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Undoubtedly, payroll is a critical process for any organization. The pay cycle in Israel refers to the period for which an organization pays its employees, and this can vary depending on the pay frequency that the organization chooses to adopt.

In Israel, the payroll cycle is typically monthly. All employees should receive a salary payment at least once a month.

The 13th-month salary payment is not legally required in Israel; however, an employee is entitled to a Recreation Payment after one year of service.

The payment is usually made between July and September, and the amount of compensation is determined by law, updated annually, and corresponds to the number of years of employment.

Overtime work cannot exceed four hours of overtime per day or 12 hours per week. Generally, employees are required to pay overtime for any work performed more than

• Eight hours per day for those working a six-day workweek,
• Nine hours per day for those working a five-day workweek, or
• 45 hours in a week

Employers must pay 125% of the worker's normal wages for the first two hours of overtime in a day and 150% for any hours thereafter.

Employees who work on a paid holiday must be compensated with 150% of their normal pay and an additional vacation day.

In Israel, tax documents should be kept for ten years from the end of the tax year for which a return is filed. Documents generally should be kept for seven years.

Increase in pension benefits in 2023: With effect from January 2023, the employees qualifying with the mentioned terms shall get increased disability pensions and old-age pension benefits.

Amendment of tax rates, deductions, and benefits for 2023: With effect from January 11, 2023,

• Increment of 3% for additional tax on high income exceeding 58,190 Israeli shekels (US$17,005) per month and 698,280 shekels (US$204,065) per annum.
• The amount of tax exemption on rental income is increased to 5,471 shekels (US$1,598).
• The updated tax credit amount of 235 shekels (US$68) per month.

The Employment Equal Opportunities Law prevents age discrimination in hiring, employment terms, promotion, training, termination, severance, and termination benefits.

The Notice to Employees and Job Candidates (Terms of Employment and Screening and Recruitment Process) Law obliges the employer to provide each employee with a notice of the employee’s main employment terms using a stipulated form.

Although, in general, Israeli law does not require an employment contract to be in writing, most employers choose to provide their employees with a written employment agreement.

At present, the Minister of Industry, Trade, and Labour has prescribed that the employer must keep the following documents at the employee's place of work:

• A copy of the health insurance policy obtained for the foreign employee;
• A record of the employee’s residential address;
• A record of working hours for the previous three-month period.

There is no law with respect to the length of a probation period in Israel; the duration of probation periods should be reasonable, and the probationary period is stipulated in the employment contract or a collective agreement. It usually ranges between three to six months. The minimum statutory written prior notice for a monthly employee is one day for each month during the first six months of employment and two-and-a-half days for every additional month.

There are nine national holidays in Israel.

• Apr 6: Passover (Day 1)
• Apr 12: Passover (Day 7)
• Apr 26: HaAtzmaut
• May 26: Shavuot
• Sept 16 and Sept 17: Rosh Hashana
• Sept 25: Yom Kippur
• Sept 30: Sukkot (Day 1)
• Oct 7: Shemini Atzeret / Simchat Torah

Sick leave is accrued at a rate of 1.5 days per month, with a maximum of 90 days in total. The payment of sickness is dependent on the length of leave as follows:

• For the first day of sick leave, the employee is not entitled to being paid.
• On the second and third day of sickness, the employee is entitled to 50.00% of their regular pay.
• From the 4th day onwards, the employee is entitled to 100.00% of their regular pay.

Upon return, the employee must provide a medical certificate from a medical professional.

Female employees are entitled to 26 weeks of maternity leave following the completion of one year of service within an organization.

The employee can take up to seven weeks of leave before the predicted due date of the child and the remainder after the birth. Israel’s Social Security system compensates the maternity leave if the employee is eligible and generally equals 15 weeks of fully paid leave and 11 weeks of unpaid leave.

Employees who have worked for their employer for less than one year are entitled to only 15 weeks of maternity leave.

