Payroll and Benefits Guide Israel
Last updated: Mar 03, 2026
Contribution
| Employer Payroll Contributions | |
|
3.55%
|
Social Security (on the first 7,522 ILS)
|
|
7.60%
|
Social Security (on income between 7,522 ILS and 49,030 ILS) |
|
8.33%
|
Severance Pay
|
|
6.50%
|
Pension Fund
|
| Up to 21.78% |
Total Employment Cost
|
| Employee Payroll Contributions | |
|
0.40%
|
Social Security (on the first 7,522 ILS)
|
|
7.00%
|
Social Security (on income between 7,522 ILS and 50,695 ILS)
|
|
3.10%
|
Health Insurance (on the first 7,522 ILS)
|
|
5.00%
|
Health Insurance (on income between 7,522 ILS and 49,030 ILS) |
|
6.00%
|
Pension Fund
|
| Up to 21.1% |
Total Employee Cost
|
| Employee Income Tax | |
|
10%
|
Up to 7,010 ILS monthly income
|
|
14.00%
|
On income between 7,011 ILS-10,060 ILS monthly
|
|
20.00%
|
On income between 10,061 ILS-16,150 ILS monthly |
|
31.00%
|
On income between 16,151 ILS-22,440 ILS monthly |
|
35.00%
|
On income between 22,441 ILS-46,690 ILS monthly |
|
47.00%
|
On income between 46,691 ILS-60,130 ILS monthly |
|
50%
|
721,560 ILS and above |
Employer taxes
Employee taxes
Minimum Wage
General
The monthly minimum wage in Israel is 5,880 ILS. It is set to increase in April 2025 to 6,248 ILS per month.
MINIMUM WAGE (PER MONTH)
Payroll
Payroll Cycle
In Israel, the payroll cycle is typically monthly. All employees should receive a salary payment at least once a month, Salaries must be paid until the 9th of the following month.
13th Salary
The 13th-month salary payment is not legally required in Israel.
Recreation Payment
An employee is entitled to a recreation payment after one year of service. The payment is usually made between July and September, and the amount of compensation is determined by law, updated annually, and corresponds to the number of years of employment.
Working Hours
General
Standard working hours in Israel consists of 42 hours per week and 7-9 hours per day depending on how many days per week are worked. Employees should receive at least 48 hours of rest per week, usually taken on Friday and Saturday, resulting in a working week of Sunday-Thursday.
Forcing an employee to work more than 12 hours a day or 16 overtime hours in a week is illegal.
Overtime
- Maximum Ordinary Hours: As of April 1, 2018, the standard maximum working week for most employees is 42 hours.
- For a 5-day work week, the daily limit is typically $8.4$ or $8.6$ hours (depending on how the reduction from 43 to 42 hours is implemented).
- For a 6-day work week, the daily limit is 8 hours, with a shorter day (7 hours) on the day preceding the weekly rest day (usually Friday) and holidays.
- Overtime Threshold: Overtime is generally calculated on a daily basis. Any work performed beyond the statutory daily limit (or beyond 42 hours in a week) is considered overtime.
- Daily Cap: The maximum number of working hours, including overtime, generally cannot exceed 12 hours per day.
- Weekly Overtime Cap: An employee is generally not permitted to work more than 16 hours of overtime per week.
- Authorization Required: Overtime work is only permitted if the employer has obtained a general or specific permit from the Ministry of Labor. An employee is only entitled to overtime compensation for additional hours approved by the employer.
Mandatory Overtime Pay Rates
Israeli law mandates a progressive minimum premium rate for overtime. This rate is non-negotiable and based on the employee’s regular hourly wage.
| Hours Worked (Beyond Daily/Weekly Limit) | Minimum Premium Rate (Statutory) | Total Pay Rate | Notes |
| First 2 Hours of Overtime (on the same workday) | +25% of the regular wage. | 125% | Applies immediately after the ordinary daily limit is reached. |
| Each Additional Overtime Hour Thereafter | +50% of the regular wage. | 150% | Applies to the 3rd, 4th, and subsequent overtime hours in that day. |
| Weekly Rest Day/Holiday Work | +50% of the regular wage. | 150% | This rate is for hours worked during the employee’s weekly rest period (a minimum of 36 consecutive hours, usually including the Sabbath/religious day of rest) or on a statutory holiday. In addition, the employee is entitled to compensatory rest (a full day off) within a specified time. |
Exemptions: The Hours of Work and Rest Law, including the overtime provisions, does not apply to employees in certain management positions or roles requiring a special degree of personal trust, or to certain public sector workers (e.g., police officers).
