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Employment in Israel

Israeli labor law applies to employees located in Israel and is comprised of a set of cogent statutory rules, regulations, and case law. In addition, there are collective agreements and expansion orders which apply to all or certain sectors of the labor market.

Key points on employment in Israel

There are several key areas to be aware of within the Israel employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department.  These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.

  1. Contracts

    The employer has entered into a written employment contract with the foreign worker, in a language understood by the foreign worker, and had provided the foreign worker with a copy thereof.

    Such terms of employment as have been agreed between the parties shall be specified in the contract subject to the provisions of any enactment, and also specifying all the following:

    (1) the identity of the employer and of the foreign worker;

    (2) job description;

    (3) the foreign worker’s salary, the composition thereof, the manner of updating the same including its constituents parts and dates of payment;

    (4) a list of deductions from the salary;

    (5) payment made by the employer and the employee for the employee’s social benefits’

    (6) the date of commencement of the employment and the period thereof;

    (7) the length of the foreign worker’s normal working day or week including his weekly rest day;

    (8) conditions concerning aid absences, including leaves, festival days and sickness days;

    (9) the employer’s obligations under sections 1D and 1E and under section 1A, in so far as they apply to him.

    Nothing by virtue of the provisions of this section shall derogate from the provisions of a collective agreement or extension order within the meaning thereof in the Collective Agreements Law, 5757-1957, or from the provisions of any enactment, that apply to the foreign worker and to the employer.

    The Minister may make supplementary regulations for the purpose of this section and to section 1F including prescribing those additional matters which must be written into the said employment contract, and as to those terms that must not be included in the employment contract, which if included, shall be null and void, and all in order to ensure fair conditions for the foreign worker having regard to the provisions of any law, a collective agreement or an extension order as provided above.

  2. Termination Procedures

    The basic requirements for termination of employment are the following:

    1. Hearing: An employer who is contemplating the dismissal of an employee must conduct a hearing prior to reaching a final decision on the matter. The hearing allows the employee to hear the reasons for his or her intended dismissal, to express an opinion regarding the dismissal and to allow the employer to reach an informed decision on the matter;
    2. Advance Notice: Both employee and employer are required to provide each other with an advanced written notice before their termination of the employment. Generally speaking, the statutory periods for such advance notice can vary depending on the employee’s seniority as well as the payment basis (hourly or monthly), reaching as much as one month;
    3. Severance Pay: Other than in certain cases set out under applicable law, an employee who continuously works for the same employer or at the same place of work for at least 12 months and is dismissed is entitled to severance pay, which is calculated by multiplying the employee’s last month’s salary prior to his or her dismissal, by the number of years worked by such employee (or any part thereof); Since 2008, however, employers are obligated to contribute certain amounts towards severance pay, on a monthly basis, to the employee’s pension insurance fund. Such amounts are deducted from the employee’s entitlement to severance pay upon termination. In certain cases, the law further allows an employer to increase contributions towards severance pay. In such cases the amount accumulated in the insurance fund is considered as being paid to the employee in lieu of paying severance pay. In these cases, no outstanding obligation is incumbent on the employer upon termination;
    4. General: Some terminations may be found to be illegal (e.g. dismissal of a pregnant employee who worked for at least six months for the same employer or at the same workplace is prohibited unless the employer has received a specific authorisation from the competent authority and dismissal due to the employee’s religion, personal status or sex and several other grounds is also prohibited, etc.).
  3. Minimum Wage and Working hours

    The law establishes that an employee shall not be paid less than the minimum wage as established from time to time. As of November 2015 the minimum monthly wage for a full time position is NIS 4,650 and the minimum hourly wage is NIS 25.

    Working day:

    (a) A working day shall not exceed eight working hours.

    (b) a working day shall not exceed seven working hours in night work on the day preceding the weekly rest and on the day preceding a festival on which an employee is not employed, whether by law or by agreement or custom.

    Working week.

    A working week shall not exceed forty-five working hours.

    Variation of working day or working week:

    (a) The Minister of Labour and Social Affairs may, by regulations, prescribe

    (1) A working day shorter than that prescribed in section 2 or a working week shorter than that prescribed in section 3, in respect of particular types of employment if he deems it necessary for reasons connected with the employee’s health or the circumstances of such employment;

    (2) a working day longer than that prescribed in section 2 or a working week longer than that prescribed in section 2 –

    (i) in respect of particular classes of agricultural employment or employment directly connected with the care of animals;

    (ii) in respect of employment in places for the care of the sick, pharmacies, convalescent homes and institutions for the care of the aged or of children;

    (iii) in respect of employment in restaurants, hotels and cafes;

    (iv) in respect of all or any persons in non-industrial employment in the service of the State or local authorities, whose employment is, in the opinion of the Minster of Labour and Social Affairs, essential to the public and is prescribed by regulations provided that a working day shall not exceed ten working hours and a working week shall not exceed on average, over a period prescribed by regulations, forty-five working hours.

    (b) Notwithstanding the provisions of section 2, the working day of a monthly employee in private domestic service, not being a part-time employee, shall not exceed 10 working hours; and a working day under this subsection shall be deemed a working day under section 2.

  4. Statutory Leave

    The duration of the leave, in respect of a working year with the same employer or at the same place of employment shall be as follows:

    (1) in respect of each of the first four years – 14 days;

    (2) in respect of the fifth year – 16 days;

    (3) in respect of the sixth year – 18 days;

    (4) in respect of the seventh year – 21 days;

    (5) in respect of the eighth year and onwards – one additional day per working year up to a period of leave of 28 days; but the Minister of Labour and Social Affairs may, by regulations, prescribe longer leave in the case of some particular employment if he deems it necessary for reasons connected with the employee’s health or the circumstances of such employment. The days of leave shall include not more than one weekly rest for seven days of leave.

