Employment Law in Israel for Employers (2026)

Israel attracts global companies for good reason: a large pool of experienced engineers and technical professionals, a technology sector that spans cybersecurity, fintech, and enterprise software, and a government that actively courts foreign investment. What those companies often discover only after committing to their first hire is that Israel's employment law is dense, procedurally strict, and enforced by Labor Courts with a strong pro-employee track record.

The main compliance risks aren't obscure — they're the fundamentals: mandatory pension enrollment, two-tier national insurance contributions, a compulsory pre-termination hearing, and a suite of statutory benefits like recuperation pay that most foreign human resources (HR) teams have never encountered. Israel's statutory framework applies regardless of what the employment contract says. There is no at-will employment here.

This guide explains Israeli employment law for employers. It covers the rules that apply once you employ someone in Israel.

The guide covers:

• Israeli employment law basics, employee status, and key 2026 changes

• Payroll, tax, and employer costs

• Statutory benefits and leave

• How an Employer of Record works in Israel

• A seven-step hiring checklist

• Visa routes for foreign hires

• The termination process, including the shimua hearing

To learn more about how an EOR can help, read hire and pay employees in Israel.

Israel employment law: what every employer must know

Several Israeli laws govern employment, including the Hours of Work and Rest Law, the Annual Leave Law, the Wage Protection Law, the Severance Pay Law, and a body of collective agreements known as extension orders (tzavei harchava) issued by the Ministry of Labor. These statutes set floors that no contract can undercut. Where a sector-specific extension order exists, it can raise those floors further.

For foreign employers, the important starting point is that employment relationships in Israel are not governed primarily by the contract. The contract matters — it must exist, in writing, within 30 days of the start date — but statutory entitlements sit on top of it, unconditionally.

Employment status categories

The legal category you hire under determines which obligations apply. Israel distinguishes three primary relationships:

Israel's Labor Courts apply a multi-factor "integration" test to determine real employment status when it is disputed. A person classified as an independent contractor in a written agreement can be found to be an employee in law, triggering full retrospective liability for pension contributions, Bituach Leumi, severance, and unpaid annual leave — sometimes running back multiple years. The contract's label is not the deciding factor. The actual working conditions are.

Written contract (30-day obligation)

Every employer must issue a written statement of employment terms within 30 days of the employee's start date, under the Notice to Employee Law. This document must specify: the employee's role, start date, work location, gross salary and its components, working hours, the designated pension fund, annual leave entitlement, and probation terms if applicable.

Minimum wage

Israel's national minimum wage is ILS 6,443.85 per month (ILS 35.40 per hour), effective 1 April 2026 under the relevant Ministry of Labor order. The rate applies uniformly across sectors and worker types, including foreign nationals on work permits.

Working time rules

The Hours of Work and Rest Law (1951) sets the governing framework:

• Standard working week: Up to 42 hours over five working days (Sunday to Thursday). Employees on a six-day week may work up to 45 hours.

• Maximum daily hours: 12 hours (including overtime).

• Weekly rest: Every employee is entitled to 36 consecutive hours of rest per week. For most employees this includes Saturday (Shabbat).

• Overtime premium: The first two overtime hours per day are paid at 125% of the regular hourly rate. Subsequent overtime hours are paid at 150%. Overtime must be authorized by the employer.

Right-to-work verification

Israeli citizens and permanent residents carry a teudat zehut (national identity card), which establishes both identity and right to work. For foreign nationals, a B-1 work permit or an equivalent category issued by the Population and Immigration Authority (PIBA) must be in place before the employee's first working day. Employment before permit approval is unlawful.

Data protection regime

Israel operates under the Protection of Privacy Law (1981), administered by the Privacy Protection Authority (PPA). The PPA has positioned the Israeli regime as equivalent in substance to the EU's General Data Protection Regulation (GDPR), which is why Israeli companies can receive EU personal data under an adequacy arrangement. For employers, practical obligations include registering personal-data databases used for HR purposes, documenting the lawful basis for each processing activity, and notifying employees of how their personal data is used.

Statutory public holidays

Israel's nine national public holidays — including Rosh Hashanah, Yom Kippur, Passover (first and last days), Independence Day, Shavuot, and Sukkot — are statutory paid days off under the Days of Rest Ordinance. They are in addition to annual leave entitlement. The specific dates shift each year based on the Hebrew calendar, so payroll calendars must be updated annually.

