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Read moreDo You Have to Contributeto an Employee's Pension?When it starts, whether it is retroactive, and how much you contribute
A guide for employers and freelancers · when the duty to contribute to a pension begins under the Extension Order for Mandatory Pension, whether you pay retroactively after 3 months, what the employee, employer and severance contribution rates are · and how anyone working through NETO receives pension contributions by law without handling any of it themselves.
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The duty to contribute to a pension is determined by the employee's status on day one. An employee who arrives with an active pension fund is entitled to pension insurance from the first day · the employer may wait until the end of 3 months of employment and then deposit retroactively for the whole period. An employee without an active fund · contributions start only from the seventh month, with no retroactivity. An employee who left after two months is entitled to pension and severance only if they arrived with an active fund. Contribution rates under the Extension Order: employee 6% for benefits, employer 6.5% for benefits, and severance of at least 6% (topped up to 8.33% upon dismissal) or 8.33% upfront under Section 14. NETO, as an official employer, contributes to the pension of the workers it employs, as required by law.
Do you have to contribute to an employee's pension?
Yes · but when the duty begins depends on the employee's pension status on day one. If the employee has an active pension fund · you must contribute from the first day (the actual payment may be made after 3 months of employment, and then retroactively). If the employee has no active pension fund · the duty begins only from the seventh month of employment.
On this page we sort it all out: what the deciding rule is, what happens in each of the two situations, what the employee, employer and severance contribution rates are under the Extension Order for Mandatory Pension (official Hebrew name: צו הרחבה לפנסיה חובה), what happens when an employee leaves · and how anyone working as a freelancer through NETO or employed via NETO receives pension contributions by law without handling it themselves. Looking at it from the worker's side? See our guide to employee pension contributions in Israel.
The deciding rule
What was the employee's status on day one?
To know whether you must pay retroactively, you check one simple thing · whether the employee has an active (existing) pension fund or not. Under the Extension Order for Mandatory Pension, which applies to every salaried employee in Israel, there are two situations.
Situation 1 · an employee arriving with an active pension fund
If money was deposited into a pension fund for the employee in the months before they started working for you, they are entitled to pension insurance from the first day. The employer has the right to wait and not transfer the money immediately · they may wait until the end of 3 months of employment (or the end of the tax year). Once 3 months have passed, the employer must deposit funds for the entire period (months 1, 2 and 3) at once · that is, retroactively. Even if the employee left after two months · the right accrued from the first day, and in the final settlement pension and severance must be paid for those two months.
Situation 2 · an employee without an active pension fund
If this is an employee who is new to the job market, or someone for whom no deposits were made for a long period · entitlement begins only after completing 6 months of employment. Contributions start from the seventh month onward, and there is no duty to pay for the first half year · no retroactivity (unless a special sectoral collective agreement provides otherwise).
The information on this page is general and does not constitute advice. The binding text is the wording of the Extension Order and the applicable agreements · verify with a professional (payroll accountant, tax adviser or employment lawyer) and against the official sources before acting.
The rates
Pension contribution rates
The three components of the contribution under the Extension Order, as quoted in the source · the employee's share, the employer's share and the severance component. The rates are updated from time to time · verify the exact, up-to-date rates against the official sources before acting.
Employee · benefits
6%
The employee's share for benefits (provident), deducted from the salary · the minimum rate under the Extension Order.
Employer · benefits
6.5%
The employer's share for benefits (pension insurance), at the employer's expense and on top of the salary.
Employer · severance
6% – 8.33%
At least 6%, topped up to 8.33% upon dismissal · or 8.33% upfront under Section 14, in which case there is no top-up on dismissal.
NETO's default follows Section 14: the employer contributes 8.33% to severance and 6.5% to pension from the first day · the fullest, most comprehensive contribution for the employee. NETO's rate summary (as quoted in the source): employee 6% + employer 6.5% benefits + 8.33% severance (Section 14) = 20.83% of the salary in total. Verify the up-to-date rates.
Summary table
Do you have to contribute to a pension?
The difference between the two situations at a glance · by the employee's status on day one.
| Employee's status on entry | When do you start? | Retroactive? | Left after two months? |
|---|---|---|---|
| Has an active pension fund | From the first day (actual payment after 3 months) | Yes | Must pay |
| No active pension fund | After 6 months of employment | No | No duty to pay |
How to get it right
Four steps to determine the duty
The practical process for determining the pension contribution duty for a new employee, under the Extension Order for Mandatory Pension.
Check the status on day one
Find out whether the employee has an active pension fund · that is, whether money was deposited into a pension fund for them in the months before they started. This is the deciding rule.
Active fund · from the first day
Entitlement runs from the first day. The employer may wait until the end of 3 months of employment (or the end of the tax year), then deposit retroactively for the whole period at once.
No active fund · from the seventh month
Entitlement begins only after completing 6 months of employment, with contributions from the seventh month onward · no retroactivity, unless a sectoral collective agreement provides otherwise.
