Yes — working through an invoice service company (cheshbonit leshachir) can be fully legal, as long as it is done through a licensed, government-authorized Employer of Record (EOR).

That said, not every such service operates within the law — so it’s essential to understand how the model works, what rights you are entitled to, and what the risks are before you begin.

This page is aimed at freelancers, consultants, and service providers working with clients — in Israel or abroad — who want to issue invoices without opening a business file. Here you’ll find a clear, legal, and practical explanation to help you decide whether this is right for you.

What Is an Invoice Service and How Does It Work?

An invoice service (cheshbonit leshachir) is an employment model in which a licensed staffing company acts as the official employer of the service provider. The client who orders the service pays the invoice issued by the staffing company, which in turn pays the worker a salary including all statutory benefits.

The main advantage of this model is its simplicity: there’s no need to open a tax file, no bookkeeping, no accountant fees, and no bureaucracy.

The Legal Basis

The Employment of Workers by Manpower Contractors Law (1996) provides the legal foundation for these companies. The law requires any entity wishing to operate as a manpower contractor to obtain a license from the Ministry of Labor. License applicants must also pass a personal interview and a comprehensive knowledge exam in labor law.

What Happened in the Landmark Labor Court Ruling?

For years, legal uncertainty surrounded this employment model. The National Insurance Institute opposed the service, claiming it constituted fictitious invoices. However, in a 2022 landmark ruling, the Labor Court clarified that employment through a licensed manpower company in the cheshbonit leshachir format is entirely legal, when the threshold conditions are met.

Employee Rights Under This Model

Workers employed through licensed staffing companies are entitled to the full package of statutory rights. The expansion order in the manpower services sector grants these workers all the rights of salaried employees — vacation days, sick pay, severance, pension contributions, and more.

Beyond basic rights, workers are entitled to pension contributions, National Insurance coverage as salaried employees, and full insurance coverage.

Employee Rights Under the Invoice Service Model:

• ✅ Recuperation pay
• ✅ Annual vacation days
• ✅ Travel allowance
• ✅ Seniority tracking
• ✅ Full National Insurance
• ✅ Pension contributions
• ✅ Severance pay
• ✅ Monthly payslip

Who Is This Service Right For?

The invoice service is especially suited to professionals who provide services to businesses on a project-by-project or occasional basis — lecturers, consultants, designers, developers, photographers, event staff, and more. It’s less suited to those planning a long-term independent career with multiple steady clients.

Risks and Legal Distinctions

The distinction between genuine employer-employee relationships and fictitious employment is tested by several legal criteria. The primary test examines the actual nature of the relationship: does the service provider work fixed hours, at the client’s premises, using the client’s tools and equipment, under close supervision?

When a service provider supplies services to the same client continuously and consistently, using the client’s tools and under direct supervision, the court may determine that an actual employment relationship exists — and the invoice company may be deemed a fictitious arrangement.

Tax Considerations

Using an invoice service does not exempt you from paying taxes. Israel’s tax system is progressive, meaning the tax rate increases with income. The employing company deducts tax at source from your payslip in accordance with income tax brackets. Tax coordination can be performed to prevent over-withholding.

When It May NOT Be Legal

It’s important to understand that not every situation suits this model. In certain cases, a court may determine that an employment relationship exists directly between the worker and the client:

• When the service provider is fully integrated into the workplace — using the client’s tools, working fixed hours, under close supervision — the arrangement may be found to constitute a direct employment relationship.
• ⚠️ Legal warning: If the company is not properly licensed, the invoice may be considered a fictitious invoice — which carries serious legal and tax consequences.
• If an employment relationship is established by a court, the client may be required to pay social benefits retroactively.
• Always ensure the arrangement genuinely reflects project-based work, not ongoing permanent employment.

This is why choosing a licensed invoice company with a valid license is a critical step in protecting both worker and client.

Why Consider Working Through NETO?

NETO, holding Manpower Contractor License No. 1565, operates with full transparency and in accordance with all labor laws. NETO provides a complete digital platform for issuing invoices, receiving payments, and managing social benefits — all in one place.

Official Information Sources

• Employment of Workers by Manpower Contractors Law, 1996
• Ministry of Labor — Israel Government Website
• National Insurance Institute of Israel