Leave
Annual Leave (vacation)
Employees with a 5-day working 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 year up to the ninth year, and thereafter, to a maximum of 23 working days.
Annual leave payment is calculated at the regular salary pay rate.
PTO carryover
In Israel, statutory annual leave can be carried over by agreement, generally up to 3 years.
Note:
Public Holidays
Public holidays that fall on the weekend are usually lost.
Holidays are based on religious association and days can be swapped out to align with one’s religious observance.
| Date | Day | Holiday | Notes |
|---|---|---|---|
| 3 March 2026 | Tuesday | Purim | |
| 2 April 2026 | Thursday | Passover (Pesach) I | Standard holiday |
| 8 April 2026 | Wednesday | Passover (Pesach) VII | Standard holiday |
| 22 April 2026 | Wednesday | Israel Independence Day | Standard holiday |
| 22 May 2026 | Friday | Shavuot | Standard holiday |
| 12 September 2026 | Saturday | Rosh Hashana I | Standard holiday |
| 13 September 2026 | Sunday | Rosh Hashana II | Standard holiday |
| 21 September 2026 | Monday | Yom Kippur | Standard holiday |
| 26 September 2026 | Saturday | Sukkot I | Standard holiday |
| 3 October 2026 | Saturday | Shemini Atzeret & Simchat Torah | Standard holiday |
Sick Days
Sick leave is accrued at a rate of 1.5 days per month with a maximum of 90 days total. Payment during sickness is dependent on the length of leave as follows:
- For the first day of sick leave, the employee is not entitled to pay
- On the second and third day of sickness, the employee is entitled to 50.00% of their regular pay
- From the 4th day onwards, the employee is entitled to 100.00% of their regular pay
Upon return, the employee must provide a medical certificate from a medical professional.
Under the Sick Pay Law amendment an employee suffering from a malignant disease (cancer) or a condition that requires regular dialysis treatments, or who recovered from such a disease, is eligible for full sick pay (100%) from the first day of absence, if on leave from work to receive care or undergo periodic examinations for that condition. (up to a maximum of 90 days).
Employees must provide a medical certificate from a medical professional confirming the necessity of treatment or examination because of the condition.
Maternity Leave
Female employees are entitled to 26 weeks of maternity leave following the completion of one year of service within an organization. The employee may take up to seven weeks of leave before the predicted due date of the child and the remainder after the birth. Israel’s social security system compensates the maternity leave if the employee is eligible which generally equals 15 weeks of fully paid leave and 11 weeks of unpaid leave.
Employees who have worked for their employer for less than one year are entitled to only 15 weeks of maternity leave.
An employee may extend their maternity leave entitlement by three weeks in the case of multiple or complicated births. In the unfortunate circumstance that a mother loses her child after the birth, she may take unpaid maternity leave up to 60 days after the birth.
From the 7th week of leave, the mother can choose to return to work and transfer the remaining maternity leave period to her spouse.
Paternity Leave
Following a partner going into labor and up to 24 hours following the birth, an employee is allowed to be absent from work for up to 5 days as paternity leave. The first three days of this leave will be paid from their accrued annual vacation and the remaining two days will be deducted from their accrued sick leave.
Parental Leave
Fathers can take days off after the birth of a child, but these days will be subtracted from the maternity leave.
Bereavement Leave
In Israel, in the event of a death of an immediate family member, the employee is entitled to up to seven calendar days of paid leave to grieve for their loss. The employer fully compensates bereavement leave once the employee has completed three months of service.
In Israel, employees serving on reserve duty must still be paid by their employer. Military service is mandatory in Israel.
PAID MATERNITY LEAVE (DAYS)
Termination
Termination Process
In Israel the standard termination process stipulates that employers must exercise their right to terminate an employee’s employment in good faith, for valid reasons, and in compliance with applicable law, any written employment contracts, workplace customs, and collective bargaining agreements.
The termination of employment procedure includes a hearing process. This means the employer is obligated to provide the worker with a written hearing invitation, detailing the reasons in which the employer considers termination of employment.
The hearing should be scheduled within a reasonable time after the hearing invitation has been sent to the worker, so it leaves the worker sufficient time to prepare for the hearing. The hearing should be conducted by the worker’s manager. During the hearing, the worker needs to receive a genuine opportunity to express their viewpoint regarding the possibility to terminate their employment, and defend themselves against it.
After the hearing meeting, the employer should take the time to consider the arguments raised by the worker seriously in good faith and an open heart. According to the Israeli National Labor Court ruling, the decision made by the employer cannot be made immediately after the hearing, but a reasonable time after, at least 48 hours from the time the hearing was held. The decision made by the employer should be communicated to the worker in writing. It is recommended to provide the worker with a termination letter in person.
According to the labor court’s decisions, in certain circumstances before deciding on termination of employment, employers are required to consider whether they can offer the employee an alternative position.
Under the Prior Notice Before Termination Law, employers must provide the employee with prior written notice when ending their employment.
An employer may choose to pay the employee in lieu of notice, which would be calculated as an equal salary payment to that which the employee would have received had the employee continued to work throughout the notice period.
| Salary payment interval / date | Final payment on termination | Bank account payment requirement |
|---|---|---|
| Employees must be paid at least once a month, and compensation for work in one month should be paid by the 9th of the following month at the latest. | Upon termination, the employer must pay all due wages, unused entitlements and severance (when applicable). While there is no universal “within X days” deadline in all sources for every type of payment, the employer must comply with the obligations under the Wage Protection Law and Severance Pay Law. | Wages are paid in monetary form and the law permits payment by bank transfer, cheque, or other method. An amendment to the Wage Protection Law enables employees to request payment via a broader variety of entities, including bank account transfers. |
Notice Period
The employee’s length of service determines the notice period in Israel.
If an employee has served 0-6 months of service, then one day’s notice is required for each month of employment. For each month of service following the sixth month of service until the first year of employment, an employee accumulates 2.5 days of notice. Following one year of service, a 30-day notice is required.
Severance Pay
In Israel, employees who are being dismissed are entitled to severance pay upon completing one year of service. The severance pay is calculated at one month’s salary multiplied by the number of years of employment (including work for part of a year).
Under the Section 14 Arrangement, the employer must carry out monthly contributions equivalent to 8.33% of the employee’s monthly salary payment towards the severance pay component. The accrued amount is to be released to the employee upon termination, even if the employee resigned without circumstances that would entitle the employee to severance pay if the employee was not subjected to the Section 14 Arrangement.
Probation Period
Probationary periods are permitted by Israeli law, and during this time the employee is considered a regular employee for all intents and purposes. The probationary period is stipulated in the employment contract or a collective agreement.
If an employer considers termination a worker’s employment during the probation period, the employer must conduct and follow the hearing process.
Minimal Statutory Termination Costs
PTO cash out
convalescence pay cash out (after completing 1 year of service)
Any pending bonuses, commissions, expenses,
Any other compensation agreed directly between the client and the worker
Notice Period:
Up to 6 months of employment: 1 day of notice for every month worked
From the 7th month until completion of the first year: 6 days + 2.5 days for each month worked in this period
After 1 year of employment: 30 days (1 calendar month) of notice
Notice Period for Hourly or Daily Paid Employees:
During the first year: 1 day of notice for every month of employment
Second year: 14 days + 1 extra day for every 2 months worked
Third year: 21 days + 1 extra day for every 2 months worked
After the third year: 30 days (1 calendar month)
Severance:
Worker’s in IL are entitled to severance of 1 month salary, per each year worked, after completing 1 year of employment.
However, if section 14 applies, and the employer contributes monthly 8.33% of the worker’s full monthly salary to the pension fund, the employer doesn’t need to pay additional severance.
Papaya’s EoR contributes the full monthly 8.33% severance to the pension fund, so unless there are unusual circumstances, additional severance is not owed to the worker.
Setting Up a Business
Setting up a legal entity
There are six types of businesses in Israel: company, foreign company, self-employed, partnership, non-profit, and corporation.
Companies are the most common types of business in Israel, and you will most likely register as a private or a public company. Private companies must have a director and at least one shareholder.
Public companies are registered on the Israeli stock market and must have at least seven shareholders. If you register as a foreign company in Israel, your company will have the status of a branch or a subsidiary.