2026 reform note

Several significant employment-law changes took effect in 2026. The Knesset passed the Economic Efficiency Law on 30 March 2026 (Amendment 288), widening the 20% and 31% income-tax brackets retroactively from 1 January 2026. Maternity leave for births involving complex disabilities was extended by four weeks from April 2026. The private-sector recuperation-pay rate was updated by Ministry of Labor extension order to ILS 451.50 per day, published August 2026.

Payroll, tax, and employer costs explained

Israel's payroll system runs on monthly employer withholding (nikui matara), regulated by the Israel Tax Authority. Every employer must register with the Tax Authority before running a first payroll, obtaining a withholding agent number that appears on every employee payslip. Wages must be paid by the 9th of the following calendar month under the Wage Protection Law — breach of this deadline is a criminal offense, not just a civil liability.

The monthly payroll cycle

Israel's monthly payroll cycle involves more filings than most employers are used to:

• Payslip generation (tlush maskoret): Hebrew-language monthly payslips must detail every salary component — base salary, allowances, transport reimbursement, overtime, pension contributions, income tax withheld, Bituach Leumi deductions, and net salary.

• Tax Authority filing: By the 15th of the following month, employers must submit Form 102 to the Tax Authority, detailing every employee's gross salary, income tax withheld, and Bituach Leumi contributions.

• Bituach Leumi payment: Employer and employee NII contributions must be remitted to Bituach Leumi by the 15th of the following month.

• Pension fund contributions: Monthly pension contributions — employer share, employee share, and Section 14 component — must be transferred within 45 days of the salary date.

For a full breakdown of what you'll spend above gross salary in Israel, see Deel's Israel employer cost guide.

Income tax (Mas Hachnasa)

Income tax is withheld at source by the employer and remitted monthly to the Israel Tax Authority. Israel applies a seven-bracket progressive scale. The 2026 scale, widened by Amendment 288, applies from 1 January 2026:

Every resident employee benefits from tax credit points (nekudot zikkuy) that reduce monthly tax liability. Each credit point is worth ILS 242 per month in 2026. Israeli residents receive a minimum of 2.25 points as a base allocation. Women receive an additional 0.5 points.

Bituach Leumi (National Insurance Institute)

Bituach Leumi collects both National Insurance contributions and the National Health Tax through a single combined payment, split across two salary bands. The 2026 employer and employee rates, per the National Insurance Law:

Mandatory pension

Under the 2008 mandatory pension extension order (Tzav Harchavat Pensia), every employer must enroll new employees in a licensed pension fund within six months of their start date — though pension contributions must begin retroactively from day one once enrollment happens. The minimum contribution rates:

• Employer pension: 6.5% of gross salary (or up to 7.5% where loss-of-work-capacity coverage is included)

• Employee pension: 6.0% of gross salary

• Section 14 severance component: 8.33% of gross salary, paid by the employer as a separate pre-funded contribution

Section 14 severance pre-funding

Section 14 of the Severance Pay Law (1963) is the mechanism that makes Israel's severance system workable for modern employers. Without it, the statutory entitlement of one month's salary per year of service would sit as a growing liability on the employer's balance sheet — payable as a lump sum on dismissal, with the final salary used as the calculation base.

Under a Section 14 arrangement, the employer contributes 8.33% of gross salary monthly into the employee's pension fund. This corresponds exactly to one month's salary per year of service. The funds are the employee's property unconditionally: at any termination, the employer simply releases the accumulated balance from the fund. No additional payment is required. Key requirements:

• The employment contract must explicitly include a Section 14 clause.

• Without a written Section 14 clause, the employer retains the right to reclaim the fund balance on resignation.

• 8.33% is the floor required to fully pre-fund the one-month-per-year statutory entitlement.

Total employer cost example

The table below illustrates the total monthly employer cost for an employee earning a gross salary of ILS 15,000/month:

Note that this table excludes optional benefits like a keren hishtalmut (training fund), which adds a further 7.5% employer contribution.

Statutory benefits and leave entitlements

Israel's statutory benefits apply to every employee, regardless of whether they're mentioned in the employment contract. Extension orders issued by the Ministry of Labor can expand these entitlements for specific sectors. The benefits below represent the legal minimums.

Annual leave

Under the Annual Leave Law (1951), every full-time employee accrues vacation at a minimum of one working day per month — 12 days in year one for employees on a five-day working week. Key rules:

• Accrual: One working day per month from the first day of employment.

