Israel payroll
Accurate, compliant payroll for your team in Israel, with every contribution handled.
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Employer cost in Israel
What it really costs to employ someone in Israel
The salary you agree on is only part of the story. On top of gross, an Israeli employer pays pension, severance, national insurance and recuperation. NETO turns all of it into one clear invoice. Under manpower license 1565.
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 12,500 to 13,000 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 7.6% up to ILS 49,030, then 5.86%.
- Pension: mandatory employer contribution of at least 6.5% of gross.
- Severance: 8.33% for full coverage (6% minimum by law).
- Recuperation: ILS 394/day, 10 days in the first year.
- NETO bundles it all into one invoice, under manpower license 1565.
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 7.6% on earnings up to ILS 49,030 per month. Above that ceiling the employer rate drops to 5.86%. Rates updated January 2026.
7.6% (5.86% above ceiling)Pension 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 394 per day in 2026. In the first year an employee is entitled to 10 days, which comes to ILS 3,940 per year.
ILS 394/day · 10 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 26.40 per day for actual commuting days, paid to the employee for the days worked.
Up to ILS 26.40/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 (7.6%) | Pension + severance (14.83%) | Monthly recuperation | Total cost | % above gross |
|---|---|---|---|---|---|
| ILS 5,880 (minimum wage) | ILS 447 | ILS 872 | ILS 328 | ~ILS 7,527 | 28% |
| ILS 10,000 | ILS 760 | ILS 1,483 | ILS 328 | ~ILS 12,571 | 26% |
| ILS 15,000 | ILS 1,140 | ILS 2,225 | ILS 328 | ~ILS 18,693 | 25% |
| ILS 20,000 | ILS 1,520 | ILS 2,966 | ILS 328 | ~ILS 24,814 | 24% |
| ILS 30,000 | ILS 2,280 | ILS 4,449 | ILS 328 | ~ILS 37,057 | 24% |
Note: The national insurance ceiling for the reduced employer rate is ILS 49,030 per month (2026). Above this ceiling, the employer rate drops to 5.86%.
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 (7.6%) | Not counted | ILS 760 | 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 12,571 + 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 12,500 to 13,000. Here is the breakdown:
- National insurance (Bituach Leumi): ILS 760 (7.6%)
- Pension, employer contribution: ILS 650 (6.5%)
- Full severance pay: ILS 833 (8.33%)
- Total estimated employer cost: ~ILS 12,571 (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.
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 12,500 to 13,000 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 7.6% on earnings up to ILS 49,030 per month. Above that ceiling the employer rate drops to 5.86%. These rates were updated January 2026 and are revised annually each January.
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 394 per day in 2026. In the first year an employee is entitled to 10 days, which comes to ILS 3,940 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 12,500 to 13,000 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.
