Employment Laws in Israel: A Complete Guide for Foreign Employers
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Table of Contents
Israel Employment Laws Overview
Israel employment laws are layered. The Knesset’s statutory framework (the Wage Protection Law, the Severance Pay Law, the Sick Pay Law, the Hours of Work and Rest Law, the Advance Notice for Dismissal and Resignation Law, the Equal Employment Opportunities Law) sits alongside binding Extension Orders (the 2008 Mandatory Pension Extension Order being the most important) and a thick body of Labour Court precedent that interprets every statutory ambiguity. For a foreign employer, Israel labor law is closer to Continental European labour codes than to United States at-will employment.
Israel is not an at-will jurisdiction. Termination requires a fair-hearing process called shimua, statutory notice, and statutory severance. Employees enjoy mandatory pension contributions, mandatory severance accrual, statutory paid leave, statutory sick leave, and statutory Recreation Pay (Dmei Havraa). The Labour Court enforces all of this with claim-friendly procedures and the willingness to award reinstatement remedies.
This guide walks through the foundational Israel employment laws that govern hiring, payroll, leave, termination, IP assignment, non-compete enforceability, and statutory benefits. Every claim in this guide ties back to a named law, an Extension Order, or a Labour Court precedent. Asanify Employer of Record Israel runs the full lifecycle on your behalf so your foreign parent never has to interpret a Labour Court ruling on a Friday afternoon.
The Statutory Framework Governing Israel Employment
Israel labor law is built on a small number of foundational statutes plus a wide body of Extension Orders that turn collective-bargaining outcomes into binding obligations on every employer. A foreign employer hiring in Israel must comply with the statutes directly and with the Extension Orders that apply to the relevant sector.
Core Israeli Employment Statutes
The core Israel employment laws are the Wage Protection Law (5718-1958, salary payment and payslip requirements), the Severance Pay Law (5723-1963, severance liability and Section 14 arrangement), the Hours of Work and Rest Law (working hours, overtime, rest day), the Advance Notice for Dismissal and Resignation Law (5761-2001, notice schedule), the Sick Pay Law (5736-1976, sick-leave accrual), the Annual Leave Law (5711-1951), the Equal Employment Opportunities Law (5748-1988), the Protection of Wages (Penal) Law, and the Income Tax Ordinance. Read together, they cover the full employment lifecycle from offer to exit.
Extension Orders and Collective Agreements
Extension Orders (tzav harchaba) extend the terms of a sectoral collective agreement to every employer in that sector, regardless of union membership. The 2008 Extension Order on Comprehensive Pension Insurance (expanded in 2017) makes pension contributions of employer 6.5% plus severance 8.33% and employee 6.0% mandatory across virtually every sector. The Collective Agreements General Order makes Dmei Havraa and shiva leave mandatory. Asanify Employer of Record Israel applies every relevant Extension Order on every Israeli hire by default.
Israel Is Not an At-Will Jurisdiction
Unlike the United States, Israel does not recognise at-will employment. Every dismissal must be supported by a documented reason, preceded by a fair-hearing process (shimua), and paired with statutory notice and statutory severance. A dismissal that skips shimua, that is decided before the hearing, or that is discriminatory under the Equal Employment Opportunities Law (5748-1988) can be reversed by the Labour Court with reinstatement and damages.
The shimua hearing is procedural rather than adversarial. The employer issues a written letter setting out the contemplated dismissal and the reasons, gives the employee a fair opportunity (typically 5 to 7 working days) to respond in writing or in person, and decides the dismissal only after considering the response. The decision letter must reference the response and explain why dismissal still proceeds. Failure to follow shimua is the single most common Labour Court loss for foreign employers.
The Shimua Hearing: Procedural Requirements
Shimua requires written notice of the contemplated dismissal, written disclosure of the reasons, a fair opportunity for the employee to respond (in person or in writing), genuine consideration of the response by the decision-maker, and a written decision letter that addresses the response. Asanify schedules and documents shimua hearings as part of the standard termination workflow on every Israeli hire.
Notice Periods Under the Advance Notice Law (5761-2001)
For salaried employees: 1 day per month in months 1 through 6 of service, 6 days plus 2.5 days per month in months 7 through 12, scaling to 1 month after 1 year of service. For wage (hourly) employees: 1 day per month in year 1, 14 days plus 1 day per 2 months in year 2, 21 days plus 1 day per 2 months in year 3, scaling to 1 month after 3 years. Notice applies equally to employer-side dismissal and employee-side resignation. Pay-in-lieu is permitted at the employer’s option.
