Employer of Record Israel
Infotree Global Solutions assists organizations planning for expansion in Israel by providing employer of record services in Israel. If you wish to recruit professionals in Israel, you can easily accomplish it with us without even having an establishment in Israel. Our team of dedicated professionals would take up all the recruitment and payroll management responsibilities for your organization. From searching for ideal employees to hiring and onboarding them, we take every step on your behalf with total compliance.
Our Israel employer of record would give you insights into the compensation, benefits, and facilities required for your employees in Israel. Here are some of the important factors you need to know before you start hiring in Israel:
Table of Contents
What is an Employer of Record (EOR) in Israel?
In Israel, an EOR or Employer of Record comes forward as a service partner that legally takes over the responsibilities of employment. It works for entities that are planning to expand in different countries and assists them with crucial tasks like payroll, taxes, compliance, and benefits under local labor laws. It helps them without establishing a legal setup and just by being a partner with the firm, it actively works for the client company. The expanding firms take leverage of an EOR that guides local labor laws and manages employee payroll and HR functions. It also assists companies with flexibility that works well with their global expansion plans.
How does an EOR work in Israel?
An Employer of Record in Israel works as a professional service provider that facilitates companies to recruit and engage employees without having their own legal entity. The EOR is responsible for all employment-related responsibilities like HR, managing payroll, and taking care of the complaint part. The client company becomes partners with EOR and it helps them identify the right talent in a specific country. The EOR also assists with preparing employment contracts stating terms, compensation, and benefits of employment under Israeli law. Besides, it provides HR support while taking care of compliance requirements at every step. While the EOR manages all the administrative responsibilities, the client company holds control over the routine work.
Hiring in Israel
Hiring in Israel is quite different from the usual process. Depending on the type of job a candidate is looking for, the steps involved may differ, but the general rules remain the same. Here is a short breakdown of the process –
- The first step includes an initial telephone interview with the human resource team. At this step, the candidate is required to give a short explanation of their work history.
- After a telephonic interview, the candidate must attend the face-to-face interview with the executives.
- Once the interview processes are completed, the candidate is informed about their selection or rejection. It usually takes a couple of days.
- Apart from this, you must complete your registration as a business in Israel before starting any hiring process. All of this must include considering regional benefits, payroll tax, and HR laws.
Looks like a lengthy process you need assistance with. As an experienced Employer of Record in Israel, we understand expanding your business in this country initially can get a little hard. And that’s why we present to you our wide range of services, including assistance in the hiring process as a part of it!
Israel Employment law has few legal obligations which every employer needs to abide by. They should provide formal written employment letters for all employees. An Employer of Record Israel assists you to learn about the contract. Every contract must include all required details like remuneration, job title, termination policy, and others. As your Employer of Record, we will bring you expert guidance for each stage of expansion!
Compensation – Compensation in Israel is regulated by the applicable laws. These apply to all workers working in Israel, whether they are residents or foreigners. The minimum wage for a full-time job is 4300 NIS, which comes to 186 hours per month and 23.12 NIS per hour upon breakdown. The wages for the previous month must be paid within the 9th of every month. However, in the case of overtime, the payment for the first two hours must be at least 28.9 NIS which can go up to 34.68 NIS for the duration after the first two hours.
Working Hours – As of April 2008, regulations regarding working hours are set at 42 hours per week. However, the length of work is limited to 8.6 hours in case there is a policy of a 5-day work week while the limit for a 6-day workweek is 8 hours with a half-day on Fridays. In practice, employers can also add additional time to facilitate a break between working hours, but it must be made sure that it is a maximum of 45 hours of the workweek. Any work time beyond these limits comes under the category of overtime.
Probation Period – As per the general probation policies in Israel, new employees are usually kept on a probation period ranging from 1 month to 12 months. However, it can also differ depending on the contract of employment or mutual agreement.
Bonus – There are no specific regulations regarding bonuses in Israel. However, employers can prefer to pay a 13-month salary to their employees. It is the standard bonus followed by several world’s top markets, including Israel.
Termination and Severance – Generally, an employer can terminate an employee, keeping in view the limitations prescribed by the law, and the employment contract for any applicable agreement. However, it is mandatory to conduct an internal hearing process for the same before announcing the final decision about termination. The employee is also required to give a notice period ranging between one day to one month before the day of termination. Terminated employees are entitled to receive their last narration, a severance pay equal to one month of their basic salary per year. In addition to this, termination cannot take place in the following cases –
- the employee is a pregnant woman
- a female employee on maternity leave
- any employee who has been called for military service
- employees on sick leave
- employees belonging to any deprived families
On the other hand, severance pay is defined and calculated as per the provisions of The Severance Pay Law. According to the law, it is owed to the employee given that employment lasts for at least one year. It is calculated annually based on the current wages of the employee. Unless otherwise specified in the mutual agreement contract, it is only paid to the employees who were terminated and not to the employees who left the employment of their own will.
