Israel: Israeli Labour Law: The Essentials

Last Updated: 2 May 2017
Article by Maya Schneider-Hecht and Shlomo Kaplan

The summary below contains essential and practical information relating to employment relations and labour law in Israel. It is intended to provide you with valuable, albeit rudimentary, information, when considering opening a business in Israel.

1. INTRODUCTION

Israeli labour law applies to all employees located in Israel, whether Israeli or foreign (i.e. non-Israeli employees working in Israel pursuant to a valid work visa), and is comprised of a set of cogent statutory rules, regulations and case law. In addition, there are general and special collective agreements and expansion orders which apply to all or certain sectors of the labour market. It should be noted that an employee cannot waive any minimum rights, to which he or she is entitled under Israeli law.

2. DETERMINATION OF EMPLOYMENT RELATIONS

Employers may prefer to engage potential workers as independent "consultants" or "service providers" rather than employees, in order to avoid the requirements of Israeli labour law. However, it is important to note that according to Israeli case law, the determination of whether an individual should be considered an employee is made on a case-by-case basis, taking into account the relationship between the parties in practice, rather than their contractual characterisations. The Israeli labour courts have established various criteria to determine whether an employer-employee relationship exists (e.g. whether the service of the individual is an essential asset to the regular activity of the workplace and whether the individual serves as an integral part of the workplace as opposed to an external entity).

It is therefore strongly advised to properly determine the nature of relations between the parties, in order to avoid liability as a result of failing to provide an employee with his or her proper legal entitlements.

3. EMPLOYMENT AGREEMENT

In general, employment agreements are not required to be in writing. However, the law requires that an employer provides its employees, no later than 30 days from their commencement date, with a written notification which includes certain information regarding their employment terms (e.g. the commencement date, a description of the employee's main duties, the identity of the employee's direct supervisor, the employee's salary, the length of workdays and workweeks, etc.)1. Though the law does not compel employment agreements in writing, we normally recommend that our clients sign such agreements in order to ensure the understandings between the parties and protect the vital interests of the employer, subject to the applicable law.

4. MINIMUM EMPLOYMENT TERMS AND CONDITIONS

Below is a list of the core minimum entitlements of an employee under the Israeli labour law:

(a) Minimum wage

The law2 establishes that an employee shall not be paid less than the minimum wage, as established from time to time. As of November 2015, the minimum monthly wage for a full time position is NIS 4,650 and the minimum hourly wage is NIS 25.

(b) Hours of work and rest

The law3 contains certain restrictions and obligations regarding the permitted amount of working hours per day, night and week, and the obligatory rest periods (including during workdays) applicable to employees. The key points are as follows:

  1. The working week shall not exceed 43 hours and shall consist of not more than six days. It should be noted that, in certain sectors, applicable law determines that the regular working week shall not exceed five working days. Moreover, it is now common practice in many sectors to work only five days per week (Sunday to Thursday).
  2. An employee is entitled to continuous rest of at least 36 hours per week, which shall consist of a day determined according to the employee's religion (e.g. Saturday for Jewish employees).
  3. Employers may not require employees to work more than the maximum working hours per day and per week or to work during the obligatory weekly rest period, unless such work has been permitted by law or a specific or general permission has been obtained from the competent government authority. Please note that according to general permissions which have been issued by the competent government authority, there today exists a limited amount of overtime hours which an employee may work during the working day and week.
  4. The law applies a complex compensation mechanism for overtime work as well as work carried out during rest periods. Such compensation is substantially higher than the regular hourly wage. It has become common practice in Israel for employees who are required to regularly work overtime to be paid a 'global overtime compensation' in addition to their basic salary. The amount of global overtime compensation should be calculated taking into account the average amount of overtime an employee is expected to work per month and should be limited to the maximum amount of overtime hours an employee is permitted to work under applicable law.