Working Hours, Overtime, and the Rest Day
The Hours of Work and Rest Law caps the standard work week at 42 hours. The typical pattern is 8.6 hours per day across a 5-day week or 8 hours per day across a 6-day week. Overtime is permitted with a permit from the Ministry of Labor and is capped at 16 hours per week, 60 hours per month, and 182 hours per year. The total work week including overtime may not exceed 58 hours.
Overtime premium is 125% of the regular hourly rate for the first 2 overtime hours per day and 150% thereafter. Work on the weekly rest day (Shabbat for Jewish employees, Friday for Muslim employees, Sunday for Christian employees) is paid at 150% with one day’s compensatory rest. Senior management roles (positions of trust, kohi emun) are exempt from the overtime cap and overtime premium under Section 30 of the Hours of Work and Rest Law if the contract clearly designates the role as a position of trust.
Overtime Premium Calculation
Overtime kicks in after 8.6 hours per day on a 5-day week or 8 hours per day on a 6-day week. The first 2 overtime hours per day are paid at 125% of the regular hourly rate. Hours 3 and beyond are paid at 150%. Work on the weekly rest day is paid at 150% with one compensatory rest day. Asanify computes overtime on every payslip and routes payments through the Form 102 monthly cycle.
Statutory Leave Entitlements in Israel
Israeli employees are entitled to several categories of statutory leave: paid annual leave under the Annual Leave Law (5711-1951), sick leave under the Sick Pay Law (5736-1976), maternity leave funded by Bituach Leumi maternity allowance, paternity leave, shiva leave for bereavement, and Dmei Havraa (Recreation Pay) after one year of service. The total mandatory annual leave envelope adds materially to the cost of employment compared to United States or United Kingdom hiring.
Annual leave for years 1 through 4 is 12 paid working days for a 5-day week (14 days for a 6-day week), increasing with seniority up to roughly 20 working days by year 14 and beyond. Sick leave accrues at 1.5 days per month, capped at 90 days lifetime. Day 1 of sickness is unpaid, days 2 to 3 are paid at 50% of wage, day 4 onwards at 100%. Maternity leave is 26 weeks total for employees with 12+ months of service (15 weeks paid by Bituach Leumi maternity allowance), 15 weeks for shorter tenure. Paternity leave is 5 days following birth.
Mandatory Pension and Severance Under Israel Employment Laws
Pension and severance obligations in Israel are layered onto every employment contract through the 2008 Extension Order on Comprehensive Pension Insurance (expanded in 2017) and the Severance Pay Law (5723-1963). The Extension Order makes pension contributions mandatory after 6 months of service (3 months for employees with an existing pension fund). The Severance Pay Law makes severance liability mandatory on employer-side termination after 1 year of service.
Mandatory Pension Contributions (6.5% Employer + 6% Employee)
The minimum employer pension contribution is 6.5% of salary to the pension component plus 8.33% to the severance component. The minimum employee contribution is 6.0%. The combined mandatory pension stack is 20.83% of salary on the employer side (when severance is folded in) and 6.0% on the employee side. The contributions are paid into a pension fund of the employee’s choice. The mandatory pension contribution applies to the lower of the actual salary or the contribution ceiling published by the Ministry of Finance.
Section 14 Severance Arrangement
Section 14 of the Severance Pay Law (5723-1963) lets employers fund severance liability through monthly contributions of 8.33% of salary into the employee’s pension fund severance component, fully replacing the lump-sum severance obligation of one month’s last salary per year of service. The election must be in writing in the employment contract and registered with the pension fund. On termination, the employer issues a Section 14 release letter and the employee collects the accrued severance directly from the fund. Asanify configures Section 14 by default on every Israeli hire.
IP Ownership and the Patents Law (5727-1967) Section 132
Under Section 132 of the Patents Law (5727-1967), service inventions made by an employee in the course and as a result of employment vest in the employer by default. The default assignment is automatic, but the employee may have a residual claim for compensation for the service invention under Sections 134 and 135, decided by the Compensation and Royalties Committee.
