Setting Up a Business

The amount deposited each month to the pension fund consists of two components– a percentage of the employee’s salary (deducted directly by the employer) and a sum paid directly by the employer (calculated as a percentage of the employee’s salary, but at the employer’s expense). An additional component of pension insurance is “severance payment” – an additional sum, calculated as a percentage of the employee’s salary, deposited monthly by the employer to be paid in case the employee is terminated.

National Insurance funds are also made up of two components – a certain percentage is deducted from the employee’s salary while the other is paid by the employer. For a salary or part of a salary that is up to 60% of the average salary (6,164 NIS or approximately 1,751 USD) the employer is required to pay 3.45% of the salary. For the part of the wage that is over 60% of the average salary and below the maximum income subject to insurance fees (43,890 NIS or approximately 12,469 USD), the employer is required to pay 7.5% of the salary.

Employees are entitled to partial or full wages for missed work days due to sickness. For the first day of illness, employees are not entitled to any wages; for the second day and third day of sickness they are entitled to 50% of their pay, and they are entitled to full wages from the fourth day of illness onward. Periods of sickness to be deducted from the employee’s quota are calculated differently for salaried workers and wage workers. Workers are entitled to one and a half sick leave days for every month they work for the employer. The overall number of sick leave days cannot exceed 90 days.

An employee who is pregnant or gave birth is entitled to maternity leave. Employers may not dismiss workers on maternity leave. The maternity leave’s length varies for partial or full maternity leaves. An employee who has accumulated more than 12 months of employment at the same organization before maternity leave begins is entitled to full maternity leave. An employee is entitled to a total of 26 weeks’ leave, of which 7 weeks may be used before the estimated date of birth. An employee who has not accumulated more than 12 months of employment at the same job before maternity leave begins is entitled only to partial maternity leave. In that case, the worker is entitled to a total of 15 weeks’ leave, of which 7 weeks may be taken before the estimated date of birth. A male spouse can take paternity leave for part of his partner’s maternity leave (i.e. the duration of paternity leave granted depends on how many weeks remain of the mother’s leave). In any case, the combined maximum maternity leave for both parents is 26 weeks.

Employees may be required to perform reserve military duties during their period of employment. Reserve duty is obligatory for most men in Israel up to age 45. In addition to calling up reserve soldiers as reinforcements to the regular army in routine times (for qualification, training and operational employment), the IDF is also entitled to call up soldiers during emergencies or for urgent security needs.

Reserve military duty may not be subtracted from the employee’s annual leave, and an employer is required by law to allow employees to attend such duties and may not dismiss an employee as a result of reserve duty.

Employees who commute to work are entitled to a travel allowance in addition to their basic salary. The maximum travel allowance per day is currently 22.60 NIS or approximately 6.45 USD.

Most employees in Israel who have worked for an employer for over a year are entitled to recuperation pay. Recuperation pay is calculated by the number of recuperation days the employee is entitled to, multiplied by the recuperation rate as determined by the Ministry of Economy: 378 NIS or 107 USD per day in the private sector.