An Employer of Record (EOR) is a third-party organization that takes on the legal and administrative responsibilities of employing workers on behalf of another company. In Israel, an EOR handles payroll, benefits, taxes, and compliance with local labor laws, allowing businesses to hire and manage employees without establishing their legal entity.
Hiring workers from Israel can be highly beneficial for international companies. Israel is known for its highly educated and skilled workforce, particularly in technology, engineering, and innovation. The country has a population of approximately 9.2 million, with a significant portion being skilled professionals in various sectors. Israel’s workforce is renowned for its innovation and entrepreneurial spirit, with the country often referred to as the “Start-up Nation” due to its high number of start-ups per capita. The country’s strong educational system and focus on research and development make it an attractive destination for companies looking to hire talent in the Middle East and beyond.
To effectively use an Employer of Record in Israel, follow these 6 steps:
- Find talent to hire in Israel
- Compare using an EOR to setting up a legal entity in Israel
- Get the information needed from your talent
- Choose an EOR provider with expertise in Israel
- Communicate your hiring needs to the EOR
- Have the EOR set up the contracts and hiring procedure
An EOR in Israel manages payroll processing, ensures compliance with tax regulations, and administers statutory benefits such as social security contributions and leave entitlements. They also handle the complexities of Israeli labor laws, including working hours, overtime pay, and termination procedures.
When hiring remotely in Israel, it’s crucial to consider various labor laws. The country has protective employment regulations, including rules on employment contracts, working hours, and paid time off. Israel mandates a 43-hour standard work week, with specific overtime and rest periods regulations.
The hiring process in Israel typically involves identifying suitable candidates, conducting interviews, and ensuring compliance with local employment laws. While written employment contracts are not strictly required by Israeli law, it’s best practice to provide them. The EOR facilitates this process, ensuring all legal requirements are met and managing the onboarding of new employees.
1. Find talent to hire in Israel
Businesses should explore a variety of channels to find talent to hire in Israel, emphasizing both local and global platforms to maximize reach. LinkedIn remains an essential tool for talent acquisition in Israel, especially for professional and managerial roles.
Job posting websites like AllJobs, Drushim, and Jobmaster are popular local job portals in Israel. These platforms offer avenues for employers to advertise openings and are widely used by Israeli job seekers. Employers can post their candidate requirements on these portals, allowing applicants to access them remotely.
Specialized recruitment agencies can provide tailored solutions for industries requiring specific expertise, particularly in technology, cybersecurity, and biotech fields. These agencies manage the complexities of sourcing and vetting candidates, significantly easing the hiring process for companies.
Local job boards and regional networks can be advantageous for businesses hiring within specific industries or for particular roles. Israel’s diverse economy offers a wide range of talent across various sectors, with major cities like Tel Aviv and Haifa particularly notable for their talent pools.
It’s important to note that in Israel, the hiring process often begins with drafting a detailed job description, followed by screening, shortlisting, interviews, and selection. Some roles may require candidates to provide additional documentation, such as educational certificates and professional qualifications.
