Summary – Israeli Labor Law at a Glance
Israeli labor law defines employee rights and employer obligations from the moment employment begins until it ends. Key highlights:
- Employment agreement must be provided within 30 days of start date
- Minimum wage: NIS 6,060/month (NIS 34.32/hour)
- Mandatory pension contributions: 6% employee + 6.5% employer + 6% severance
- Social benefits: vacation, sick leave, recreation pay, holidays & travel expenses
- Mandatory hearing before dismissal and written advance notice
Table of Contents
Monthly Minimum Wage
Monthly Work Hours
To Provide Employment Agreement
Pension & Severance Contributions
What Is Israeli Labor Law?
Israeli labor law is a comprehensive system of statutes, regulations, and extension orders governing the relationship between employees and employers. Its primary purpose is to protect employee rights and ensure fair working conditions across all types of employment, including salaried workers, contract workers, and temporary employees.
The labor law framework includes key legislation such as the Hours of Work and Rest Law, Severance Pay Law, Wage Protection Law, Annual Leave Law, Sick Pay Law, and more. In addition, sector-specific extension orders may expand employee rights in certain industries.
Key Labor Laws:
Let Us Handle the Headache!
Payroll, pay slips, social security, income tax, pension… Let NETO sort it all out. NETO manages your entire employment process – legally, accurately, and worry-free.
Employer-Employee Relations – Rights & Obligations
When an employer-employee relationship is established, the employer takes on numerous legal obligations. First and foremost, the employer must open a deductions file with the tax authorities and the National Insurance Institute (Bituach Leumi). Each month, the employer is required to submit reports and payments to the National Insurance Institute, the Income Tax Authority, and pension insurance providers.
The recruitment process begins with posting a job opening and ends with full onboarding and employment. Proper management of all employee rights is essential to prevent legal violations and fines.
Key Employer Obligations:
- Open a deductions file
- Monthly reporting to authorities
- Pension contributions
- Issue monthly pay slips
- Comply with all labor laws
Employment Agreement
By law, every employer must provide an employee with a written employment agreement within 30 days of the start of employment. The agreement is a binding document that defines the framework of the working relationship.
What Must the Employment Agreement Include?
- Job description – defining areas of responsibility and the direct supervisor
- Work days and hours – scope of position, work days, and working hours
- Salary and conditions – salary amount, salary components, and social benefits
- Contributions – details of pension insurance and severance contributions
- Collective agreement – if the industry is subject to a collective agreement, it must be mentioned and followed
Employee Card – Form 101
Form 101 is a mandatory document that every employee must complete within 30 days of starting work. Based on this form, tax credit points are determined and the employee’s tax liability is calculated.
Key Points About Form 101:
- Must be updated and re-signed annually at the beginning of each tax year
- Tax credit points are determined by the personal data in the form
- Special tax benefits require supporting documents – new immigrants, residents of priority areas, people with disabilities, discharged soldiers, academic degree holders, and more
Attendance Reporting
Every employer is required to maintain an attendance reporting system for employees. The reporting serves as the basis for calculating salary, overtime, vacation days, and sick days.
- Employees report attendance daily – entry and exit times
- Pay slips are synchronized with the attendance summary and issued monthly
- The attendance report contains a detailed record 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 per day
- Weekly: Beyond 42 hours per week
- Monthly: Beyond 182 hours per month
Work Hours & Rest
According to the Hours of Work and Rest Law, a full-time position consists of 182 hours per month (42 hours per week). Every employee is entitled to at least one weekly rest day.
Overtime Pay Rates
Overtime is compensated at increased rates:
- 125% – for the first 2 overtime hours per day
- 150% – from the third overtime hour onward
The calculation is performed first at the daily level (beyond 9 hours), then weekly (beyond 42 hours), and finally monthly (beyond 182 hours).
Numerical Example:
An employee with an hourly wage of NIS 34.32 who worked 11 hours in a day:
- 9 regular hours = NIS 308.88
- 2 hours at 125% = NIS 85.80
- Total per day: NIS 394.68
Pay Slips
By law, the employer must issue a pay slip to the employee every month. The pay slip must include a complete breakdown of salary components, deductions, and contributions.
What Must Appear on the Pay Slip?
- Employer and employee details
- Salary component breakdown – base salary, supplements, overtime, bonuses
- Deductions – income tax, national insurance, health insurance, employee pension share
- Employer contributions – pension, severance, continuing education fund
- Work period dates and seniority
- Vacation and sick day usage and balance
Minimum Wage
The Wage Protection Law establishes a minimum wage that is updated periodically. The minimum wage applies to all employees without exception.
Current Minimum Wage Amounts:
- Monthly salary: NIS 6,060 for a full-time position (182 hours)
- Hourly wage: NIS 34.32 per hour
- Daily wage (5-day week): NIS 280.58
- Daily wage (6-day week): NIS 242.40
Additionally, sector-specific extension orders may set a higher minimum wage in certain industries.