• Minimum: 12 days in the first year (5-day week). 14 days for employees on a 6-day week.

• Tenure increases: Most Israeli white-collar employers offer 15–20 days by the second or third year.

• Carryover: Unused annual leave accumulates without limit and cannot expire or be forfeited under Israeli law.

• Payout on termination: All accumulated leave is paid out at the daily salary rate as part of the final settlement.

• Public holidays: Israel's nine national public holidays are in addition to annual leave.

Sick leave

• Accrual: 1.5 sick days per month (18 days per year), with a lifetime maximum accumulation of 90 days.

• Payment schedule: Day 1 is unpaid. Days 2–3 are paid at 50% of the regular daily rate. From day 4 onward the employee receives 100% of their regular rate, funded from the accumulated sick-leave balance.

• Documentation: A medical certificate from the employee's Kupat Holim (public health fund) is ordinarily required for absences beyond one day.

Maternity and parental leave

Israel's parental leave system is one of the more comprehensive in the EMEA region, funded primarily through Bituach Leumi rather than directly by the employer.

The following table summarizes the key entitlements:

Key points: an employee cannot be dismissed during maternity leave or for 60 days after returning. Bituach Leumi pays the maternity allowance directly — employers don't fund it.

Recuperation pay (Dmei Havra'a)

Dmei Havra'a is a mandatory annual cash benefit for employees who have completed at least one year of service. It's a statutory entitlement under the General Extension Order issued by the Ministry of Labor — not a discretionary bonus — and it cannot be waived by contract.

The 2026 private-sector rate is ILS 451.50 per recuperation day, established under the extension order published 18 August 2026. The number of days increases with seniority:

Payment is due once per year, typically in the summer. Part-time employees receive a prorated entitlement.

Transport reimbursement

Employees commuting more than 500 meters to the workplace are entitled to reimbursement of their daily commuting costs, governed by extension order. The statutory cap is ILS 22.60 per working day, calculated based on the actual cost of the cheapest available public transport route. Reimbursement is owed for every day of physical attendance at the workplace. Remote-work days, vacation, and sick leave are excluded.

Universal health coverage

Every resident in Israel is entitled to universal public health coverage through one of four licensed Kupat Holim health funds, administered by Bituach Leumi. Coverage includes primary care, hospitalization, mental health services, prescriptions, maternity care, and pediatric services. The health component is included within the combined Bituach Leumi contribution.

Health and safety obligations

Employers must comply with the Work Safety Ordinance and related regulations, enforced by the Ministry of Labor. Key obligations:

• Risk assessment: Conduct workplace safety risk assessments and document findings.

• Instruction and training: Provide workers with written safety instructions and practical training specific to their role and workplace hazards.

• Incident reporting: Report workplace accidents and occupational illnesses to the Ministry of Labor as required.

Keren Hishtalmut (continuing education / training fund)

While not legally mandated for all employees, a keren hishtalmut is near-universal in Israeli white-collar employment. The standard contribution is 7.5% employer and 2.5% employee of gross salary. Contributions up to a statutory ceiling are tax-free for both parties. It's established by collective agreement or individual employment contract.

Military reserve duty (Miluim)

Israel's mandatory military reserve system means that many employees will be called up for active reserve duty during their employment. Employer obligations:

• Continue full salary payment during the reserve service period.

• File a reimbursement claim with Bituach Leumi — Bituach Leumi reimburses the employer for the period of service.

• Don't dismiss employees during reserve service or within 30 days of completing service exceeding two days.

• Don't demote, reassign, or worsen the employee's terms during the reserve period or the 30 days following it.

Hiring without an Israeli entity — how an Employer of Record works

Companies need an Israeli entity, payroll registrations, and pension-fund arrangements before hiring directly in Israel. Opening your own Israeli subsidiary involves company registration with the Companies Registrar, a local bank account, Tax Authority withholding-agent enrollment, Bituach Leumi registration, pension-fund agreements, and ongoing accounting and reporting obligations. That process takes three to six months and commits you to ongoing overhead regardless of how many people you're actually hiring.

An Employer of Record removes that barrier. For a full overview of what the EOR model means for Israeli hiring, see Deel's Israel EOR guide.