Certain classes of employees are exempt from the restrictions and obligations described above, due to the special characteristics of their employment (e.g. managerial positions and positions which require a special degree of personal loyalty). However, as a result of Israeli case law, the cases in which such exemptions apply are fairly limited.

(c) Annual leave

An employee is entitled to a number of days of paid annual leave in each year4. The amount of annual leave to which an employee is entitled depends upon criteria such as the length of the employee's service with the employer, the period of employment in each calendar year and the number of the employee's working days. In general, however, the amount of annual leave ranges from 10 days per year for new employees up to 24 days per year for long-serving employees.

(d) Public holidays

Eight days of Jewish holidays and one day for Israeli Independence Day have been established as paid 'days of rest' in Israel (i.e. nonworking days)5. In addition, applicable law also provides that non-Jewish employees have the right to choose between the Jewish holidays as their days of rest or other days, according to their own religion.

In relation to the Jewish holidays and the Israeli Independence Day, the law provides that those employees who are paid on a monthly basis shall not be entitled to any additional payment for such public holidays, but rather that their regular salary shall not be reduced during months when such holidays occur. In addition, such holidays shall not be deducted from these employees' entitlement to annual leave. Employees paid on an hourly or daily basis shall be entitled to separate reimbursement for such public holidays, subject to certain conditions.

(e) Sick leave

An employee is entitled to accumulate sick leave of one and a half days per full month of employment, and up to a total maximum of 90 days sick leave6. The entitlement for payment during sick leave is as follows: (i) for the first day of absence the employee is not entitled to any payment; (ii) for the second and third days of absence the employee is entitled to receive 50% of the salary he would have received if he had worked on those days; (iii) from the fourth day of absence onwards, the employee is entitled to 100% of the salary he would have received had he worked on those days.

(f) Travel expenses

An employee is entitled to receive compensation for travel expenses to and from work, at a rate which is determined according to the cost of discounted public transportation for such journey, but not more than a maximum daily rate which is updated from time to time. The current maximum daily rate stands at NIS 26.407.

(g) Pension

According to Israel's Compulsory Pension Expansion Order, an employee is entitled to receive pension insurance contributions from his employer, which are comprised of contributions towards both pension and severance pay. The contributions are calculated by reference to the lower of: (i) the employee's wage (as defined under applicable law) or (ii) the average monthly wage in Israel (the "Basic Wage").

As of November 2015, an employer is required to contribute an amount equal to 6% of the Basic Wage towards pension pay and an amount equal to 6% of the Basic Wage towards severance pay, provided that the employee also contributes an amount equal to 5.5% of the Basic Wage towards pension pay. The date upon which contributions should commence depends on whether the employee already has an active pension fund.

(h) Recuperation pay

Following completion of 12 continuous months of employment, an employee is entitled to yearly recuperation days' payment, which is determined according to the employee's length of employment and the prorated scope of employment8. The number of recuperation days for full-time employees per full year of employment ranges between five and 10 days. The level of recuperation pay is updated by the competent authority periodically. As of November 2015, the pay level is NIS 378 per recuperation day. Part time employees are entitled to a pro rata payment.

(i) Contributions to the National Insurance Institute

Employers must contribute funds to the Israeli National Insurance Institute (a government body charged with the social security of Israeli residents) towards national insurance and medical insurance (some of which are to be deducted from the employee's salary). The Scope of deductions increases with the employee's salary9.

5. PARENTAL RIGHTS

In general, Israeli law provides for certain entitlements and protections to pregnant women, women who recently gave birth (or adopted children) and women undergoing fertility treatment. Under certain circumstances, similar protections may also be afforded to men. In addition, under certain circumstances, parents may use their entitlements to sick leave in order to look after their sick children.