Compensation and benefits in Israel form an important part of employment law compliance. To maintain it, employers are entitled to pay the minimum wage. However, it has been observed that many employers add more benefits to stay competitive in the challenging business environment. Being your Israel Employer of Record, we provide you with the required guidance.
Maternity Leaves – An employee is entitled to 26 weeks of maternity leave if she has been working in the same workplace or with the same employer for at least 12 months. The period of maternity leave is further divided into 15 weeks of paid leave and 11 weeks of unpaid leave. However, a woman is entitled to only 15 weeks of maternity leave if she is employed for less than a year. The employee can also extend the unpaid maternity leave beyond the period of 11 weeks. In this case, the total period of unpaid maternity leave constitutes 25% of the duration of employment by the same employer before taking the maternity leave.
Vacation – Every employee working in Israel is entitled to 10 to 14 days of paid leave every year. As per the annual leave law, the corresponding paid leave increases every year to a maximum of 24 days. Apart from this, employers must approve of the vacation leave as they have the right to allow all employees to take their vacation leave all at once.
Sick Leave – An employee is entitled to a total of 90 days of sick leave in a year. It comes to almost one and a half days for a full month of employment. However, the employee will not receive any payment for the first day of absence while being entitled to receive 50% of the salary for the second and third days of the absence. The latter situation would be applicable only if the employee had worked on the given day. From the 4th day onwards, the employer must pay the full salary to the employee that he/she would have received on a working day.
Paternity Leaves – Paternity leave policies in Israel require the employee to be a biological or adopted father of the child. The employee is entitled to receive a 4-week paid leave on the job. A period of one year from the date of birth or legal adoption of the child is also given in addition to the 4 weeks. Moreover, an employee can take paternity leave at once or every week.
Health Benefits– Since Israel’s Health insurance system covers all its working residents, any person working in the country can receive these health benefits. The expenses are taken care of by special income-based health tax and government revenues. However, all employers must ensure that they enroll their employees, both domestic and foreign workers, into the service.
Pension– As per Israel’s Compulsory Pension Expansion Order, every employee is entitled to receive insurance contributions and a pension from their employer. This pension amount usually comprises contributions made towards the basic pension pay and severance pay. The calculation is done with reference of two major factors that include:
- Employee’s wage as per the definition given in the applicable law.
- The average monthly wage.
In addition to this, an employer must contribute an amount equivalent to 6% of the basic wage towards pension pay along with the same percentage of contribution towards severance pay. However, the employee is also required to provide an amount equivalent to 5.5 % of the total basic wage as a contribution towards pension pay.
Payroll Tax in Israel
Israel has a progressive income rate but certain areas of taxation including payroll depend on the employee’s salary. To manage taxation and legal activities, most companies usually hire services from the Employer of Record Israel for better management. In addition to this, here are some other taxes that constitute an important part of the Israeli taxation system –
Income Tax – According to the policy for income tax in Israel, it is deducted from the employee’s salary and forwarded to the tax authorities.
Note: The employer is required to pay all the applicable fees to the authorities to obtain permission to employ migrant workers. In such a case, the employer is not allowed to deduct any such fees from the salary.
Self-employed individuals pay the income tax according to the tax slab. The range usually starts from 10% and goes up to 50% plus National insurance up to 16.16% o the first NIS 43,890 monthly income. Taxes of up to 50% are levied on domestic Israeli expenses unless the recipient holds confirmation to pay at a lower rate from the tax authorities. It is supposed to be paid every month and any late payment attracts a penalty.
VAT – The standard VAT rules are applicable for registered businesses to comply with invoice formats and records. For standard goods and services, it is 17 % while it is levied at 7.5% for not-for-profit organizations. Exemptions include Financial Services, selected real estate sales and leasing properties, diamonds and precious metals, and charitable organizations.
Corporate Tax – The corporate tax rate is 23% in 2022 (the same rate as in 2021).
Withholding Tax – Withholding tax in Israel is levied at a rate of 23% when it is paid to any domestic resident company. However, the rate often goes up to 25% in case it is paid to an individual. The dividends between domestic Israeli companies are normally exempted from withholding taxes.