2. Compare using an EOR to setting up a legal entity in Israel
When working with employees in Israel, you need to consider working with an EOR versus setting up your own legal entity. Here’s a comparison of the two options:
| Factor | Employer of Record | Setting Up Legal Entity in Israel | Shared Attributes |
|---|---|---|---|
| Setup Time | Quick, often within days | Can take several months | Both require compliance with Israeli regulations |
| Initial Cost | Lower upfront costs | Higher, includes registration fees and setup costs | Both involve some level of investment |
| Ongoing Cost | May become costlier with more employees | More cost-effective for larger teams | Both have ongoing operational costs |
| Complexity | Simpler, EOR handles most administrative tasks | Both require an understanding of Israeli labor laws | Higher, the company bears all legal and financial risks |
| Control over Operations | Limited control, EOR is the legal employer | Full control over all aspects of employment | Both allow management of day-to-day activities |
| Compliance Management | Handled by EOR | Company is responsible for all compliance | Both must adhere to Israeli labor regulations |
| Scalability | Highly Flexible (easy to add or remove employees) | Less Flexible (changes may require legal procedures) | Both can support business growth |
| Local Expertise Required | Minimal, provided by EOR | Extensive (need for local legal and tax advisors) | Both benefit from local market knowledge |
| Suitable for | Market entry, testing Israeli market, hiring < 10 employees | Long-term presence, hiring > 10 employees, full operations | Both support business operations in Israel |
| Risk | Lower, EOR assumes employer liabilities | Company must navigate a complex award system | Both involve some level of business risk |
| Customization of Employment Terms | Limited flexibility | Full flexibility to tailor policies | Both must comply with Israeli labor standards |
| Handling of Modern Awards | Managed by EOR | Company must navigate complex award system | Both must ensure fair compensation |
| Termination Process | Managed by EOR | Company must handle directly | Both must follow Israeli termination regulations |
| Intellectual Property Protection | Managed by EOR, may require additional agreements | Directly controlled by the company | Both must protect company IP rights |
An Employer of Record offers a quicker, less complex route to hiring local staff, bypassing the need for a formal company presence. This approach suits companies looking to test the Israeli market or expand quickly without significant upfront investment.
On the other hand, setting up a legal entity in Israel offers greater control and the ability to customize business operations and policies. However, establishing a legal entity involves complex registration processes, significant upfront fees, and a deeper understanding of local laws and tax regulations.
In comparison, using an EOR is generally less expensive. It involves less risk, making it a suitable option for small to medium-sized businesses or those in the initial stages of market exploration. It eliminates the need for a local expert or dedicated legal and tax teams, as the EOR handles these aspects.
3. Get the information needed from your talent
You’ll need to collect essential personal information and employment details to hire employees in Israel. This typically includes:
- Employee’s full name
- Israeli ID number (Teudat Zehut) or passport details for foreign nationals
- Date of birth
- Address
- Contact information
- Educational qualifications (certified copies may be required)
- Professional certifications (if applicable)
- Bank account details for salary payments
- Comprehensive job description, including title, duties, and place of work
While employment contracts in Israel are not legally required to be in writing, it’s best practice to provide them. These contracts should detail the terms of employment, such as:
- Job title and description
- Start date
- Salary and payment terms
- Working hours and days
- Vacation entitlement
- The notice period for termination
- Any probationary period (if applicable)
- Benefits and bonuses (if applicable)
It’s important to note that in Israel, employers must provide all new employees with a written notification form regarding certain employment terms within 30 days of starting work. This form must include details such as daily and weekly work hours, main benefits, and the identity of the employer and employee.
4. Choose an EOR provider with expertise in Israel
When choosing an EOR provider to work with in Israel, selecting one with deep expertise in the Israeli market and a strong understanding of local labor laws is crucial to ensure compliance and smooth business operations.
Evaluate the provider’s experience managing employee onboarding, payroll, and legal compliance in Israel. Look for a provider with a proven track record of working successfully with companies similar to yours, and check their reputation through client case studies or reviews.
Assess the range of services offered to see if they align with your needs, such as work permit support, employee benefits management, and payroll processing. It is important to choose a provider that offers comprehensive employment services and is flexible enough to adapt to changes in Israeli labor laws.
Consider the provider’s technology and platforms, ensuring they offer secure, user-friendly systems with strong data protection measures. This is particularly important in Israel, where the Privacy Protection Law governs data protection.
Evaluate their pricing models, looking for transparency in fees, whether they charge a fixed monthly fee or a percentage of the employee’s salary, and assess the cost-effectiveness for your business.
Finally, choose an EOR provider that demonstrates a commitment to staying up-to-date with Israeli employment laws and can provide proper guidance and support to ensure your business remains compliant while operating in Israel.
