How to hire and pay EMPLOYEES IN


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Before hiring


Before hiring employees in Israel, there are a few important things you’ll need to know. Firstly, in Israel, an employer can only terminate an employee after a hearing, following which they must provide the employee with written notice.

During the first five years of employment in Israel, employees are entitled to 12 paid vacation days, which increases with each year of service.

We know this might sound overwhelming—but it doesn’t have to be. A solution like Oyster eliminates the barriers for you. With Oyster, you can automate compliance across 180+ countries, easily managing HR and payroll—all in one, easy-to-use platform. 

Get an overview of what you need to know when hiring in Israel below.

At a Glance









(based on region;
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of gross salary

13th / 14th SALARY


Good to know

  • VAT of 17% is required in Israel on the total cost of employment unless the team member has no business in Israel and will not be interacting with Israeli customers and clients.
  • A workweek in Israel is from Sunday to Thursday.
  • Employees in Israel receive an additional benefit called a recreation payment. The amount of this payment is determined by law and depends on the number of years of employment. This is paid out in the spring (normally April) and Fall (normally September or October) to coincide with traditional holiday periods.

Employment in


Working hours and overtime

Employees in Israel work 42 hours per week from Sunday to Thursday. 

The first two hours of overtime are paid at a rate of 125% of the regular pay, and 150% after that.

Overtime work and pay rates are usually outlined in the employment contract.

Employment contracts
Probationary period

The probationary period in Israel is usually between one and 12 months, depending on the employment contract.

Notice period

The length of a notice period in Israel depends on the length of the employee's service, with a maximum of 30 days. An employer can choose to make a payment to the employee in lieu of having them serve out the notice period.

IP protection and non-compete agreements

Non-compete agreements in Israel must be clear and limited in scope and time. Agreements that involve compensation from the employer after the end of employment and throughout the non-compete period are more likely to be legally enforceable. 

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View a list of recognized public holidays in Israel here.

View a list of recognized public holidays in Israel here.

Employer tax

In Israel, VAT is required on top of the total cost of the team member at a rate of 17%, unless an employer meets the following criteria:

  • The job description states there will be no work with Israeli clients, entities, companies, etc.
  • The employer agrees that the team member has no business in Israel and/or with Israeli companies or clients.

Employers are also required to pay 28.28% in social contributions which includes severance pay, social security and health insurance, pension fund, and disability insurance. 

Individual tax

Employees in Israel pay between 10% and 59% in taxes depending on their income bracket. Employees also pay 21.5% in social security contributions.

Termination of employment

In Israel, an employer can only terminate an employee after a hearing, following which they must provide the employee with written notice.

Severance pay can depend on whether the employer has been contributing to the severance pay fund and the number of years of service. This pay can be equal to one month's salary for each year of service.

However, employers that make monthly contributions equivalent to 8.33% of the employee’s monthly salary towards a severance pay fund do not need to pay severance separately. The accrued amount from this fund is released to the employee upon termination.

Start hiring employees in


Setting up a business entity everywhere you want to hire a new employee isn’t scalable—it takes too long and the legal fees are high. At the same time, understanding and adhering to the local labor laws and employee expectations can be complex and time consuming. And it’s hard to find reliable information on up-to-date employment information for all the countries where you’re considering hiring. Not to mention tracking down invoices and managing employee contracts over email and spreadsheets—that gets messy fast. 

We can’t afford to take risks when it comes to compliance—we need to make sure we follow the local guidelines, especially when it comes to taxes and legalities. 

With Oyster, you can manage HR and payroll, and automate compliance across 180+ countries—all in one, easy-to-use platform.

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