Employer of record in Israel: costs and rules

Israel's rules that change the budget

• National Insurance has two bands. Bituach Leumi charges the employer 4.51% on pay up to ILS 7,703 a month and 7.6% from there to the ILS 51,910 ceiling (2026 bands, in force January 1). At ILS 11,333.33 a month that works out to 5.50%. Health tax is deducted from the employee only.
• Pension is compulsory for employers. Under the extension order, the employer pays 6.5% to pension and 6% to a severance component, and the employee pays 6% (secondary sources: Shibolet law firm, CWS Israel).
• Recreation pay (dmei havraa) is an annual cash bonus. After the first year the employee gets ILS 451.50 per day (2026 private-sector rate, order published August 18, 2026) for 5 days, rising to 10 days with tenure (secondary sources).
• The minimum wage rose on April 1, 2026 to ILS 6,443.85 a month (ILS 35.40 an hour on a 182-hour month), up from ILS 6,247.67. Pages written before that date are out of date.
• Annual leave starts at about 12 working days (16 calendar days) and grows with seniority, per secondary sources.

We have not yet confirmed Israel's notice periods, probation rules, paid holiday count or standard week from an official source; the Kol Zchut English pages were removed in 2023. Ask the EOR for those terms in the employment contract and check them against the Ministry of Labor.

Employment costs and rules in Israel

What an EOR charges to employ someone in Israel

Severance in Israel is paid as you go

The Severance Pay Law sets one month's salary per year of service. Most employers fund it monthly through the pension's severance component under Section 14, at 6% or at 8.33%. One month a year is 8.33% of annual salary, so the choice matters: at ILS 136,000 the gap is ILS 3,168.80 a year per person. Ask each EOR which rate its Israeli contract uses and whether Section 14 applies. A provider that quotes 6% and a rival that quotes 8.33% are not pricing the same job.

Keren Hishtalmut, the study fund (7.5% employer, 2.5% employee), is customary in tech but not mandatory for most sectors. If you offer it, add 7.5% of salary, up to its tax-exempt ceiling, to the totals below.

Cost of one Israeli employee on ILS 136,000

The sample salary is ILS 136,000, roughly USD 40,000 at an assumed 3.40 ILS per USD that we did not fetch, so the EOR fee stays in dollars.

Above ILS 51,910 a month no further National Insurance is due. To test other salaries, use the calculator for international employee cost, and see how Israel ranks against its neighbors in the EOR cost index by country.

Which EOR to use in Israel

Ranked by our published scores (how we score providers), Multiplier leads at 79 and Oyster follows at 64. Multiplier lists $459 a month on an annual plan ($499 monthly) and says it owns entities in 160+ countries; its terms need 30 days to process a termination. Oyster lists $699, takes a refundable deposit of at least one month of total service cost and credits it about 60 days after the end date. Remote (62) and Deel (54) both list $599. Compare them in the best EOR rankings, or read the Deel EOR review, Remote EOR review and Oyster EOR review before you sign.

Contractor or employee in Israel

Israeli engineers often start as contractors for US companies. Once the person works full time for one client under its direction, the arrangement looks like employment, and the missed pension, severance and recreation pay become the bill. A contractor of record carries that classification risk for you; a contractor management tool only handles contracts and payments.

When an Israeli entity makes sense

The EOR fee is $7,188 a year per person at $599 a month. With a local company you replace that fee with registration, bookkeeping, a payroll provider and your own pension fund setup. The EOR or entity break-even guide shows how headcount changes the answer.