With regard to maternity leave, a female employee who has continuously worked for the same employer or at the same place of work for at least 12 months is entitled to 26 weeks of maternity leave10. In the event that the employee's work period is less than 12 months prior to commencement of maternity leave, the maternity leave entitlement is generally restricted to 14 weeks. An employer is not required to pay an employee's salary during the period of maternity leave, although, an employer is required to continue to make contributions towards pension insurance during certain periods of the maternity leave. It should be noted that: (i) under certain circumstances the maternity leave can be extended or shortened; (ii) under certain circumstances a male employee whose wife gave birth is entitled to partial paternity leave; (iii) there are various restrictions and limitations on the employer's ability to dismiss an employee during pregnancy, the maternity leave, and during certain periods after the maternity leave (See paragraph 6(d) below).

6. TERMINATION

The basic conditions for termination of employment are as follows:

  1. Hearing11: an employer who is contemplating the dismissal of an employee is obliged to conduct a hearing prior to reaching a final decision on the matter. The hearing is intended to allow the employee to hear the reasons for his or her intended dismissal, to express an opinion regarding the dismissal, and to allow the employer to reach an informed decision on the matter. There are certain guidelines according to which the hearing should be conducted (e.g. the employer shall notify the employee in writing in advance that his or her dismissal is being considered and the reasons therefor; during the hearing the employee should be given a genuine opportunity to present any argument he or she may have in respect of the contemplated dismissal, etc.).

    Please note that in some circumstances, a failure to properly carry out the hearing procedure may result in the annulment of the dismissal or may entitle the employee to damages.
  2. Advance notice12: according to applicable law, both employee and employer are required to provide each other with an advanced written notice before their termination of the employment. In general, the statutory periods for such advance notice vary depending on the employee's seniority as well as the payment basis (hourly or monthly), reaching as much as one month. Please note that an employer may terminate the employment without giving advance notice to the employee, provided that it provides him or her with a payment in lieu of the advance notice.
  3. Severance pay: other than in certain cases set out under applicable law, an employee who continuously works for the same employer or at the same place of work for at least 12 months13 and is dismissed (or resigns in circumstances which qualify as constructive dismissal) is entitled to severance pay14. In general, the amount of severance pay is calculated by multiplying the employee's last month's salary prior to his or her dismissal, by the number of years worked by such employee (or any part thereof).

    It should be noted, however, that since 2008 employers are obligated to contribute certain amounts towards severance pay, on a monthly basis, to the employee's pension insurance fund. Such amounts are deducted from the employee's entitlement to severance pay upon termination. In certain cases the law further allows an employer to increase contributions towards severance pay. In such cases the amount accumulated in the insurance fund is considered as being paid to the employee in lieu of paying severance pay. In these cases no outstanding obligation is incumbent on the employer upon termination.
  4. General: under applicable law, termination under certain circumstances or due to particular grounds may be found to be illegal (e.g. dismissal of a pregnant employee who worked for at least six months for the same employer or at the same workplace is prohibited unless the employer has received a specific authorisation from the competent authority15, and dismissal due to the employee's religion, personal status or sex and several other grounds is also prohibited, etc.).

Footnotes

1 The Employee and Candidates Notification Law (Terms of Employment and Application Process) – 2002.

2 The Minimum Wage Law - 1987.

3 Hours of Work and Rest Law - 1951 and its subsequent expansion orders.

4 Annual Leave Law - 1951.

5 Law and Governance Ordinance- 1948 and the Independence Day Law - 1949.

6 The Sick Leave Law - 1976.

7 Employers' participation in Travel Expanses to and from Work Expansion Order.

8 Payment of Recuperation Pay Expansion Order.

9 National Insurance Law - 1995.

10 Women Employment Law - 1954.

11 The hearing obligation was established by Israeli labour courts.

12 Advanced Notice for Dismissal and Resignation Law - 2001.

13 Please note that under the Severance Pay Law - 1963, an employee who is dismissed towards the end of the first year of employment may also be entitled to severance pay.

14 Severance Pay Law - 1963.

15 Women Employment Law - 1954.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions