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17 February 2023
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Payroll compliance in Israel

Israel has an advanced economy, with well-established rules and regulations for doing business in the country. Israel sits at 64th place in TMF Group’s 2022 Global Business Complexity Index, making it one of the least complex countries to do business in.

Israel’s labour laws are enshrined in several pieces of legislation, including the Work and Rest Hours Law (1951), the Annual Vacation Law (1951), the Salary Protection Law (1958), the Severance Pay Law (1963), the Sick Leave Payment Law (1976), the Minimum Wage Law (1987), the Advance Notice for Termination Law (2001), and the Notice to the Employee Law (Employment Terms) (2002).

  • Salaries in Israel must be paid at least monthly, by the ninth day of the subsequent month.
  • Employees in Israel typically work from Sunday to Thursday, often with a short workday on Friday. The maximum number of working hours are nine hours per day and 42 hours per week, with employees generally being entitled to 36 hours of consecutive rest per week. Overtime is capped at 16 hours per week, with the first two hours paid at 125% of the base rate, and the rest paid at 150%.
  • Employees are entitled to annual leave on a growing scale, according to the duration of their employment.
  • Employees in Israel may be required to perform reserve military duties, and this cannot be attributed to the employee’s annual leave. Employers are required by law to allow employees to attend such duties and continue to pay their regular salary during this time.
  • Sick leave credits in Israel are earned: employees earn 1.5 paid sick days for every month of employment, with a maximum of 90 paid sick days.

If you’re doing business in Israel and are looking to learn more about the country’s labour laws, incorporation procedures, tax implications and compliance requirements, request a copy of our full country profile, Doing business in Israel

Payroll compliance guide

The global payroll compliance landscape can be a difficult one to navigate and interpret. Overseas businesses can be subject to greater scrutiny on the part of local governments, regulators and tax authorities.

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