Global HR Compliance in Israel
Israel is a mature, innovation-driven economy with a deep talent pool in high-tech, cybersecurity, and applied R&D. It ranks among the world’s leading hubs for startups, scaleups, and cross-border venture-backed growth. This environment has created sustained demand for highly skilled local and foreign professionals across critical sectors.
For companies expanding into Israel or hiring Israeli-based talent without a local entity, the employment model must comply with local labour law, tax codes, social benefit structures, and immigration rules. Missteps in worker classification, contract drafting, or contributions to Bituach Leumi (National Insurance Institute) can quickly escalate into serious compliance risk.
If you intend to hire local nationals or bring in foreign professionals to work in Israel, the following guide will help you understand the operational and legal frameworks you need to navigate.
Hiring Guide in Israel
Employment in Israel is governed by a comprehensive legal framework consisting of the Hours of Work and Rest Law, Annual Leave Law, Severance Pay Law, Sick Pay Law, and various protections under the Women’s Employment Law. Employment contracts must be in writing and should specify job duties, compensation, working hours, leave entitlements, and the duration and nature of employment. Employment may be full-time, fixed-term, or temporary and may also be subject to collective agreements in unionised sectors.
Working Hours
The legal workweek in Israel is 42 hours. For a five-day workweek, the daily limit is typically 8.6 hours. Employees are entitled to at least 36 consecutive hours of weekly rest. For Jewish employees, rest periods typically begin Friday afternoon and end Saturday night to coincide with the Sabbath.
Non-Jewish employees may observe rest days according to their own religious or cultural practices. Any deviation from these hours requires formal permission from the Ministry of Labour.
Overtime Regulations
Overtime work must be compensated at enhanced rates and cannot exceed four hours per day or twelve hours per week. The first two daily overtime hours are paid at 125% of the regular hourly wage, and additional hours are paid at 150%.
Employees working shifts between 11 pm and 7 am may be entitled to additional compensation depending on the nature and classification of the work. Employers must keep accurate records of all overtime and ensure that such work is voluntary or agreed upon in advance.
Probation Period
Probation periods may range from one to twelve months, depending on the employment contract or applicable collective agreement. During this period, either party may terminate the contract with prior notice as stipulated in the agreement.
Probation does not eliminate the employer’s responsibility to follow procedural fairness, especially regarding disciplinary dismissal.
Annual Leave
Annual leave is calculated based on years of service and ranges from twelve to twenty-eight days per year. During the first four years of employment, the minimum is twelve working days for a five-day workweek. Entitlement increases with continued service.
Public holidays and maternity leave periods are not counted toward annual leave. Employees may defer unused leave for up to two years, provided that at least seven days are used during each calendar year. Upon termination, unused leave must be compensated.
Sick Leave
Employees accrue 1.5 days of sick leave per month of employment, up to a total of ninety days. Sick pay begins on the second day of illness. The first day is unpaid, the second and third days are paid at 50% of the regular wage, and from the fourth day onward, employees are entitled to full sick pay.
Medical documentation is required, and employers are not permitted to terminate an employee for taking lawful sick leave.
Parental Leave
Female employees are entitled to twenty-six weeks of maternity leave, of which fifteen weeks are paid by the National Insurance Institute. The remaining weeks are unpaid but protected. A mother may transfer part of the leave to the father beginning from the sixth week after childbirth, provided she returns to work. Fathers are entitled to six days of paternity leave.
Three days are deducted from their annual leave balance, and three from sick leave. If the father has exhausted both entitlements, the remaining days are considered unpaid leave. Following the paid leave period, either parent may request unpaid parental leave for up to one year, depending on length of service.
Termination and Severance
Termination of employment must comply with statutory notice periods and due process. Employees with indefinite contracts are entitled to notice based on the length of service. The minimum notice period ranges from one day for very short service to one full month for employees with over a year of continuous employment.
Dismissed employees with at least twelve months of service are generally entitled to severance pay equal to one month’s salary per year of service. Termination must not occur during protected periods, including maternity leave or during military reserve duty.
Employers are required to provide written notice of termination and to hold a pre-dismissal hearing where the employee has an opportunity to respond to the reasons for termination.
Failure to follow these procedures may render the dismissal unlawful, exposing the employer to claims for compensation and reinstatement.
Social Contributions
Employers and employees are required to contribute to the National Insurance Institute, which administers social benefits including health insurance, maternity allowances, pensions, unemployment insurance, and work injury compensation.
Rates are tiered based on employee income and are deducted at source. Employers must also contribute to severance and pension funds under the General Extension Orders, which apply to nearly all employees unless excluded by specific terms.
Employment Framework
Employment in Israel is heavily regulated, particularly in the areas of termination, parental rights, and wage protection. International employers must navigate a mix of statutory and collective agreement rules, ensure full documentation of employment terms, and observe formal notice and hearing procedures for all dismissals.
Compliance failures, particularly in termination or benefit calculation, are frequently challenged in labour courts and can result in reinstatement orders or financial penalties.
Let me know when you’re ready for the Acumen International services section tailored to Israel — or if you’d like to move to the next jurisdiction.
Why Use a Global Employer of Record (EOR) in Israel?
Establishing a legal presence in Israel involves significant time and cost. For most businesses entering the market with fewer than 10 employees — or hiring opportunistically across borders — setting up a local entity is rarely justified.
A Global Employer of Record (EOR) solves this by acting as the legal employer for your personnel in Israel.
You retain full control of the employee’s work, but the EOR handles all legal employment responsibilities: registering with authorities, managing payroll in shekels, ensuring compliance with Israeli labour law, and making social security and tax contributions on your behalf.
This hiring model eliminates misclassification risk and keeps you compliant from day one.
The Role of Acumen International
Acumen International provides a legally embedded Employer of Record (EOR) model for Israel. We become the local legal employer of your workforce while you retain operational control of their work. This allows you to:
- Offboard employees according to Israeli labour law, avoiding unfair dismissal claims
- Hire in Israel without establishing a legal entity
- Ensure all employment contracts reflect local legal requirements and market norms
- Execute payroll and tax withholding in full compliance with Israeli systems
- Manage all mandatory employer contributions, including Bituach Leumi and pensions
- Provide locally aligned benefits where required or expected
- Sponsor visas and work permits for eligible foreign workers.