In Israel, all businesses register in the same basic format regardless of business category (this includes self-employed businesses and non-profit organisations). A business must first obtain the necessary registration documents from an attorney. The attorney certifies them for a fee. The forms
include: Form No. 1 (this is the Registrar’s form, and your attorney will get it for you)
- Memorandum of the Association (description of the company’s objectives and responsibilities of director and shareholders)
- Articles of Association signed by initial shareholders
- Directors’ affidavit stating competence to serve
- The attorney then submits the documents to the Registrar of Companies.
Most documents can be in English, Hebrew, and Arabic, but the Articles of Association must be in Hebrew.
After registering with the Registrar of Companies, you will need to register with two other government departments: The Income Tax Department and the Customs and VAT Department. These are both bodies under the Ministry of Finance and charge no registration fees. Together with registering your company with the National Insurance Institute (NII).
The employer is responsible for making national insurance and health fund payments to the NII on behalf of their employees. the employers also deduct income tax payments from the employees’ salaries, which is then sent to the Income Tax Department.
Business registration must be renewed annually.
Registration as an employer
There are two common types of contracts in Israel: indeterminate duration and fixed-term contracts.
The indeterminate duration contract is the most common type of contract. It means that the worker will work indefinitely “at will” for a company under specified terms and conditions. The employer will not terminate the contract after completing a given task or time period.
Fixed-term contracts mean that the worker will work for a specific amount of time or on a specific project. This is commonly used for freelance and seasonal work. The contract is over when the time expires or the project is completed.
New Employee Registration
A written contract of employment is required and should state the employee/employer conditions together with compensation details.
Information required to register a new employee includes salary/wage and tax data, work pattern, health insurance, Worker Declaration (Form 101), bank details and personal details.
Common Benefits
- Mobile phones or mobile phone allowances can be provided as a taxable benefit.
- Meal allowance or vouchers.
- Study fund – it is very common to give employees a study fund. The employer contributes a monthly amount of up to 7.5% of the monthly salary and the employee contributes an amount of 2.5% of salary. After 6 years the accumulated amount in the fund may be released tax free. There is a tax-free ceiling set at 15,712 NIS which is annually updated.
- Holiday gifts – it is common to give holiday gifts twice a year for the Rosh Hashana and Passover holidays. These gifts are taxed.
- Additional annual leave – in some industries it is common to give additional annual leave beyond the legal minimum.
Immigration
For work or business purposes, a professional relocating to Israel should use the B/1 work visa (combined work permit and employment visa).
The B/1 work visa is a business visa granted to foreigners who have been approved to stay in Israel for a limited time for work. It is issued to experts, scientists, high-tech workers, and artists.
Israeli work visa requirements for this permit are as follows:
- approval from the Ministry of the Interior
- visa interview
- verified certificate of good conduct
- certification of medical exam performed by an approved clinic or hospital recognized by the mission
- biometrics (fingerprints and photograph)
- completed Israeli work permit visa application form
- two passport-size photos
- a signed document from the employer stating that they are offering a position of employment
Upon arrival in Israel, customs will stamp the visa, validating it for 30 days. Extensions are then possible for up to one year and allow the foreigner to leave and enter Israel as many times as required.
Specialists working in academic or non-academic fields for more than three months will be issued the B/1 visa and require:
- A higher salary requirement (at least double the average wage)
- CV/resume
- Academic certificates (if not in English, diplomas will need to be officially translated into Hebrew and notarized by an Israeli notary)
- Copy of passport (must be valid for a minimum of a year and three months from the start of the process)
- Power of attorney
- Completed and signed application forms
- Three passport-size photos
- Marriage and birth certificates (for children under 18) for any accompanying family members (original with apostille)
- Police clearance (issued within the last six months)
- Medical clearance (issued within the last three months)
The maximum stay and work period for these employees is five years and three months from the start date in Israel. The visa usually takes between two to three months to process.
VAT
General
The standard rate of VAT in Israel is 18.00%.
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Questions & Answers
See how Papaya can help you automate your global payroll or EoR whilst staying 100% compliant with local labor laws
Payroll and Benefits Guide
in Israel
What’s covered in this guide:
- Employer/employee contributions
- Minimum wage
- Working hours
- Visa requirements
And more...
