Summary – Israeli Labor Law at a Glance
This guide covers employee rights and employer obligations under Israeli labor law – from the first day of employment to termination. Key highlights:
- Employment agreement must be provided within 30 days of start date
- Current minimum wage: ₪6,060/month (₪34.32/hour)
- Mandatory pension contributions: 6% employee + 6.5% employer + 6% severance
- Social rights: annual leave, sick days, recreation pay, holidays and travel
- A hearing (shimua) is mandatory before dismissal, with written advance notice
₪6,060
Monthly Minimum Wage
182
Monthly Work Hours (Full-time)
30
Days to Provide Employment Contract
6%+6.5%+6%
Pension + Employer + Severance
What is Israeli Labor Law?
Israeli labor law is a body of laws, regulations, and collective extension orders governing the relationship between employees and employers. Its main purpose is to protect employee rights and ensure fair employment conditions across all employment types — salaried employees, contractor employees, and temporary workers.
The labor law system includes key laws such as the Hours of Work and Rest Law, the Severance Pay Law, the Wage Protection Law, the Annual Leave Law, the Sick Pay Law, and more. Additionally, sectoral extension orders expand rights in specific industries.
Key Legislation:
- Hours of Work and Rest Law, 1951
- Wage Protection Law, 1958
- Severance Pay Law, 1963
- Annual Leave Law, 1951
- Sick Pay Law, 1976
- Advance Notice Law, 2001
Let us handle the headache!
Payroll, payslips, National Insurance, income tax, pension… Let us put everything in order for you.
NETO manages the entire employment process – legally, accurately, and stress-free.
Employer-Employee Relations – Rights & Obligations
When an employer-employee relationship exists, Israeli labor law imposes extensive obligations on the employer. First, the employer must open a withholding tax file with the tax authorities and National Insurance. Every month, the employer must submit reports and payments to National Insurance (Bituach Leumi), income tax, and pension companies.
The recruitment process begins with posting a job vacancy and ends with full onboarding. There are several places where employers can post job listings for free. Proper management of all employee rights is essential to avoid legal violations and fines.
Core Employer Obligations:
- Open a withholding tax file
- Monthly reporting to authorities
- Pension contributions
- Issue monthly payslips
- Comply with all labor laws
Employment Agreement
By law, every employer must provide the employee with a written employment agreement within 30 days of the start of employment. The agreement is a binding document defining the framework of the employment relationship.
What must the Employment Agreement include?
- Job description – Defining responsibilities and the direct supervisor
- Work days and hours – Scope of position, working days, and hours
- Salary and conditions – Gross salary, salary components, and social benefits
- Contributions – Details of pension insurance and severance pay contributions
- Collective agreement – If the sector is subject to a collective agreement, it must be stated and followed
💡 Important Tip: If your sector is subject to a collective agreement, it typically provides better terms than the legal minimum. Always check this before drafting the employment agreement.
Employee Tax Form (Form 101)
Form 101 is a mandatory document that every employee must complete within 30 days of starting work. It determines the employee’s income tax credit points and calculates their tax liability.
Key Points about Form 101:
- Must be renewed and re-signed every year at the start of the tax year
- Tax credit points are determined by the personal data on the form
- Special tax benefits require supporting documents – new immigrants, priority area residents, disabled persons, discharged soldiers, academic degree holders, etc.
Attendance Tracking
Every employer must maintain an attendance tracking system for employees. The record serves as the basis for calculating salary, overtime, vacation days, and sick days.
- The employee reports attendance daily – clock-in and clock-out times
- The payslip is synchronized with the attendance report summary and issued monthly
- The attendance report includes detailed records of sick days, vacation, and absences
- Overtime is calculated at the daily level (beyond 9 hours), weekly (beyond 42), and monthly (beyond 182)
Overtime Calculation Types:
- Daily: beyond 9 hours/day
- Weekly: beyond 42 hours/week
- Monthly: beyond 182 hours/month
Working Hours & Rest
Under the Hours of Work and Rest Law, a full-time position includes 182 hours per month (42 hours per week). Every employee is entitled to at least one weekly rest day.
Overtime Compensation
Overtime is compensated at a higher rate:
- 125% – for the first 2 overtime hours per day
- 150% – from the 3rd overtime hour onward
The calculation is first done at the daily level (beyond 9 hours), then weekly (beyond 42 hours), and finally monthly (beyond 182).