Social Benefits – Vacation, Holidays & Sick Leave
Annual Vacation Days
- The number of annual vacation days is determined according to the seniority table set by the Annual Leave Law. Vacation pay accrues monthly
- The employee is entitled to time off at dates coordinated with the employer
- The employer must send the employee on an annual vacation of at least 6 consecutive days
- Unused vacation days accumulate for up to 3 years. The remaining balance is paid as vacation redemption at the end of employment
Holiday Pay
- An employee receives payment for every holiday that falls on a regular work day
- Payment is based on the average daily work value
- Condition: The employee worked the day before and after the holiday, with at least 3 months of seniority
Sick Days
- According to the Sick Pay Law, each month 1.5 sick days accrue (18 days per year, up to 90 days)
- A medical certificate is required to use sick days
Sick Day Payment:
- Day 1: No payment
- Days 2–3: 50% of salary
- Day 4 onward: 100% of salary
Additional Benefits – Recreation Pay, Holiday Gifts & Clothing
Recreation Pay (Dmei Havra’a)
- Recreation pay is usually paid once a year (July/August), provided the employee has completed one year of employment
- The amount is determined by a seniority table
- Can be paid monthly (proportional share)
- Unpaid recreation pay for the last year is settled in the final account
Holiday Gifts
- Some employers are required by extension orders to give holiday gifts
- Usually given twice a year – before Rosh Hashana and Passover
- Can be divided into 12 monthly payments
Clothing
In certain professions, the employer is required to provide work clothing annually, in accordance with relevant collective agreements and extension orders.
Travel Expense Reimbursement
Every employee is entitled to reimbursement for travel expenses to and from work.
Pension & Severance
According to the Extension Order for Mandatory Pension, every employer is required to contribute to a pension fund for the employee. 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 employment, retroactively from the first day of work. If the employee has no active pension fund, contributions begin only after 6 months of employment. The severance contribution of 6% is made under Section 14 of the Severance Pay Law, meaning the monthly severance deposits replace (fully or partially) the employer’s severance obligation.
Current Contribution Rates:
- Employee pension contribution: 6% of salary
- Employer pension contribution: 6.5% of salary
- Employer severance contribution: 6% of salary
If the employee is dismissed after a full year of employment, the employer completes the severance to 8.33% (last salary multiplied by years of seniority). If the employee resigns, the employer may only transfer the accumulated pension funds.
Total Mandatory Contributions
Employee + Employer Pension + Severance
Hearing, Advance Notice & Termination
Hearing (Shimua)
Before dismissing an employee, the employer is required to conduct a hearing – a process where the employee is given the opportunity to present their arguments. The employer must provide a written invitation detailing the reasons and give the employee reasonable time to prepare. Dismissal without a hearing may be considered unlawful termination.
Advance Notice
According to the Advance Notice Law, both the employer and the employee must give advance notice before ending the employment relationship. The notice period is determined by the employee’s seniority and can be up to one month.
Dismissal & Severance Pay
An employee who is dismissed after a full year of employment is entitled to severance pay equal to one month’s salary for each year of employment. At the end of the employment period, the employer must issue termination letters, release pension and severance funds, and complete a final account.
Steps at End of Employment:
- Hearing – written invitation + conduct
- Dismissal/resignation letter
- Advance notice (up to one month)
- Final account: vacation redemption, recreation pay
- Release/transfer of pension and severance funds
- Employment certificate (Form 161)
Tired of the Bureaucracy? Let NETO Handle Everything!
Salary calculations, pay slips, contributions, authority reports, severance… We manage your entire employment from A to Z. Legal, simple, and error-free.
Summary – Israeli Labor Law at a Glance
An employer who hires an employee is obligated to provide all rights under Israeli labor law. It is essential to stay updated on evolving case law.
When Hiring:
- Employment agreement within 30 days
- Complete Form 101
- Open a deductions file
- Define salary and social benefit terms
Social Rights:
- Annual vacation
- Paid holidays
- Sick days
- Recreation pay
- Travel reimbursement
Pension Rights:
- Mandatory pension contributions (from 3 months retroactively or 6 months)
- 6% severance contribution
- Severance completion to 8.33% upon dismissal
Upon Termination:
- Hearing before dismissal
- Advance notice
- Termination letter + final account
- Release of pension and severance funds
Frequently Asked Questions About Israeli Labor Law
The current minimum wage in Israel is NIS 6,060 per month for a full-time position of 182 hours, which equals NIS 34.32 per hour. The minimum wage applies to all employees without exception, and an employer who pays less is violating the law and faces sanctions.
By law, the employer must provide a written employment agreement within 30 days of the start of employment. The agreement must include the job description, working hours, salary, social conditions, and details of pension contributions.
Under the Extension Order for Mandatory Pension, the employer must contribute: 6.5% employer share for pension, 6% for severance, and the employee contributes 6% of salary. If the employee has an active pension fund, contributions begin after 3 months, retroactively from day one. If there is no active pension fund, contributions begin after 6 months of employment.
The number of vacation days is determined by the employee’s seniority. In the first year, the employee is entitled to 12 vacation days (including Saturdays, for a 6-day work week). Vacation days accrue monthly, and if unused, they accumulate for up to 3 years. At the end of employment, vacation redemption is paid for unused days.
Yes, a hearing is mandatory under case law. The employer must provide the employee with a written invitation to the hearing, detail the reasons for the planned dismissal, and give the employee reasonable time to prepare and present their arguments. Dismissal without a hearing may entitle the employee to additional compensation beyond regular severance pay.
Every employee accrues 1.5 sick days per month (up to a maximum of 90 days). A medical certificate is required to use sick days. Day 1 – no payment. Days 2–3 – 50% of salary. From day 4 onward – 100% of salary.
Overtime refers to work hours beyond the regular quota. The first 2 overtime hours are compensated at 125% of regular pay, and from the third hour onward at 150%. The calculation is first performed 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 employment. Payment is usually made once a year (July/August), but can also be paid monthly. The amount is determined by a seniority table – 5 recreation days in the first year, increasing gradually. Unpaid recreation pay for the last year is paid as part of the final account at the end of employment.
