Israel payroll
Accurate, compliant payroll for your team in Israel, with every contribution handled.
Read moreEmployer Cost in Israel · True Cost to Employ Someone
Gross plus pension, severance, national insurance and recuperation. See the real employer cost in Israel and how NETO turns it into one invoice.
AI summary · Employer Cost in Israel 2026Click to read the page summary
In Israel, gross salary is only the start of the cost, not the full cost. On top of gross an employer adds pension, severance, national insurance, and recuperation, which together drive the true cost to hire. The guide breaks down employer cost by salary level for Israel 2026 and works a full example on ILS 10,000 gross. NETO turns the whole thing into a single all-in invoice.
The true number
Gross is not the cost, it is the start
When you agree on a gross salary in Israel, the actual cost to the employer is meaningfully higher. Israeli law adds several mandatory employer contributions on top of gross, so the true employer cost is typically 20 to 30 percent above the figure you negotiated. A gross salary of ILS 10,000, for example, works out to roughly ILS 12,300 to 12,800 in real employer cost. NETO shows the complete cost upfront and turns every component into a single invoice.
- Pension, severance, national insurance and recuperation, all accounted for.
- One invoice per month covers salary and every statutory contribution.
- NETO is the legal employer of record under license 1565.
Summary · the key facts
- True employer cost runs about 20 to 30% above gross salary.
- National insurance: employer share 4.51% up to ILS 7,703, then 7.6% up to the ILS 51,910 ceiling; nothing above.
- Pension: mandatory employer contribution of at least 6.5% of gross.
- Severance: 8.33% for full coverage (6% minimum by law).
- Recuperation: ILS 451.50/day, 5 days in the first year.
- NETO bundles it all into one invoice, under manpower license 1565.
How it works at NETO
The law requires 6% · at NETO it is 8.33%
6%The employer's duty under the extension order
8.33%What NETO actually contributes
The mandatory pension extension order obliges every employer to contribute 6% of salary to the severance component, and section 14 of the Severance Pay Law applies to that money automatically. NETO contributes the full severance component by default · 8.33% · so the ongoing contribution replaces severance pay in full and no top-up is due when the employment ends. An employer contributing less than 8.33% must top up severance at the end of the employment relationship.
The one exception
Section 14 and the sources in the labour law centre →
A worker who declares they have no active pension fund, in a one-off engagement · there the contribution obligation begins only after six months of work. A worker with an active pension arrangement is entitled from day one, with contributions made retroactively after three months or at the end of the tax year, whichever is earlier.
General information · not legal advice. The binding text is the statute and the extension order themselves.
At a glance
The headline rates that drive the cost
These are the main employer contributions added on top of gross salary in Israel for 2026.
20 to 30%
Above the gross salary you agreed on
7.6%
National insurance, employer share
6.5%
Pension, employer contribution
8.33%
Severance, full coverage
The components
What makes up employer cost in Israel
On top of the gross salary, Israeli law requires the employer to fund the following. Every figure below is a 2026 statutory rate.
National insurance (Bituach Leumi)
The employer share is 4.51% on the first ILS 7,703 of monthly salary, then 7.6% on the portion from ILS 7,703 up to the ceiling of ILS 51,910 per month. There is no employer contribution above ILS 51,910. Rates updated January 2026. Source: National Insurance Institute · contribution rates for salaried employees.
4.51% to ILS 7,703 · 7.6% to ILS 51,910Pension contributions
A mandatory employer contribution toward the employee's pension, calculated on gross salary. This is a legal minimum, not optional.
Minimum 6.5% of grossSeverance pay
A minimum of 6% by law, with 8.33% recommended for full severance coverage, set aside toward the employee's severance entitlement.
6% minimum, 8.33% fullRecuperation pay (Dmei Havra'a)
ILS 451.50 per day in 2026. In the first year an employee is entitled to 5 days, which comes to ILS 2,258 per year.
ILS 451.50/day · 5 days year oneVacation and sick days
Paid leave days when the employee is not working. These are part of the real cost of employment even though no work is performed on those days.
Statutory paid leaveTransportation
Up to ILS 22.60 per day for actual commuting days, paid to the employee for the days worked.
Up to ILS 22.60/day Cost breakdown
Employer cost by salary level · Israel 2026
Estimated employer cost based on gross salary, calculated using 2026 rates: national insurance, pension 6.5%, severance 8.33% and monthly recuperation.
| Gross salary | National insurance (4.51% / 7.6%) | Pension + severance (14.83%) | Monthly recuperation | Total cost | % above gross |
|---|---|---|---|---|---|
| ILS 6,443.85 (minimum wage) | ILS 291 | ILS 956 | ILS 376 | ~ILS 8,067 | 25% |
| ILS 10,000 | ILS 522 | ILS 1,483 | ILS 376 | ~ILS 12,381 | 24% |
| ILS 15,000 | ILS 902 | ILS 2,225 | ILS 376 | ~ILS 18,503 | 23% |
| ILS 20,000 | ILS 1,282 | ILS 2,966 | ILS 376 | ~ILS 24,624 | 23% |
| ILS 30,000 | ILS 2,042 | ILS 4,449 | ILS 376 | ~ILS 36,867 | 23% |
Note: The employer pays national insurance at 4.51% on the first ILS 7,703 of monthly salary, then 7.6% on the portion up to the ceiling of ILS 51,910 per month; there is no employer contribution above ILS 51,910 (2026 rates). Source: National Insurance Institute · contribution rates for salaried employees.