What are the best EOR providers to use in Israel?
| EOR Provider | Why Selected |
|---|---|
| Deel | Provides global hiring solutions with strong presence in Israel’s tech sector |
| Remote | Known for its user-friendly platform and competitive pricing for the Israeli market |
| Multiplier | Offers tailored EOR services with expertise in Israeli labor laws and regulations |
| CWS Israel | Offers comprehensive EOR services with deep knowledge of Israel’s unique landscape |
5. Communicate your hiring needs to the EOR
It is important to communicate your hiring needs to the EOR to ensure the process aligns with company goals and legal requirements. Provide a detailed job description, including title, responsibilities, required qualifications, and skills.
Specify the job’s expected start date, location, and whether it’s remote or onsite. Outline the proposed salary, bonuses, commission structures, and other compensation benefits. Clarify the contract length and detail the working hours, including flexibility or shift requirements.
Discuss the company culture, growth plans, and how the position fits into future expansion. Specify equipment needs and onboarding procedures. By accurately representing these aspects, the EOR can find the right talent and ensure legal and administrative compliance.
Additionally, communicate any specific requirements related to Israeli labor laws, such as the need for social security registration or any industry-specific regulations that may apply to your business. It’s also important to discuss any specific benefits you want to offer, as the EOR can help you design a competitive package that complies with local norms and regulations.
Be sure to mention any language requirements, as Hebrew and English are commonly used in business in Israel, especially in sectors like technology and finance.
6. Have the EOR set up the contracts and hiring procedure
Once you have chosen which provider to work with and communicated your hiring needs, the EOR will set up the contracts and hiring procedure, ensuring compliance with local labor laws and employment practices.
The EOR will draft employment contracts that comply with Israeli labor laws, including specific terms regarding job details, working hours, and termination procedures. They’ll also manage the necessary documentation for social security registration, tax setup, and payroll, adhering to mandatory withholdings and reporting requirements.
The EOR also registers employment with relevant Israeli authorities, such as the National Insurance Institute (Bituach Leumi), to ensure the company is properly licensed and authorized to operate and hire employees in Israel.
They’ll ensure your company complies with local regulations related to working hours, minimum wage, and leave entitlements. Additionally, the EOR administers benefits and handles formal onboarding, including the introduction to company systems and culture.
The EOR will also ensure that all necessary paperwork is completed, including registering the employee for social security purposes. They will handle setting up payroll systems to ensure timely and accurate payment of salaries and statutory contributions.
What help does an EOR provide in Israel’s payroll, taxes, and benefits administration?
The EOR will support all of Israel’s payroll, taxes, and benefits administration, ensuring compliance with complex local laws. It calculates and processes employee salaries, withholds the correct tax amounts, and handles social security contributions.
The EOR manages payslips that reflect mandatory withholdings and contributions, adhering to Israeli regulations. While there is no personal income tax in Israel, the EOR ensures compliance with applicable corporate tax regulations and manages any required reporting to local authorities.
For benefits, the EOR ensures compliance with statutory requirements, such as annual, sick, and maternity leave. It can also administer additional common benefits in Israel, such as pension plans and educational funds (Keren Hishtalmut).
Specific tasks include:
- Calculating and processing salaries in Israeli New Shekels (ILS)
- Managing contributions to the National Insurance Institute (Bituach Leumi)
- Handling pension fund contributions
- Ensuring compliance with the Wage Protection Law for salary payments
- Administering mandatory health insurance coverage
- Managing annual leave entitlements and other statutory leave types
- Handling overtime calculations and payments according to Israeli labor law
What labor laws do you need to consider when hiring in Israel?
When hiring in Israel, there are several key labor laws to consider. Israel’s approach to labor laws generally protects employees, offering extensive employee protections while maintaining a business-friendly environment.
Employment contracts
While not legally required, providing written employment contracts in Israel is best practice. These should specify job details, including position, duties, working hours, salary, and termination conditions.