📊 Numerical Example: An employee earning ₪34.32/hour works 11 hours in a day:
9 regular hours = ₪308.88 | 2 hours at 125% = ₪85.80 | Daily total: ₪394.68
Payslips
By law, the employer must provide the employee with a payslip every month. The payslip must include a full breakdown of salary components, deductions, and contributions.
What must appear on the payslip?
- Employer details and employee details
- Description of salary components – base salary, supplements, overtime, bonuses
- Deductions – income tax, National Insurance, health insurance, employee pension share
- Employer contributions – pension, severance, training fund
- Employment period dates and seniority
- Vacation and sick day balance and usage
⚠️ Note: An employer who fails to provide a payslip or provides an incomplete one is exposed to heavy fines and even lawsuits. Always issue a complete and detailed payslip every month.
Minimum Wage Under Israeli Labor Law
The Wage Protection Law sets a minimum wage that is updated periodically. The minimum wage applies to all employees without exception.
₪34.32
Minimum Wage per Hour
Current Minimum Wage Rates:
- Monthly: ₪6,060 for full-time (182 hours)
- Hourly: ₪34.32 per hour
- Daily (5-day week): ₪280.58
- Daily (6-day week): ₪242.40
Additionally, sectoral extension orders may set a higher minimum wage in certain industries.
Social Rights – Leave, Holidays & Sick Days
Annual Leave
- Number of vacation days is determined by the seniority table in the Annual Leave Law
- Leave entitlement accrues monthly
- The employee is entitled to take leave at times coordinated with the employer
- The employer must send the employee on annual leave of at least 6 consecutive days
- Unused vacation days accumulate for up to 3 years; the remaining balance is paid as leave redemption upon termination
Public Holidays
- An employee receives payment for every public holiday falling on a regular workday
- Payment equals the value of an average workday
- Condition: the employee worked the day before and the day after the holiday, with a minimum of 3 months’ seniority
Sick Days
- 1.5 sick days accrue per month (18 days/year, up to 90 days)
- Requires a medical certificate to claim
Sick Day Payment Rates:
- Day 1: No payment
- Days 2–3: 50% of salary
- From day 4: 100% of salary
Additional Benefits – Recreation Pay, Holiday Gifts & Clothing
Recreation Pay (Dmei Havra’ah)
- Recreation pay is usually paid once a year (July/August), provided the employee has completed one year of work
- The amount is determined by a seniority table
- Can be paid monthly (proportional amount)
- Last year’s unpaid recreation pay is paid in the final settlement
Holiday Gift
- Some employers are obligated by extension orders to give a holiday gift
- Usually given twice a year – Rosh Hashana and Passover
- Can be split into 12 monthly payments
Clothing (Work Attire)
In certain professions, the employer is required to provide work clothing annually, in accordance with applicable collective agreements and extension orders.
Travel Expense Reimbursement
Every employee is entitled to reimbursement of travel expenses to and from work. Read more about travel reimbursement.
Pension & Severance – Mandatory Contributions
Under the mandatory pension extension order, every employer is required to contribute to the pension fund of the employee’s choice. The timing of contributions depends on the employee’s pension status:
- If the employee has an active pension fund – contributions begin after 3 months of work, retroactively from the first day.
- If the employee has no active pension fund – contributions begin after 6 months of work.
The 6% severance contribution (under Section 14 of the Severance Pay Law) means that funds deposited monthly for severance replace (fully or partially) the employer’s severance obligation.
18.5%
Total Mandatory Contributions
Pension Contribution Rates:
- Employee contribution to pension: 6% of salary
- Employer contribution to pension: 6.5% of salary
- Employer contribution for severance: 6% of salary
If an employee is dismissed after one full year of work – the employer supplements the severance to 8.33% (last salary × years of service). If the employee resigns – the employer may retain only the accumulated fund amounts.
6% employee + 6.5% employer + 6% severance = 18.5% total
Hearing, Advance Notice & Dismissal
Hearing (Shimua)
Before dismissing an employee, the employer is legally required to hold a hearing – a process in which the employee is given the opportunity to present their case. The employee must receive a written invitation specifying the reasons, and be given reasonable time to prepare.
Dismissal without a hearing may be considered unlawful termination.