    Where the legal bond between the employee and the employer exists throughout the working year, and the employee works during that year

    (1) at least 200 days, the number of leave days shall be as specified above;

    (2) less than 200 days, the number of leave days shall bear to the number of days specified above the same proportion as the number of actual working days bears to 200; fractions of a leave day shall be disregarded.

    Where the legal bond between the employee and the employer exists during a part of the working year, and the employee works during that part of the year.

    (1) at least 240 days, the number of leave days shall be as specified above;

    (2) less than 240 days, the number of leave days shall bear to the number of days specified above the same proportion as the number of actual working days bears to 240; fractions of a leave day shall be disregarded.

    Sick Leaves: A worker absent from work in consequence of sickness shall, subject to the maximum period of entitlement under section 4, be entitled to receive from his employer

    (1) from the fourth day of his absence as aforesaid, a payment under this Law in respect of the period of his sickness (such payment hereinafter referred to as “sick pay”);

    (2) in respect of the second and the third day of his absence as aforesaid, half the amount of the sick pay. Provided that the Minister of Labour and Social Affairs may, with the approval of the Knesset Labour and Social Affairs Committee, enact by regulations, provisions as to the payment of sick pay in respect of the first, the second and the third day of worker’s absence as aforesaid, and such provisions shall have effect notwithstanding any provision of this section.

    The period of sickness shall be calculated as follows:

    (1) in the case of a salaried worker, it shall be all the days of his sickness, including days of weekly rest and holydays;

    (2) in the case of a wage-worker who worked full-time for the same employer or at the same place of employment, shall be all the days of his sickness, except days of weekly rest and holydays.;

    (3) in the case of a wage-worker who worked otherwise than full-time for the same employer or at the same place of employment (such a worker hereinafter referred to as an “intermittently employed worker”), it shall be a number of days which bears to the total number of his days of sickness, except days of weekly rest and holydays, the same proportion as the number of his days of employment during the quarter of his fullest employment in the twelve months immediately preceding his sickness bears to the total number of work-days in that quarter.

    (4) in the case of an intermittently employed worker who has not yet worked for a period of three months for the same employer or at the same place of employment, it shall be a number of days which bears to the total number of his days of sickness, except days of weekly rest and holydays, the same proportion as the weekly average of his days of employment during the period of employment preceding his sickness bears to six;

    (5) Where a wage-worker or intermittently employed worker used to work on days of weekly rest and on holydays under a permit pursuant to a Hours of Work and Rest Law, 5711-1951, such days shall be included in computing the period of sickness; further more, in the case of an intermittently employed worker under paragraph (3), the words “the total number of workdays in that quarter” in that paragraph shall be replace by the word “ninety”, and in the case of an intermittently employed worker under paragraph (4), the word “six” in that paragraph shall be replaced by the word “seven”.

    The Minister of Labour and Social Affairs may, with the approval of the Knesset Labour and Social Affairs Committee, make regulations concerning procedure in connection with the receipt of sick pay, including the delivery of particulars and evidence to the employer as to the sickness, as well as concerning the date of payment of the sick pay. 

    The period of entitlement to sick pay shall not exceed a cumulative period of one and one half days for every full month of work that the worker worked for the same employer or at the same place of employment from the day on which this Law first applied to him but not more than ninety days in all, less any period in respect of which the worker received sick pay under this Law.

    Where in a particular month a worker did not work for the same employer or at the same place of employment on all work-days, then, for the above purposes, twenty-five workdays shall be regarded as a full working month, and a fraction of a full working month shall entitle the worker to proportionate sick pay.

    A period in which sick pay insurance exists in respect of a worker under the provisions of sections 8 and 9 shall not be included in computing the period of his entitlement to sick pay: Provided that a period for which he is not entitled to a payment under the conditions of insurance – except any such waiting period of qualifying period as is obligatory under the said conditions – shall be included in the computation.

    The Minister of Labour and Social Affairs may, with the approval of the Knesset Labour and Social Affairs Committee, make regulations as to the method of computing the period of entitlement and as to periods of work and work breaks to be included in the computation: Provided that any work break in respect of which the worker is entitled to a wage or to be treated as wage shall be regarded as work. 

    The rate of sick pay shall be seventy-five per cent of the wage the worker would be entitled to receive in the period of his entitlement to sick pay had he continued to work.

    Where a worker is paid according to output, the rate of sick pay shall be seventy-five per cent of the wage he would be entitled to receive in the period of his entitlement to sick pay if he continued to work and produced on each day of that period the average output per workday he produced in the three months preceding his sickness. 

    Maternity Leave: A female employee who has continuously worked for the same employer or at the same place of work for at least 12 months is entitled to receive 26 weeks of maternity leave. When the employee’s work period is less than 12 months, the maternity leave is accorded generally for 14 weeks only. An employer is not required to pay an employee’s salary during the period of maternity leave, although he/she is required to continue to make contributions towards pension insurance during certain periods of the maternity leave.

    It is important to notice that:

    • the maternity leave may be extended or shortened;
    • a male employee, whose wife gave birth may be entitled to partial paternity leave;
    • there are various restrictions and limitations on the employer’s ability to dismiss an employee during pregnancy the maternity leave, and during certain periods after the maternity leave.

Outsourcing Employment Through a GEO Employer of Record Service

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Israel. For companies, which intend to employ their staff directly through their incorporated Israeli entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Israel.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Israel.

The Shield GEO solution is an attractive alternative where

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in Israel

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Israel

– the company needs help with tax, employment, immigration and payroll compliance in Israel

Shield GEO can contract directly with the company to employ and payroll their staff in Israel. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits.  Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.

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