What an EOR does in Israel

The EOR is the legal employer of record in Israel. It holds the local company registration, the Tax Authority withholding-agent number, Bituach Leumi employer registration, and the pension-fund relationships. The EOR handles payroll processing, mandatory benefit enrollment, monthly statutory filings, and the full offboarding process including the shimua hearing. The client company retains full control over the employee's day-to-day work, role definition, performance standards, and deliverables.

The following table illustrates how the responsibilities split:

Misclassification risk in Israel

Misclassifying an employee as an independent contractor is one of the most common and costly mistakes foreign employers make in Israel. Labor Courts apply the multi-factor integration test aggressively, and an unfavorable ruling triggers full retroactive liability — pension contributions, Bituach Leumi, annual leave encashment, sick pay, and severance — sometimes running back three years or more from the date of reclassification.

The factors Israeli courts weigh most heavily:

• Control and supervision: Who sets the worker's schedule, methods, and day-to-day tasks?

• Exclusivity: Does the worker work only for this company, or genuinely for multiple clients?

• Integration into business: Is the worker embedded in the company's regular operational structure, attending team meetings and working alongside employees?

• Economic dependence: Is the company the worker's primary or sole source of income?

• Tools and equipment: Who provides the computer, workspace, and other tools of the trade?

For any engagement that resembles ongoing employment, an EOR provides an employment structure from day one that significantly reduces the risk of retrospective misclassification liability.

EOR vs. own entity

For companies deciding between the EOR path and opening their own Israeli entity, this comparison typically drives the decision. For a deeper strategic analysis, see Deel's EOR vs. entity guide.

When to open your own entity

An Israeli subsidiary makes economic sense when you have consistent local revenue to run through the entity, a team large enough to absorb registration and accounting overhead (typically 10 or more employees), and a long-term strategic commitment to the Israeli market. Below that threshold, the EOR model provides better economics and a faster time-to-hire.

What makes Deel's EOR different in Israel

Israel's compliance environment is more procedurally demanding than most markets Deel operates in. Deel's local operations team manages every touchpoint:

• Section 14 from day one: Every applicable Israel EOR employment agreement includes the Section 14 arrangement, with the 8.33% severance pre-funding contribution configured from the start. No follow-up required from the client.

• Hebrew-language payslips (tlush maskoret): Generated monthly, reflecting every salary component correctly.

• Form 101 processing: Deel issues and processes the mandatory Form 101 at hire and at each new tax year, so the employee's monthly withholding calculation stays accurate.

• Reserve-duty reimbursement: When an employee is called for Miluim, Deel files the Bituach Leumi reimbursement claim directly.

• Dmei Havra'a tracking: The recuperation-pay accrual builds automatically in Deel's payroll engine from the employee's first month.

• Shimua and offboarding management: When a client initiates a termination, Deel schedules the shimua hearing, prepares the written summons and decision letter, and handles the Bituach Leumi and Tax Authority closing filings.

Step-by-step guide to hiring an employee in Israel

Hiring an employee in Israel follows a structured seven-step sequence. Each step carries its own documentation requirement and, often, its own legal deadline. The steps below apply whether you're hiring directly through your own entity or through an EOR — though an EOR handles the compliance mechanics of most of these steps on your behalf.

Step 1: Choose your hiring model

Your structural choice determines the compliance path you follow. The three options for hiring in Israel are:

• EOR (recommended for most new entrants): Use when you need to hire quickly, don't have a local entity, or have fewer than ten employees. An EOR like Deel can place an employee on payroll in days.

• Own Israeli entity: Use when you have a long-term commitment to the market, a team of 10 or more, and the appetite for ongoing registration and accounting. The full entity setup process typically takes three to six months.

• Independent contractor: Use only for genuinely project-based, short-term work that is not core to your business and where the worker has other clients. Given Israel's integration test, anyone working exclusively for your company on a continuous basis is likely to be reclassified as an employee by a Labor Court.

Step 2: Verify right to work

Before any employment begins, employers must verify and record the worker's right to work in Israel:

• Israeli citizens and permanent residents: The teudat zehut (national identity card) establishes identity and right to work. Record the document number in the employment file.

• Foreign nationals: A valid B-1 work permit (or equivalent visa category) issued by PIBA must be in place before the employee's first day. For high-tech workers, the HIT track offers processing in approximately 10 business days. Standard B-1 processing takes three to four months.

Step 3: Draft and issue a compliant employment contract

Israel requires a signed, written employment agreement issued within 30 days of the start date. Key requirements:

• Timeline: Issued within 30 days of the start date. Statutory penalties apply for late or missing contracts.