Public Holidays Calendar
| Date | Day | Holiday | Notes |
|---|---|---|---|
| 3 March 2026 | Tuesday | Purim | |
| 2 April 2026 | Thursday | Passover (Pesach) I | Standard holiday |
| 8 April 2026 | Wednesday | Passover (Pesach) VII | Standard holiday |
| 22 April 2026 | Wednesday | Israel Independence Day | Standard holiday |
| 22 May 2026 | Friday | Shavuot | Standard holiday |
| 12 September 2026 | Saturday | Rosh Hashana I | Standard holiday |
| 13 September 2026 | Sunday | Rosh Hashana II | Standard holiday |
| 21 September 2026 | Monday | Yom Kippur | Standard holiday |
| 26 September 2026 | Saturday | Sukkot I | Standard holiday |
| 3 October 2026 | Saturday | Shemini Atzeret & Simchat Torah | Standard holiday |
Hi, what is the amount of the “dmei haavraah” and when is it paid?
Hi, good question. For the private sector, the amount is 378 NIS per day accrued and 429 NIS per day for the public sector and is paid out in the month of July/August. Employees are entitled to this amount if they have been employed for at least one year by the month of July and .5 days are accrued each month. If one has not been employed for a year by this time, the amount is simply paid out the following year or upon termination.
What’s the daily minimum wage/per day pay in Israel?
The current daily minimum wage for a 5-day workweek is NIS 244.62 and NIS 212 for a 6-day workweek. The minimum wages will change in April 2022.
Thanks
please provide a source for the 16 days of annual leave? As far as I know, the law is 12 days for those that work a 5-day week and 14 for those that work a 6-day week.
As we state in our CountryPedia, the working Time Act 1997 is responsible for providing the entitlement. The Act provides a basic annual paid leave entitlement of four weeks, although an employee’s contract can provide even more leave. The following link is a government source – //www.citizensinformation.ie/en/employment/employment_rights_and_conditions/leave_and_holidays/annual_leave_public_holidays.html#:~:text=Most%20employees%20are%20entitled%20to,in%20your%20contract%20of%20employment.
As an employee perk, what is the average lunch allowance in Israel? Is it cumulative?
A lunch voucher is given monthly and typically to employees in the tech industry. Depending on the size and value of the company, the allowance ranges between 500 NIS and 1200 NIS per month.
Do you get Severance Pay when going on pension
Pension savings in Israel are made up of over a third of compensation component funds. Savings are significantly reduced when compensation funds are withdrawn. There will also be a reduction in the old age pension when that day comes. There is generally some tax exemption associated with severance pay. There are also tax benefits associated with retirement. By taking advantage of today’s tax benefits, retirees may lose out on their rights to tax benefits in the future.
In Israel, can you switch payroll providers any time during the year? I know a Jan 1st switch is best, but if you can’t do it in January, can you later in the year?
Since the taxation year runs from Jan-Dec, it is always best to decide on such change at the beginning of the calendar year.
Are there rules or what is typical for PTO carryover?
It is at the employer’s discretion to decide if a carryover is allowed. Many companies will allow a minimum of 5 days or more to carry over.
How to compute the severance pay? Because i work for my previous employer for 25 months (2yrs and 1 month) i resigned, they compute my severance pay just 19 months instead of 25 months, they told me that there is a new law for computing severance pay, they say the computation is strt at the 6months of working of the foreign work. I just want to know if its true that there is a new law for severance pay, thank you
Hello,
Generally, workers who have been employed consecutively with the same employer for 1 year are entitled to receive severance. If you can provide more details on what is meant by ‘foreign work’ we will be glad to look into this further.
Additionally, if an employee decides to resign, it’s important to note that the release of the severance funds depends whether they signed under section 14. However, as the question lacks some context, I would advise to seek legal advise in order to fully comprehend the terms and implications associated with their employment terms.
What i mean is foreign worker., because im a foreign worker here in israel as a caregiver. I’ve start working from my last employer is april 21,2022 and i resigned may 31,2023, they compute my severance pay just 19 months instead of 25 months, i ask them about it and they told me that there is a new law for computing severance pay, it only start to compute on the 6months of working of the foreign worker. But i check on internet even in kavlaoved there is no new rules severance pay, Can you please check this computation if its right? Because for me i think its not enough for my severance pay,. Or if there is a new rules can you please show it to me., thank you for answering my question.,
Monthly salary : 5,572
Number of months: 19
Number of days: 9
Percentage : 6
Total :6,189,12