Apply the contribution rates
Contribute according to the Extension Order rates · the employee's share for benefits, the employer's share for benefits, and the severance component per Section 14 where it applies. Verify the up-to-date rates before acting.
Where NETO comes in
NETO contributes to pensions for its workers
Anyone working through NETO as an employed worker · NETO is their official employer and contributes to their pension as required by law. No need to track deposit deadlines, rates or top-ups · everything is handled at the source, from the payslip.
Section 14 contribution · from day one8.33% to severance and 6.5% to pension · the fullest contribution for the employee, from the first day.
Freelancers too · without opening a tax fileAnyone working through NETO Freelancers receives an orderly payslip · and the pension is contributed just like for any salaried employee.
A licensed manpower contractorNETO is operated by Bareket I.T Ltd (Co. no. 515486058), a manpower contractor holding licence 1565, supervised by the Ministry of Labor.
The above does not constitute advice and should not be relied upon · consult a professional such as a payroll accountant, tax adviser or a lawyer specialising in labor law (see the Wage Protection Law), and verify the up-to-date rates and dates against the official sources. You can also contact our support and customer service · 08-976-1874.
Going deeper
Relevant guides and links
More information on the NETO site and in the official sources · each link opens as a full page.
Recruiting and employing workers
Freelancers at NETO
Invoice as an employee
Invoice without opening a business
Employer of Record in Israel
Employer cost · how to calculate
Employee pension contributions · the worker's guide
The Wage Protection Law
Extension Order for Mandatory Pension · Kol Zchut
Contact us · 08-976-1874
Frequently asked questions
Questions and answers · pension contributions for employees
Do you have to contribute to an employee's pension from the first day?
It depends on the employee's status: if they have an active pension fund on day one · you must contribute from the first day, and the actual payment may be made after 3 months of employment (or the end of the tax year) retroactively. If they have no active pension fund · the duty begins only from the seventh month.
Is an employee who left after two months entitled to a pension?
If they had an active pension fund on day one · yes. The right accrued from the first day, so in the final settlement (dismissal or resignation) pension and severance must be paid for the entire period worked. If they had no active pension fund · there is no duty to pay.
What are the pension contribution rates under the Extension Order?
According to the source quoted on the page: the employee's share for benefits is 6%, the employer's share for benefits is 6.5%, and the severance component is at least 6% (topped up to 8.33% upon dismissal) · or 8.33% upfront under Section 14. Verify the exact, up-to-date rates against the official sources before acting.
What happens if the employer did not contribute to the pension?
Failure to contribute to a pension may constitute an offence and expose the employer to payment of the amount that should have been contributed plus interest and linkage, to fines from the tax authorities and to a civil claim by the employee.
Does the duty also apply to part-time or temporary employees?
Yes. The duty also applies to part-time employees, temporary employees and employees on unpaid leave. The contribution is calculated on the salary actually paid, not on a full-time position.
Does a freelancer working through NETO receive pension contributions?
Yes. When working through NETO as an employed worker, NETO is the official employer and contributes to the pension as required by law · the worker does not need to handle it themselves.
Summary · do you have to contribute to an employee's pension?
The duty to contribute to a pension is determined by the employee's status on day one. With an active pension fund · from the first day (actual payment after 3 months, retroactively). Without an active fund · only from the seventh month, with no retroactivity. The rates follow the Extension Order, and anyone working through NETO receives the contributions by law without handling it themselves.
- Active fund = from the first day · retroactive payment after 3 months.
- No active fund = contributions from the seventh month, no retroactivity.
- Rates (source): employee 6% · employer 6.5% benefits · severance 6%–8.33%.
- NETO · under Section 14: 8.33% severance + 6.5% pension from day one.
- Applies to part-time, temporary and unpaid-leave workers too · based on the actual salary paid.
- General information · verify up-to-date rates and dates against the official sources.
Let pension contributions take care of themselves · by the law
Work through a licensed manpower contractor (licence 1565) · pension, severance and rights are handled for you at the source, from the payslip, under Section 14 and from the first day.
More information
More guides you may find useful
Employee pension contributions in Israel
The same pension rules from the worker's side · rates, Section 14 and what to check on your payslip.
Read moreFreelancers at NETO
Work as a freelancer and receive a payslip with pension and rights · like any salaried employee.
Read moreEmployer of Record in Israel
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Read moreEmployer cost · how to calculate
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Read moreInvoice without opening a business
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Read moreRecruiting and employing workers
Free job posting, recruitment and employment at the click of a button · for employers.
Read moreEmployee pension contributions in Israel
The same pension rules from the worker's side · rates, Section 14 and what to check on your payslip.
Read moreFreelancers at NETO
Work as a freelancer and receive a payslip with pension and rights · like any salaried employee.
Read moreEmployer of Record in Israel
Employ workers in Israel through a registered employer · including pension, payroll and legal compliance.
Read moreEmployer cost · how to calculate
How much a worker really costs · salary, pension, severance and social benefits in one calculation.
Read moreInvoice without opening a business
The legal way to issue an invoice to a client · without opening a tax file.
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