• Language: Hebrew is strongly preferred and should be the governing language in any contract adjudicated by an Israeli Labor Court.

• Mandatory clauses: Job title and duties, start date, work location, gross salary and its breakdown, working hours per week, designated pension fund, annual leave entitlement, notice period, and probation terms if applicable.

• Section 14 clause: The contract should explicitly include the Section 14 arrangement for severance pre-funding — specifying the 8.33% monthly employer contribution and the employee's unconditional entitlement to the accumulated fund on any termination.

• Data protection acknowledgment: For any role involving personal data, include a data-processing consent clause consistent with the Protection of Privacy Law.

Step 4: Register with the local tax/payroll authority

Before running the first payroll, the employer entity must hold a Tax Authority withholding-agent registration (nikui matara). For companies setting up their own entity in Israel, the registration process and timeline are explained in Deel's entity setup guide for Israel.

The full set of registrations an Israeli employing entity needs includes:

• Israel Tax Authority (nikui matara): Payroll withholding registration and monthly employer filings.

• Bituach Leumi: Employer registration must be completed before the first salary payment. This covers NII, health contributions, and maternity allowances.

• Pension fund: Designated in the employment contract. Enrollment must begin by month six (contributions accrue retroactively from day one once enrolled).

• VAT (Ma'am): Separate registration required if the entity will invoice for services.

• Payroll deductions file: Monthly report to the Tax Authority listing every employee's salary components, income tax withheld, and Bituach Leumi deductions.

Step 5: Set up pension/benefits enrolment

Pension enrollment is time-sensitive but often overlooked:

• Pension fund designation: The employment contract specifies the fund. The employer initiates enrollment before or at month six. Contributions accrue from day one.

• Section 14 contribution: The employer's monthly 8.33% severance contribution flows into the same pension fund as the pension component. Set this up in the payroll system from the start.

• Dmei Havra'a: Configure the recuperation-pay accrual in the payroll system from the first month. The first payment falls due after 12 months of service.

• Transport reimbursement: Confirm the employee's home address and commuting route before the first payroll run, and set the daily reimbursement amount based on actual public transport cost (up to ILS 22.60/day).

• Keren Hishtalmut: If offered, set up the training fund alongside pension — typically 7.5% employer and 2.5% employee.

Step 6: Run the onboarding workflow

Before or on day one, complete the following checklist:

• Form 101: Complete this mandatory tax declaration at hire. It captures the employee's personal details, credit-point elections, other income sources, and pension fund information.

• Bituach Leumi registration: Confirm the employee is registered with Bituach Leumi before the first salary payment.

• Payslip explanation: Israeli payslips list every component and can be complex for new employees. Provide a brief component guide during orientation.

• Safety and policy documentation: Issue written workplace safety guidelines, confidentiality agreement, IP assignment, and any other contractual documentation specific to the role.

Step 7: Maintain ongoing compliance

Compliance doesn't end at onboarding. Key ongoing obligations:

• Monthly NII reporting: Bituach Leumi employer reports are due by the end of each calendar month.

• Reserve duty (Miluim): Employers must continue paying full salary during reserve service, file a reimbursement claim with Bituach Leumi, and not dismiss an employee during reserve service or within 30 days of its completion.

• Extension order monitoring: Subscribe to official Ministry of Labor updates to catch changes before they take effect.

• Annual Form 101 renewal: Each January, employees complete a new Form 101 updating their credit-point elections and any changes in tax status.

• Year-end Bituach Leumi reconciliation: Verify that total NII contributions match the actual salary figures reported to the Tax Authority.

Hiring internationally into Israel — visas and right to work

Israel's visa system for foreign workers is managed by the Population and Immigration Authority (PIBA) and built on a B-1 permit framework with several subcategories designed for different employment contexts. A foreign national who will physically work in Israel must hold an approved work permit before their first day.

For companies hiring through Deel's EOR in Israel, immigration support may be coordinated through Deel Mobility alongside the EOR engagement.

The B-1 work visa — Foreign Expert route

The standard long-term route for hiring a skilled foreign national in Israel is the B-1 Foreign Expert visa. Requirements as of 2026:

• Eligible employer: The sponsoring employer must be a registered Israeli legal entity, or an EOR acting on the entity's behalf.