Working hours and paid holidays
The standard work week in Israel is 43 hours, typically 5 or 6 days. Most businesses are closed during the Jewish Sabbath (from Friday evening to Saturday evening). Employees are entitled to at least 36 hours of continuous weekly rest.
Employees are entitled to a minimum of 12 days of paid annual leave after completing their first year, increasing with tenure up to a maximum of 28 days. There are also several paid public holidays throughout the year.
Taxes
Israel has a progressive income tax system, with rates ranging from 10% to 50%. Employers are responsible for withholding income tax and national insurance contributions from employees’ salaries.
Severance pay
Israel’s employees are entitled to severance pay after completing at least one year of continuous service. The amount is typically one month’s salary for each year of employment.
Maternity and paternity leave
Female employees are entitled to 26 weeks of maternity leave if they have worked for the same employer for at least 12 months. The National Insurance Institute pays the first 15 weeks. Fathers can take paternity leave for part of this period instead of the mother.
| Labor Law | Key Points |
|---|---|
| Employment Contracts | Not legally required but recommended, should specify job details and conditions |
| Working Hours | 43-hour standard work week, overtime regulations apply |
| Paid Holidays | Minimum 12 days annual leave, increasing with tenure, plus public holidays |
| Taxes | In a progressive income tax system, employers are responsible for withholding |
| Severance Pay | One month’s salary per year of service after one year of employment |
| Maternity/Paternity Leave | 26 weeks for mothers, fathers can share part of this period |
How does the hiring process work in Israel?
When hiring staff in Israel, employers typically follow these steps:
- Identify the vacancy and create a detailed job description
- Advertise the position through various channels, including local job portals and recruitment agencies
- Review applications and shortlist candidates
- Conduct interviews and assessments, which may include skill tests or presentations for some roles
- Select the preferred candidate and make a job offer
- Negotiate and finalize the employment terms
- Prepare and sign the employment contract (if using written contracts)
- Register the employee with relevant authorities (e.g., National Insurance Institute)
- Conduct any required pre-employment checks
- Onboard the new employee
Employers must ensure compliance with Israel’s labor laws and regulations throughout this process, including anti-discrimination legislation and data privacy requirements. It’s also important to be aware of cultural nuances in the Israeli hiring process, such as the importance of personal relationships and the value placed on military service experience.
Employers should also be prepared to discuss benefits beyond the statutory requirements, as Israeli employees often expect additional perks such as pension plans, educational funds (Keren Hishtalmut), and transportation allowances.
Is Israel a relatively easy country to hire employees remotely through an EOR?
Yes, Israel is generally considered a relatively easy country to hire employees remotely through an Employer of Record. The country’s advanced technological infrastructure, highly skilled workforce, and business-friendly environment make it an attractive destination for international hiring.
Pros
Cons
Israel’s labor laws, while protective of employees, are clear and well-established, making compliance manageable with the help of an experienced EOR. The country’s robust digital infrastructure facilitates remote work arrangements, especially in urban areas and tech hubs like Tel Aviv.
However, it’s important to note that while hiring through an EOR in Israel is relatively straightforward, employers must still be mindful of local labor laws and cultural nuances. An experienced EOR can navigate these requirements effectively, ensuring compliance while simplifying the hiring process for foreign companies.
The Israeli government has been actively promoting the country as a hub for innovation and international business, which has led to an environment conducive to remote work and global collaboration. This further enhances Israel’s attractiveness for remote hiring arrangements.
In conclusion, Israel’s combination of a highly skilled workforce, favorable business environment, and established legal framework makes it a viable option for companies hiring remote employees through an EOR. The country’s ongoing efforts to attract global talent and businesses and its strategic location and world-class infrastructure position it as an increasingly popular destination for international employment.
By partnering with a knowledgeable and experienced EOR provider, companies can effectively navigate Israel’s employment landscape and tap into its diverse talent pool, particularly in high-tech and innovative sectors.