Recent rulings allow employees to waive future compensation in writing if the waiver is express and informed. Best practice for an Israeli employment contract is an explicit IP-assignment clause (covering inventions, copyright works, designs, and trade secrets) plus a service-invention waiver under Sections 134 to 135. Asanify Employer of Record Israel includes both clauses in the standard Israeli contract template.
Non-Compete, Non-Solicit, and Confidentiality Under Israel Employment Laws
Post-termination non-compete clauses are generally not enforceable in Israel. The leading case is Dan Frumer v Checkpoint, in which the Supreme Court ruled that a post-employment non-compete will only be upheld if the employer can prove one of four narrow conditions: protection of a legitimate trade secret, special and costly training investment in the employee, special consideration paid for the restraint, or bad faith on the employee’s part. Garden-variety non-competes are routinely struck down by the Labour Court.
Non-Solicit and Confidentiality Clauses
Non-solicit clauses (forbidding the former employee from soliciting the employer’s customers or employees) are more commonly upheld than non-competes, provided they are reasonable in scope and duration (typically 12 months or less) and tied to a legitimate business interest. Confidentiality clauses are routinely upheld and survive termination. Asanify includes a 12-month non-solicit and a perpetual confidentiality clause in the standard Israeli contract template.
Trade Secret Protection
Trade secrets are protected under the Commercial Torts Law (5759-1999). The employer must show that the information meets the statutory definition of a trade secret (commercial value, not generally known, subject to reasonable measures to maintain secrecy). Trade-secret misappropriation by a former employee can support both injunctive relief and damages, including a post-termination non-compete remedy under the Frumer test.
Equal Employment Opportunities and Anti-Discrimination Law
The Equal Employment Opportunities Law (5748-1988) prohibits discrimination in hiring, working conditions, promotion, training, dismissal, and severance on the basis of sex, sexual orientation, personal status, pregnancy, fertility treatment, parenthood, age, race, religion, nationality, country of origin, residence, worldview, political affiliation, military reserve service, or disability. The law applies to every stage of the employment lifecycle, including the interview process.
The Equal Pay (for Male and Female Workers) Law (5724-1964) requires equal pay for equal work or work of equal value. The Prevention of Sexual Harassment Law (5758-1998) requires every employer with more than one employee to publish a sexual-harassment policy, appoint a person responsible (memuneh), and conduct training. Asanify provides the policy template, training scheduling, and policy publication on every Israeli hire.
Background Checks Under the Criminal Registry and Rehabilitation of Offenders Law
Pre-employment criminal background checks are generally prohibited in Israel under the Criminal Registry and Rehabilitation of Offenders Law (5741-1981, as amended in 2019, in force from 2022). An employer may not request, directly or indirectly (including via questionnaire or affidavit), criminal-record information from a candidate. Exceptions exist for roles involving children, persons with mental or developmental disabilities, state-security positions defined by law, and specific licensed financial roles. Violation is a criminal offense.
Credit checks are permitted only with the candidate’s express written consent and only where the role objectively justifies it (financial management, custodianship of funds). Reference checks are permitted with consent. For full detail on what is and is not permitted, see the Asanify guide to background checks in Israel.
Foreign Workers and the B/1 Expert Work Visa
Foreign nationals working in Israel require a B/1 Expert Work Visa, issued by the Population and Immigration Authority for skilled professionals. The B/1 process requires sponsor-employer documentation, professional qualification proof, and security clearance. The visa is normally granted for one year, renewable annually for up to a total of 63 months. The minimum salary for a B/1 expert is currently approximately twice the average wage (cross-check current threshold with the Population and Immigration Authority).
Asanify Sponsorship for B/1 Visas
Asanify Employer of Record Israel can sponsor the B/1 visa for qualifying tech, R&D, and senior commercial roles. The sponsorship covers the documentation, the salary-threshold compliance, the security-clearance support, and the renewal cadence. The full sponsorship workflow runs in parallel with the standard 7-day onboarding for the local-law employment contract.
Termination, Severance, and the Final Settlement
Termination in Israel proceeds in five steps: shimua hearing (with written notice and a fair opportunity to respond), decision letter, statutory notice (or pay-in-lieu), severance settlement (lump-sum under the Severance Pay Law or Section 14 release letter to the pension fund), and final payslip with leave encashment, Dmei Havraa accrual, and any other dues. The closure target is 30 days from the last working day. Skipping any step exposes the employer to Labour Court claims with reinstatement and statutory damages.