• Minimum salary threshold: ILS 27,132 per month gross (double the current average Israeli salary, as updated by the Israel Innovation Authority effective 1 January 2026). The threshold must be met as base salary, excluding bonuses and benefits.

• Qualifications: The applicant must hold a relevant academic degree or demonstrate expert-level professional experience in a specialized field that cannot reasonably be filled by Israeli candidates.

• Processing timeline: Standard B-1 processing involves three stages — a work permit application to the Work Permit Unit, Ministry of Interior review, and consular processing at the Israeli embassy in the applicant's home country. The total timeline is approximately three to four months.

• Validity: Up to one year per permit, extendable annually for a cumulative total of up to 63 months.

The High-Tech Visa (HIT) — B-1 expedited track

Companies recognized as high-tech employers by the Israel Innovation Authority can access the B-1 High-Tech (HIT) route, which offers significantly faster processing than the standard B-1:

• Processing time: Approximately 10 business days for the work permit, followed by consular processing in the applicant's home country.

• Minimum salary: ILS 27,132 per month gross (same threshold as the standard B-1 one-year visa, per the 2026 update).

• Validity: Up to one year, extendable for up to five years and three months.

• Family inclusion: Spouses of HIT visa holders are eligible for their own general work authorization.

• Eligibility gate: The employing company must be classified as a high-tech company by the Innovation Authority.

Short-term options (up to 90 days)

For project-based or temporary assignments, two expedited routes exist for qualifying applicants:

• SEA — Short Employment Authorization: Available to nationals of countries with a visa-waiver arrangement with Israel. Processed within approximately 6 working days. No consular processing required before entry. Valid for up to 90 days per calendar year. No minimum salary requirement.

• STEP — Short-Term Employment Permit: Available to all nationalities, including visa-required nationals. Typical timeline is two to three weeks from application submission. Valid for up to 90 days per calendar year. Commonly used for technical specialists.

Both short-term routes are incompatible with ongoing employment arrangements. If the engagement is expected to extend beyond 90 days or recur regularly, the standard B-1 Foreign Expert or HIT route is the appropriate path.

Visa comparison at a glance

The following summarizes the four primary routes for employing a foreign national in Israel:

How EOR and Deel Mobility support visa processes

In an EOR arrangement where Deel acts as the employing entity, the immigration process may be coordinated through Deel Mobility alongside the EOR engagement. The applicable sponsorship, permit route, documentation requirements, and processing timelines depend on the specific visa category and the individual's nationality. For complex cases or roles requiring specialist justifications, Deel Mobility can assess eligibility and coordinate the applicable immigration process.

Termination, redundancy, and offboarding

Israel is not an at-will jurisdiction. Every dismissal must be preceded by a documented shimua hearing, supported by a lawful reason, and paired with statutory notice and severance pay where applicable. Israel's Labor Courts enforce procedural requirements strictly — a substantively valid reason for dismissal does not protect an employer who skipped or mishandled the shimua process. Procedural defects are an independent source of liability.

The Ministry of Labor and the Notice Period (Dismissal and Resignation) Law, 5761-2001 govern the procedural requirements at each stage.

Fair dismissal grounds

In Israeli law, dismissal must be grounded in a legitimate reason — typically one of the following:

• Performance: Documented failure to meet established performance standards after fair warning and a genuine improvement opportunity.

• Conduct: Breach of workplace policies, misconduct, or violation of the employment agreement. Gross misconduct can justify dismissal without notice, but courts scrutinize such claims tightly.

• Business necessity: Genuine operational restructuring, role elimination, or economic hardship — documented, not a pretext for a targeted dismissal.

• Incapacity: Long-term inability to perform the role due to illness or disability, handled with Ministry of Labor coordination for protected employees.

Even where a legitimate reason exists, the employer must still complete the full shimua process before making a final decision.

The shimua pre-termination hearing

The shimua (literally: "hearing") is a mandatory, substantive procedural step — not a formality. Israeli Labor Courts treat a skipped or rubber-stamped shimua as an independent grounds for compensation awards, in addition to any substantive wrongful-termination claim.

The process requires four steps, in order:

• Written summons: Send a written notice clearly stating that dismissal is being considered and detailing the specific grounds.

• Preparation time: Give the employee enough time to prepare a genuine response — typically three to five working days.

• The hearing: Listen to the employee's arguments with an open mind. The employee may bring a representative — a lawyer, union representative, or colleague. Take minutes.