An employee can extend their maternity leave entitlement by three weeks in the case of multiple or complicated births. In the unfortunate incident that a mother loses her child after the birth, the employee can take unpaid maternity leave up to 60 post the birth date.

Following a partner going into labor and up to 24 hours following the birth, an employee is allowed to be absent from work on account of the accrued sick leave.

Spouses are entitled to take the first five days following the child’s birth as paid paternity leave; the first three days of this leave will be paid in account of their accrued annual vacation and the following two days on account of their accrued sick leave.

Employers in Israel are required to grant employees 16 to 28 days of paid vacation, the amount depending on workers' length of service with the same employer. 

An employee must take at least seven consecutive days off in any given year but can carry over the remaining leave days into the next two years.

Employees may not choose to take pay in lieu of leave, but upon termination they are compensated for any unused leave they have earned.

Employees forfeit their right to be paid for leave if they work for another employer during the leave period. 

In Israel, in the event of the death of an immediate family member, the employee is entitled to up to seven calendar days of paid leave to grieve for their loss. The employer fully compensates bereavement leave once the employee has completed three months of service. 

In Israel, employees serving on reserve duty must still be paid by their employer. Military service is mandatory in Israel. 

Termination is an evolving issue in labour court rulings and is subject to good faith obligations. This means an employer must have a justified reason for terminating an employee’s employment. 

The Advance Notice for Dismissal and Resignation Law requires both employers and employees to give a notice of termination before dismissal. The length of the notice period is set according to the duration of employment, with a maximum of 30 calendar days. An employer does not require the employee to attend work during the notice period if it pays the employee in lieu of notice.

In Israel employees who are being dismissed are entitled to severance pay upon completing one year of service. The severance pay is calculated at one month’s salary multiplied by the number of years of employment (including work for part of a year).

Under the Section 14 Arrangement, the employer must carry out monthly contributions equivalent to 8.33% of the employee’s monthly salary payment towards the severance pay component.

The accrued amount is to be released to the employee upon termination, even if the employee resigned without circumstances that would entitle the employee to severance pay.

For work or business purposes, a professional relocating to Israel should use the B/1 work visa (combined work permit and employment visa). 

The B/1 work visa is a business visa granted to foreigners who have been approved to stay in Israel for a limited time for work. It is issued to experts, scientists, high-tech workers, and artists.

Israeli work visa requirements for this permit are as follows:  

1. Approval from the Ministry of the Interior
2. Visa interview
3. Verified certificate of good conduct
4. Certification of medical exam performed by an approved clinic or hospital recognized by the mission
5. Biometrics (fingerprints and photographs)
6. Completed Israeli work permit visa application form
7. Two passport-size photos
8. A signed document from the employer stating that they are offering a position of employment

Upon arrival in Israel, customs will stamp the visa, making it valid for 30 days. Extensions are then possible for up to one year and allow the foreigner to leave and enter Israel as many times as required.

Specialists working in academic or non-academic fields for more than three months will be issued the B/1 visa and require:

• A higher salary requirement (at least double the average wage)
• CV/resume
• Academic certificates (if not in English, diplomas will need to be officially translated into Hebrew and notarized by an Israeli notary)
• Copy of passport (must be valid for a minimum of a year and three months from the start of the process)
• Power of attorney
• Completed and signed application forms
• Three passport-size photos
• Marriage and birth certificates (for children under 18) for any accompanying family members (original with apostille)
• Police clearance (issued within the last six months)
• Medical clearance (issued within the previous three months).  

The maximum stay and work period for these employees is five years and three months from the start date in Israel. The visa usually takes between two to three months to process.

• Criminal background checks are strictly forbidden, except for government security agencies specified by law. Employers providing services to children and people who have disabilities or mental illnesses must require that all male applicants provide a police confirmation that they have not been convicted of a sex crime. Credit checks for employment purposes are also forbidden by law
• Medical background checks are generally irrelevant (save for industries and occupations) and should not be included in background checks
• Drug screening is generally forbidden unless required by law in certain specific cases