Advance Notice
Under the Advance Notice Law, both the employer and the employee must provide advance notice before terminating the employment relationship. The notice period is determined by the employee’s seniority and can be up to one month.
Severance Pay
An employee dismissed after one full year of employment is entitled to severance pay equal to one month’s last salary for each year of service.
At the end of the employment period: termination letters must be issued, pension and severance funds released, and a full final settlement completed.
End-of-Employment Process:
- Hearing – written invitation + meeting
- Termination/resignation letter
- Advance notice (up to one month)
- Final settlement: leave redemption, recreation pay
- Release/transfer of pension and severance funds
- Issuance of employment certificate (Form 161)
Tired of the bureaucracy? Let NETO handle everything!
Payroll calculations, payslips, contributions, reporting to authorities, severance… We manage the entire employment process from A to Z. Legal, simple, and error-free.
Want to hire without the headache? Click here
Summary – Israeli Labor Law at a Glance
An employer hiring an employee is obligated to provide all rights under Israeli labor law. Stay updated with evolving case law.
Upon Hiring:
- Employment agreement within 30 days
- Complete Form 101
- Open withholding tax file
- Define salary and social benefit terms
Social Rights:
- Annual leave
- Paid public holidays
- Sick days
- Recreation pay (Dmei Havra’ah)
- Travel reimbursement
Pension Rights:
- Mandatory pension contributions from day one
- 6% severance contribution
- Top-up to 8.33% upon dismissal
Upon Termination:
- Hearing before dismissal
- Advance notice
- Termination letter + final settlement
- Release of pension and severance funds
Frequently Asked Questions – Israeli Labor Law
The current minimum wage in Israel is ₪6,060 per month for a full-time position of 182 hours, meaning ₪34.32 per hour. The minimum wage applies to all employees without exception, and an employer paying less is violating the law and subject to sanctions.
By law, the employer must provide the employee with a written employment agreement within 30 days of the start of employment. The agreement must include the job description, working hours, salary, social benefits, and details of pension contributions.
Under the mandatory pension extension order, the employer must contribute: 6.5% employer share to pension, 6% for severance, and the employee contributes 6% of salary. If the employee has an active pension fund – contributions start after 3 months, retroactively. If not – contributions start after 6 months of work.
The number of vacation days is determined by the seniority table in the Annual Leave Law. In the first year, the employee is entitled to 12 vacation days (including Saturdays, in a 6-day week). Vacation days accrue monthly, and if unused, accumulate for 3 years. Upon termination, accrued unused days are paid as leave redemption.
Yes, a hearing is mandatory under Israeli case law. The employer must provide the employee with a written invitation to the hearing, specify the reasons for the planned dismissal, and give the employee reasonable time to prepare and present their case. Dismissal without a hearing may entitle the employee to additional compensation beyond regular severance.
Every employee accrues 1.5 sick days per month (up to a cap of 90 days). To claim sick days, a medical certificate must be provided. Day 1 – no payment. Days 2–3 – 50% of salary. From day 4 onward – 100% of salary.
Overtime refers to working hours beyond the regular quota. The first 2 overtime hours are compensated at 125% of the regular wage, and from the 3rd hour onward at 150%. Calculation is first at the daily level (beyond 9 hours), then weekly (beyond 42 hours), and finally monthly (beyond 182 hours).
Recreation pay is available to every employee who has completed at least one year of work. Payment is usually made once a year (July/August), but can also be paid monthly. The amount is determined by a seniority table – in the first year: 5 recreation days. Unpaid recreation pay from the last year is paid as part of the final settlement upon termination.
More Information on Israeli Labor Law
Employee Rights
Employer Rights
Hours of Work and Rest Law
Severance Pay Law
Wage Protection Law
Temporary Employee Rights
Travel Expense Reimbursement
Tax Coordination for Employees
All labor law handled – you just need to start
NETO manages payroll, payslips, contributions and reports – all legal and accurate. Let us handle all the headaches, so you can focus on running your business.
⚠️ Disclaimer: The information on this page is intended for general knowledge only and should not be considered legal advice. Please consult a lawyer, tax advisor, CPA, or other professional as needed. For official and up-to-date information, refer to the Ministry of Labor, National Insurance Institute, and Kol Zchut.
אני מעסיק — בואו נתחיל
אני פרילנסר — הרשמה חינם