• Written decision: Issue a written decision after genuinely considering the response, explaining whether dismissal proceeds and why.

Protected employees

Several categories cannot be dismissed without prior Ministry of Labor approval:

• Pregnant employees: Cannot be dismissed during pregnancy or for the first 60 days after returning from maternity leave.

• Employees on reserve duty: Cannot be dismissed during active reserve service or within 30 days of completing reserve service exceeding two days.

• Employees on certified sick leave: Cannot be dismissed during a period of certified absence exceeding 30 days.

Notice periods

The Notice Period (Dismissal and Resignation) Law, 5761-2001 sets the statutory minimum notice for monthly-paid employees as follows:

The same notice scale applies symmetrically when an employee resigns. Employers may opt for payment in lieu of notice — paying the employee's full regular salary for the notice period while ending active work immediately.

Severance pay

Under the Severance Pay Law (1963), a dismissed employee who has completed at least one continuous year of service is entitled to one month's gross salary per completed year of service, calculated using the final monthly salary as the base. Where a Section 14 arrangement is in place, the accumulated fund in the pension fund covers this liability exactly. The employer instructs the pension fund to release the balance to the employee at termination, with no additional payment required.

Redundancy process

When a company conducts multiple simultaneous dismissals — restructuring or headcount reduction — additional requirements apply:

• Individual hearings: Each affected employee receives their own separate shimua hearing. A single group information session does not satisfy the legal requirement.

• Union notification: Where a recognized workers' committee or trade union represents the employees, it must be formally notified before dismissal notices go out.

• Objective selection criteria: The selection process must be documented and defensible — role elimination, skills requirements, or seniority are all supportable grounds.

• Protected employees: Any protected individual on the list requires Ministry of Labor approval before dismissal can proceed.

• Timeline: In larger redundancies, the process from initial union notification through individual hearings to final notice can take several weeks. Build this into the restructuring timeline.

How Deel handles offboarding

When a client company initiates an offboarding through Deel's EOR, Deel coordinates every step:

• Scheduling and running the shimua hearing, with full documentation of summons, the hearing itself, and the written decision letter.

• Issuing the statutory notice or processing payment in lieu through payroll.

• Confirming the Section 14 balance with the pension fund and instructing its release to the employee.

• Calculating and paying any remaining Dmei Havra'a accrual and unused annual leave balance in the final payslip.

• Closing the Bituach Leumi enrollment and Tax Authority records.

• Meeting the statutory 9-day wage-payment deadline for the final payslip under the Wage Protection Law.

Hire in Israel with Deel

Israel's talent market is exceptionally strong — the country has one of the highest concentrations of engineers and technical professionals per capita in the world, and its startup and enterprise technology sector spans cybersecurity, fintech, defense technology, enterprise software, and life sciences. For companies that want access to that market, the employment-law framework described in this guide is not optional complexity — it's the operating environment every employer must work within.

Doing that compliantly without a local entity requires:

• A registered Israeli employing entity with Tax Authority, Bituach Leumi, and pension fund enrollment already in place

• Section 14 severance arrangements set up from day one in every employment contract

• Hebrew-language monthly payslips (tlush maskoret) with every mandatory component correctly reflected

• Form 101 processing at hire and each January

• Shimua hearing documentation at every termination

• Reserve-duty reimbursement coordination with Bituach Leumi when employees are called up

Deel Hire identifies the right hiring path for your situation. Where employer of record (EOR) is the appropriate model, Deel's EOR solution manages the local employment, payroll, benefits, and statutory administration:

• No local entity required: Deel is already registered in Israel, with withholding-agent status, Bituach Leumi employer enrollment, and pension fund relationships in place.

• Compliant payroll from day one: Hebrew-language payslips, Tax Authority filings, and Form 101 management handled by Deel's local team.

• Section 14 pre-configured: Every applicable Israel EOR employment agreement includes the standard Section 14 arrangement, so severance builds correctly from the start without balloon-payment risk.

• Statutory benefits administered: Mandatory pension, Bituach Leumi, recuperation pay, and applicable transport reimbursement are all administered through Deel's payroll engine. Keren hishtalmut can be included when part of the employee's package.

• Managed terminations: Deel coordinates the shimua process, final settlement, pension-fund release, and closing Bituach Leumi and Tax Authority filings.

Book a demo below to see how Deel can get your first Israeli hire running in days, with local EOR employment, payroll, and compliance administration handled from the start.