenting a medical certificate signed by a doctor, detailing the condition, and estimating the amount of time needed off work. Employees receive 50% of their pay for the second and third day of incapacity and 100% thereafter.
Leave entitlement equates to a day-and-a-half for each month worked in a year, which is calculated at 18 days per year which if not taken can be carried forward, for five years to a maximum of 90 days. If contracts or collective agreements in their sector provide for better allowances, they apply.
Vacations / Holidays in Israel
Employees receive paid vacation as per length of service with their employer. The allowance is 16 days a year for the first five years: 18 days from the sixth year and 21 from the seventh. From the eighth year of employment an extra day is added each year to a maximum of 28 days.
Additionally, employees are entitled to paid leave for nine paid holidays, according to the religious or Jewish holidays of their choice.
Annual leave can only be accrued over a four-year period to encourage employees to use their holiday entitlement. However, if an employee leaves his job, they are entitled to payment for the annual leave accumulated.
The employer is permitted to request that his workers all take time off simultaneously, otherwise approval is still needed by the employer for individual requested dates.
Maternity/Paternity Leave in Israel
Maternity Benefit or Allowance: The allowance for maternity leave is made in one payment directly into the entitled mother’s bank account by the National Insurance Institute (NII). The amount is calculated on the basis of the individual’s income and the amount of related insurance contributions made to the NII.
Daily rate of benefit is calculated by:
- Previous three months’ salary divided by 90
- Previous six months’ salary divided by 180
Employees who have paid insurance taxes for 10 of the 14 months, or 15 of the 22 months preceding maternity leave are entitled to the maternity benefit for 15 weeks (105 days). Those who paid contributions for only six months out of the 14 preceding maternity leave receive benefit for eight weeks (56 days).
Entitlement for the self-employed depends on determining their income from advanced payments made to the NII, then benefit will be decided from the income tax assessment for the current or preceding year, whichever is highest.
Women who are both salaried and self-employed can combine all their income in the assessment, up to the permitted daily allowance. The maximum benefit is ILS 1,485.83 (€413, US$467) per day.
Maternity / Paternity / Parental Leave: Employees who have worked for the same employer or in the same place of work for 12 months receive 26 weeks maternity leave, or 15 weeks if they have worked fewer than 12 months for the same employer.
The spouse / partner of the mother is entitled to one week’s paternity leave at the same time as the maternity leave, provided the mother confirms in writing she is forfeiting one week of her maternity benefit. If the mother ends her maternity leave the minimum six weeks after birth, her spouse can replace her for the remainder of the leave.
Bonuses in Israel
Many Israeli employers pay a 13th month salary on the basis that there are 52 weeks in the year but only 12 calendar months, but it is not a legal requirement.
However, after one year of employment, an employee is eligible to receive a Recreation Payment which is normally paid between July and September.
How much is decided by law and reviewed annually determined by the number of years of employment. A pay slip is issued as normal, and tax is paid on the bonus.
Car Allowance Israel
Employees who need a car for their work, generally receive a ‘transport’ allowance as part of their company package. This could be a payment which is equal to the cost of running a car, or use of a company car.
By law, if neither is forthcoming, they have to be allocated an allowance towards public transport. These payments or benefits are taxable and should be included in the payroll.
Do not Suffer Culture Shock, Call us!
To expand into Israel successfully, the nuances of tax, payroll and employment laws are part of a business culture that will increase your workload and slow progress while trying to prioritize international expansion. Bradford Jacobs’ Professional Employment Organization (PEO) and Employer of Record (EOR) platforms, remove the mysteries of these issues – freeing your staff to concentrate on growing your business. Plus, our on-call HR advisers help with adjusting to the workplace environment and understanding a new culture.