Three ways to look at it
Gross only vs true cost vs NETO all-in
The same ILS 10,000 hire, viewed three ways: the gross figure alone, the real cost an employer carries, and what NETO bundles into one invoice. Figures use 2026 statutory rates.
| What you account for | Gross salary only | True employer cost | NETO all-in |
|---|---|---|---|
| Gross salary | ILS 10,000 | ILS 10,000 | ILS 10,000 |
| National insurance | Not counted | ILS 522 | Included |
| Pension (6.5%) | Not counted | ILS 650 | Included & transferred |
| Severance (8.33%) | Not counted | ILS 833 | Included & set aside |
| Recuperation, pay slips, reporting | Not counted | Your responsibility | Handled for you |
| What it really costs | Looks like ILS 10,000 | ~ILS 12,381 + admin | One invoice · 5% commission |
Note: Salary, national insurance and pension are not subject to VAT. With NETO, VAT applies only to the service commission (5%), not to the salary itself.
Worked example
ILS 10,000 gross, in full
When you agree on a gross salary of ILS 10,000, the actual employer cost comes out to approximately ILS 12,300 to 12,800. Here is the breakdown:
- National insurance (Bituach Leumi): ILS 522 (4.51% on the first ILS 7,703, then 7.6%)
- Pension, employer contribution: ILS 650 (6.5%)
- Full severance pay: ILS 833 (8.33%)
- Total estimated employer cost: ~ILS 12,381 (before transportation)
The process
How to know your real cost, step by step
From an agreed gross salary to a single, fully covered invoice · here is how it works with NETO, under manpower license 1565.
1
Start from the gross
Begin with the gross salary you agreed on with the employee. This is the negotiated figure, before any employer contributions are added.
2
Add the statutory costs
Layer on national insurance (7.6%), pension (6.5%) and severance (8.33%), plus recuperation pay. This is where the real cost lands 20 to 30% above gross.
3
Register with NETO
Open an account and enter the role and salary. NETO calculates the complete employer cost upfront, so there are no surprises later.
4
Pay one monthly invoice
NETO consolidates salary and every contribution into a single invoice, transfers funds to the pension funds, reports to the authorities and issues pay slips automatically.
One invoice
How NETO turns it all into a single invoice
Instead of tracking every contribution yourself, the employer pays one invoice that covers the full cost of employment.
One monthly invoice
NETO consolidates salary and every statutory contribution into a single invoice. No separate transfers to manage, no missed payments.
Contributions handled
NETO transfers funds to the pension funds, reports to the authorities and generates pay slips automatically, every month.
Full transparency
Employers see the complete cost of each employee upfront, with no manual calculations and no hidden surprises, under license 1565.
Watch · how employers work with NETO
Two minutes that show exactly what happens from signup to payslip · before you commit to anything.
FAQ
Questions employers ask
What is the difference between gross salary and employer cost in Israel?
Gross salary is the amount you agree on before deductions. Employer cost is the total you actually pay: gross plus national insurance, pension, severance and recuperation pay. On average, employer cost is 20 to 30 percent higher than the gross salary.
How much higher than gross is the real employer cost?
Typically 20 to 30 percent above the gross salary. For example, a gross salary of ILS 10,000 works out to roughly ILS 12,300 to 12,800 in actual employer cost once national insurance, pension, severance and recuperation are added.
What is the national insurance ceiling for employers in 2026?
The employer pays 4.51% on the first ILS 7,703 of monthly salary, then 7.6% on the portion from ILS 7,703 up to the ceiling of ILS 51,910 per month. There is no employer contribution above ILS 51,910. These rates were updated January 2026 and are revised annually each January. Source: National Insurance Institute · contribution rates for salaried employees.
How much does the employer contribute to pension?
The employer pension contribution is a minimum of 6.5% of the gross salary, and it is mandatory. NETO transfers these contributions to the pension funds automatically every month.
How much is severance pay in Israel?
Severance is a minimum of 6% by law, with 8.33% recommended for full severance coverage set aside toward the employee's severance entitlement.
What is recuperation pay and how much is it?
Recuperation pay (Dmei Havra'a) is ILS 451.50 per day in 2026. In the first year an employee is entitled to 5 days, which comes to ILS 2,258 per year.
Does employer cost include VAT?
No. Salaries, national insurance and pension contributions are not subject to VAT in Israel. With NETO, the employer receives an invoice with VAT only on the service fee, while the salary payment itself does not include VAT.
How does NETO simplify employer cost?
NETO centralizes payroll into one invoice: it transfers funds to the pension funds, reports to the authorities and generates pay slips automatically. Employers know exactly what each employee costs, without manual calculations, under manpower license 1565. See employee pension contributions in Israel for the employee side.
In short
The bottom line on employer cost in Israel
Gross salary is only the starting point. Once national insurance, pension, severance and recuperation are added, the true cost to employ someone in Israel runs roughly 20 to 30 percent higher than the figure you negotiated · about ILS 12,300 to 12,800 on a ILS 10,000 gross. NETO turns all of it into one transparent invoice, transfers the contributions, reports to the authorities and issues pay slips, so you always know exactly what each employee costs · under manpower license 1565.
Know your real cost before you hire
See the full employer cost of any salary in Israel, then let NETO handle pension, severance, national insurance and recuperation in one invoice, under license 1565.
Learn more
Guides & tools
Employer of Record (EOR)
Hire in Israel without opening a local entity. NETO becomes the legal employer.
Read more
Pension contributions
How pension is funded in Israel and what the employer and employee each pay.
Read more