Type of Visa and Work Permits in Israel
The Israeli government offers several options in terms of working visas and permits in the country. These primarily include:
- Immigration visa
- Temporary resident visa
- Student visa
- Clergy visa for clerical jobs
- A/4 visa for spouses and children
- Work visa and visitor’s visa
As for work permits, applicants are required to apply for a B-1 work visa for specialist work in industrial fields. This category is for foreign candidates who wish to stay in Israel for a limited period. It is usually issued to experts and professionals belonging to a specific industry. Moreover, if you need help with any of these steps, you can reach out to us for our Employer of Record services!
Challenges When Expanding Into Israel
While expanding any business into Israel, there are a plethora of things to consider before taking any step. As your Employer of Record, we take care of all these aspects for you. One of these aspects includes considering the challenges involved while expanding your business into Israel. Here are a few issues that you may face while planning your business expansion in the country –
- Israel is a country that promotes innovation and integration of new-age technologies with emerging businesses. However, it gets difficult for US-based companies to enter the market due to the high competition from both domestic and international businesses.
- Since Israel is a hub of a high volume of economic activities, the Israeli regulatory authorities keep a bureaucratic attitude towards legislation and administration. It is a significant factor that can affect your business operations in Israel to a great extent.
- Israeli authorities follow the technical standards set by the European Union. They do not recognize the international standards set for a selected category of industries. So, expansion in Israel can get a bit problematic if you run a US-based manufacturing engineering, technical, or any similar category of business.
- Israel is a significant part of the geopolitical scenario in Middle East politics. It plays a pivotal role in international political affairs, which can be a potential hurdle for international businesses to establish and grow their business in the country.
Services offered by an EOR in Israel:
An EOR in Israel provides a wide range of employment services to the client company. Their primary function is to act as a legal employer to provide support for HR, and administrative tasks. Let’s take a look at the services provided by EOR in Israel:
HR and Payroll – The EOR manages HR tasks like file processing, employee records, leaves, and other day-to-day administrative responsibilities. It also handles payroll responsibilities, including calculating salaries, tax withholdings, and deductions following the country’s labor laws.
Employment Contracts – The EOR also supports drafting employment contracts for client companies. It ensures that the terms stated in the contracts are compliant with local regulations and customized to the specific needs of the organization.
Benefits Management – It includes taking care of employee benefits like pension plans, health insurance, and other kinds of statutory benefits under Israeli law.
Legal Assistance – The EOR makes sure that every step should be taken in compliance with the country’s labor laws and regulations. It provides legal support for tax filings, statutory obligations, and social security contributions.
Employee Onboarding & Offboarding – The EOR assists the client company to manage the onboarding process of new employees and takes care of the documentation, orientation, etc. They also handle the off-boarding when a staff leaves the organization.
Risk Management – The EOR assists in mitigating employment-related risks. It includes managing labor disputes, and employee concerns and ensuring compliance at every step is in sync with local labor regulations.
Benefits of Israel Employer of Record
To simplify your expansion process let Infotree Global assist you to deal with all the complexities. Be it hiring employees, distributing payroll, or taking care of expenses, we are there to assist you at every step. Partner with us and start your global business without worries.
Market Access – Relying on the professional expertise of an Employer of Record is the best way to enter an unknown market quickly. By using EOR services, an international organization can avail the expertise of an Israeli employee to work for its company. Besides quick access to the Israeli market, the employer of record also enables the client to ease off worries related to payroll and HR.
In-Country Laws – It is hard to ignore the importance of regulations and compliance in a foreign country. If you are operating a business in Israel, you need to be well aware of the payroll and taxation rules. With Israel Employer of Record services, a company can hire a foreign individual or local employees and deal with the complexities of the country’s rules. Be it income tax, social security contribution, expanse management, withholding charges, or business tax, an EOR or PEO company takes care of it all with total compliance.
Diverse Solutions – No matter whether you already have a company in an international location or you are going to establish one, an employer of record can help you significantly. The employer of record Company can hire staff on your behalf without setting up a subsidiary in Israel. If your firm is already operating, using EOR for managing payroll tasks can be a great idea as it can present an effective solution to tax and accounting responsibilities in the country.
Why Infotree Global Solutions?
Companies should focus more on growing the business instead of spending time with legal formalities, different tax structures, and other employment-related issues. We at Infotree Global Solutions will help you set up your business in Israel by managing payroll services and other legal formalities within the shortest possible time. Our employer of record services is designed to best suit the interests of employees and employers. Our experienced in-territory experts will be constantly present to supervise and regulate your business endeavor in Israel. We are committed to providing the best result to our customers and will make your company’s task our priority.
Make the most of our professional services and overcome the challenges associated with international hiring. For Israel Employer of Record details and demo contact us today!