How Asanify Runs Israeli Employment Compliance End-to-End
Asanify Employer of Record Israel applies every Israel employment law on every hire by default: shimua-compliant termination workflow, Section 14 severance arrangement, mandatory pension at 6.5% plus 6.0%, Bituach Leumi tiered contributions, Form 102 monthly filings, Form 106 distribution by 31 March, statutory leave administration, IP-assignment plus service-invention waiver in the contract template, sexual-harassment policy and memuneh appointment, B/1 visa sponsorship for qualifying foreign hires, and a 30-day closure target on termination.
Country-priced from $299 per employee per month, Asanify is roughly half the entry price of generic global EOR providers. Onboarding to first payroll runs in 7 days. Cross-reference the full Israel Employer of Record page or book a 30-minute Israel hiring call to walk through your statutory compliance plan.
Israel Employment Laws FAQs
Is Israel an at-will employment jurisdiction?
No. Israel is not at-will. Every dismissal must be preceded by a documented shimua (fair-hearing) process, paired with statutory notice under the Advance Notice for Dismissal and Resignation Law (5761-2001), and supported by statutory severance under the Severance Pay Law (5723-1963). A dismissal that skips shimua or is decided before the hearing can be reversed by the Labour Court with reinstatement and damages. Asanify Employer of Record Israel runs the full shimua workflow on every termination.
What is the standard work week under Israel labor law?
42 hours per week under the Hours of Work and Rest Law. Standard patterns are 8.6 hours per day across 5 days or 8 hours per day across 6 days. Overtime is capped at 16 hours per week, 60 hours per month, and 182 hours per year, with total weekly hours including overtime not to exceed 58. Overtime premium is 125% for the first 2 overtime hours per day and 150% thereafter.
What notice period applies to a 2-year tenure salaried employee?
1 month. Under the Advance Notice for Dismissal and Resignation Law (5761-2001), salaried employees with 1 year or more of service are entitled to 1 month of notice (employer-side dismissal or employee-side resignation). The notice is mutual: the same 1-month period applies in either direction. Pay-in-lieu of notice is permitted at the employer’s option.
Are post-employment non-compete clauses enforceable in Israel?
Generally no. Per Dan Frumer v Checkpoint (Supreme Court), a post-termination non-compete will only be upheld if the employer can prove one of four narrow conditions: protection of a legitimate trade secret, special and costly training investment, special consideration paid for the restraint, or bad faith by the employee. Garden-variety non-competes are routinely struck down by the Labour Court. Non-solicit and confidentiality clauses are more commonly upheld if reasonable in scope and duration.
Who owns inventions made by an employee under Israeli law?
The employer, by default. Section 132 of the Patents Law (5727-1967) provides that service inventions made by an employee in the course and as a result of employment vest in the employer. The employee may have a residual claim for compensation under Sections 134 to 135, but recent rulings allow an express written waiver of future compensation. Asanify includes both an IP-assignment clause and a service-invention waiver in the standard Israeli contract template.
What is the mandatory pension contribution in Israel?
Under the 2008 Extension Order on Comprehensive Pension Insurance (expanded in 2017), the minimum employer contribution is 6.5% of salary to the pension component plus 8.33% to the severance component. The minimum employee contribution is 6.0%. The contribution applies to all employees after 6 months of service (3 months for employees with an existing pension fund). Asanify configures the Section 14 severance arrangement on every hire so the 8.33% replaces the lump-sum severance liability.
How much annual leave do Israeli employees get?
For years 1 through 4 of service: 12 paid working days per year on a 5-day week (14 days on a 6-day week). The entitlement increases with seniority, reaching roughly 20 working days by year 14 and beyond. Unused leave can be carried forward subject to the Annual Leave Law (5711-1951) limits, and any balance must be paid out on termination. Asanify Employer of Record Israel administers leave accrual and payout as part of the standard payroll cycle.
Are employers required to publish a sexual-harassment policy?
Yes. The Prevention of Sexual Harassment Law (5758-1998) requires every employer with more than one employee to publish a sexual-harassment policy, appoint a memuneh (responsible person), conduct training, and respond promptly to complaints. Asanify provides the policy template, training scheduling, and memuneh appointment as part of the standard onboarding workflow.