Employer of Record (EOR) in Israel
An EOR in Israel allows businesses to enter the market quickly and help maintain compliance with local laws, all while reducing the overhead costs of establishing a local entity. Atlas HXM offers a seamless EOR service that handles all aspects of employment from payroll processing to compliant administration.
Partner with Atlas HXM for a cost-effective, compliant solution to hire and manage your workforce in Israel.
Quick Overview of EOR in Israel
Expanding into Israel doesn't have to mean drowning in paperwork or hefty setup costs. With an Employer of Record (EOR), you can bypass the complexities of local regulations and quickly hire employees, all while maintaining compliance with Israel's labor laws. From payroll processing and tax compliance to benefits management, an EOR takes care of the legal nitty-gritty like National Insurance contributions, so you can focus on growing your business without the need to set up a costly local entity.
The EOR model offers a low-risk, cost-effective alternative to setting up a subsidiary. Establishing a local entity in Israel can cost anywhere from USD 20,000 to USD 40,000 plus the cost of maintaining human resources (HR), legal assistance, accountants and more. It can also become highly administrative. By partnering with an EOR, you can avoid these setup costs and enter the market faster, avoiding the overhead of a physical office. This is especially beneficial for startups, SMEs, and businesses testing new markets, who need to act quickly and comply with complex local regulations.
How an EOR Works
Atlas HXM provides EOR services that ensure your business remains compliant with Israel's labor laws while you focus on growing your operations, free from administrative and legal burdens.
Candidate Selection
Atlas HXM does not recruit candidates but will check the employment setup for compliance around new hires like validating right-to-work, reviewing contract terms against Israeli rules, and configuring payroll and statutory obligations correctly.
Employment Contracts
Atlas HXM drafts and administers employment contracts in compliance with Israeli labor law. In the contract, we clearly outline employment terms to reduce the risk of future disputes, such as:
Job title and responsibilities
Salary, benefits, and working hours
Leave entitlements and notice periods
Payroll & Benefits Management
Payroll is processed in Israeli shekels (ILS), including:
Accurate tax withholdings and National Insurance contributions
Statutory benefits such as health insurance and pension contributions
The EOR also helps maintain compliance with mandatory benefits, so employees are protected under Israel's laws.
Ongoing HR Support
Provides HR support, including: Leave management, employee relations and regulatory updates throughout the employee's tenure. This allows businesses to focus on core operations, while Atlas HXM handles ongoing compliance.
What to Choose: EOR vs PEO
Work Life in Israel
Israel's employment framework is designed to balance operational needs with strong employee protections. Here's what you need to know:
Employment Types:
Permanent: Ongoing employment with full statutory benefits and strong job security protections.
Fixed-Term: Hired for a specific project or defined duration, with written contracts required for terms exceeding 30 days.
Temporary: Short-term assignments up to 12 months; entitled to proportional statutory benefits and protections.
Probation Periods: Maximum 12 months for permanent positions. Probation periods must be explicitly stated in employment contracts. Notice periods during probation differ depending on the employee’s tenure, ranging from 1 day per completed month of service during the first 6 months (e.g., 3 days' notice for 3 months of service) up to approximately 2.5 weeks for an employee reaching 11 to 12 months of service, and the EOR ensures that all terms comply with Israeli labor law.
Working Hours & Overtime: In Israel, the standard workweek is 42 hours, with a maximum of 8 hours per day. Employees must receive a minimum 36-hour continuous rest period weekly, including the Sabbath. For eligible employees, overtime is strictly regulated and only allowed in emergencies, with payment at 125% for the first 2 hours and 150% for additional hours, with maximum 4 hours overtime per day and 100 hours per year. The EOR ensures that all overtime is calculated correctly and that employee work hours comply with local regulations.
Leave Entitlements
Leave Type | Eligibility / Duration | Payment / Notes |
|---|---|---|
Annual Leave | 16-28 days annually based on service years | Regular salary paid in advance; increases with tenure |
Maternity Leave | 26 weeks (7 before birth, 19 after) | National Insurance allowance up to ILS 1,752.33 daily; job protection guaranteed |
Paternity Leave | 7 days | National Insurance allowance; must be taken immediately after birth |
Sick Leave | 1.5 days per month worked (max 90 days) | First day unpaid; 50% pay for days 2-3; 100% thereafter |
Public Holidays | All statutory holidays | 150% pay for work on holidays; alternative rest day provided |
Payroll & Benefits: Wages must meet minimum wage requirements set annually by the government. Atlas HXM manages payroll in ILS, National Insurance contributions (employer and employee), mandatory severance pay accrual, health insurance, and pension contributions. Supplemental benefits can include private health insurance, professional development, transportation allowances, and technology stipends.
Atlas HXM can help you manage these aspects and can help ensure that employees are supported and compliant with Israel's labor laws while businesses can focus on operations without administrative burdens.
What to Choose: Indirect vs Direct EOR
Taxes & Compliance
Israel operates on a calendar-year tax system, running from January 1 to December 31. Employers must submit monthly payroll taxes and National Insurance contributions by the 15th of the following month, and annual tax returns by April 30th. Income tax withholdings must be remitted by the 15th of the month following payment.
Category | Details |
|---|---|
Employer Payroll Tax | National Insurance: 4.5%–7.6% of salaryof gross salary subject to salary thresholds Maternity benefit Unemployment insurance Work accident insurance |
Employee Payroll Tax | Progressive income tax: 10%-50% based on income brackets National Insurance contributions (varying rates) Health insurance premiums |
Pension System | Basic old-age pension through National Insurance Institute Retirement age: 67 for men, 65 for women (transitioning to 67) Minimum 60 months contributions in 10 years preceding retirement |
VAT & EOR Costs: Israel applies a 17% VAT rate to most services, including EOR fees. EOR services are generally subject to standard VAT rates as professional services. Businesses may be able to recover VAT paid on EOR services depending on their VAT registration status and business activities.
Atlas HXM handles tax compliance, including progressive income tax calculations, National Insurance contributions, year-end filings, and expatriate tax planning, ensuring businesses remain compliant with local laws while minimizing administrative burden.
Termination
Employees must give written notice for termination, with statutory notice periods varying by employee category and length of service. For wage workers: 1 day per month (first year), 14 days plus incremental increases (second year), 21 days plus incremental increases (third year), and 1 month (after 3 years). For salaried workers: 1 day per month (first 6 months), 6 days plus 2.5 days per month beyond 6 months (months 7-12), and 1 month (after 1 year). Severance pay is required for employees dismissed after one year of continuous service (1 month salary per year of service). Strong employee protections exist during pregnancy, sick leave, and union activities. The EOR helps ensure proper handling of terminations, including notice periods, severance calculations, final wages, and required documentation.
5 Things to Look for in an EOR Provider in Israel
Local expertise and knowledge of Israeli labor laws, National Insurance contributions, and immigration requirements.
Advanced technology for payroll, reporting, and HR system integration.
Experience in your industry and understanding of Israeli business culture.
Strong compliance track record and relationships with government agencies and legal advisors.
Global presence to support multi-country expansion, with verified security and compliance standards (ISO 27001/27017/27018, GDPR).
Atlas HXM provides direct EOR services, managing payroll, compliance and benefits efficiently. Atlas HXM's unified platform automates HR, payroll, and compliance tasks, while offering premium employee support, global benefits, and access to 9,000+ learning courses. Recognized by Everest Group PEAK Matrix 2025 and NelsonHall NEAT Assessment 2026, Atlas HXM combines compliance, technology, and global expertise.
FAQs
How quickly can I hire employees in Israel through an EOR?
You can typically hire employees within 1-2 weeks, compared to 3-6 months required for establishing a local entity.
What is the minimum wage in Israel?
As of April 2026, the minimum monthly salary is ILS 6,443.85, with rates varying based on working hours and schedule.
Are there restrictions on terminating employees?
Yes, Israel has strong employee protection laws requiring proper notice, just cause (if applicable), and severance pay for employees with over one year of service.
How does overtime work in Israel?
Overtime is strictly regulated and only allowed in emergencies. Payment is 125% for the first 2 hours, 150% for additional hours, with a maximum of 4 hours per day and 100 hours per year.
What are the main employer payroll contributions?
Employers contribute National Insurance contributions of approximately 4.5% - 7.6% of gross salary which funds benefits such as unemployment insurance, maternity, and work accident insurance.
What is the standard vacation entitlement?
Employees are entitled to 16-28 days of annual vacation based on years of service, with vacation pay provided in advance equal to regular salary.