Employer of Record in Israel: what one employee really costs

Questions people ask before booking a demo

How much does an employer of record cost in Israel?

For one employee at US$75,000 gross a year (about ILS 228,000), the statutory employer charges are national insurance at 4.51% on the first ILS 7,703 a month and 7.6% up to ILS 51,910 a month, plus 6.5% pension and 6% severance on the insured salary capped at the national average wage. That comes to at least 15% on top of salary, and the words matter: it is a floor, not a final figure, because the severance owed above the capped monthly provision falls due on dismissal and is not counted here. Published employer-of-record fees then run from US$199 to US$699 per employee per month, so the all-in cost starts at roughly US$7,400 a month and reaches about US$7,900 with the most expensive provider, before that severance tail.

Why is this figure lower than the 19% to 23% providers quote for Israel?

Because the extension order that creates the Israeli pension duty caps the insured salary at the average wage in the economy, ILS 13,769 a month from 1 January 2026, and because its minimum severance rate is 6%, not 8.33%. Provider quotes apply both pension and severance to the whole salary and use 8.33% for severance, which is lawful, common and more generous than the statute requires. This page shows the floor Israeli law compels, which is why it is published as 'at least' rather than as a total; the difference is contractual, and it is worth asking each provider which of the two it has priced.

Is the compulsory pension in Israel really capped?

Yes, for the statutory minimum. Section 6(c) of the consolidated extension order applies the pension duty to the salary paid or the average wage in the economy, whichever is lower, so the mandatory 6.5% and 6% stop at ILS 165,228 a year. That is well below a senior Tel Aviv salary, which is why Israel's statutory on-cost falls as pay rises. Most Israeli employers insure the whole salary anyway, by contract or collective arrangement, and any offer competitive in the tech market will do the same.

How many paid vacation days does Israeli law require?

The Annual Leave Law gives 16 leave days a year for each of the first five years of service, rising to 18 in the sixth year, 21 in the seventh and one more day a year after that up to 28. Those are leave days rather than working days: only one weekly rest may be counted for every seven leave days, so on the standard Sunday-to-Thursday week the first-year entitlement works out at 12 working days off, which is the figure used here.

Is a 13th-month salary mandatory in Israel?

No. Israel has no 13th-month entitlement. What it has instead, and what foreign employers routinely miss, is a set of annual obligations that are not a percentage of the payslip: convalescence pay scaled by seniority, a travel allowance per working day, and in the tech market a study fund that is optional in law and close to compulsory in practice. None of the three is counted in the total on this page, and all three will appear on a real Israeli invoice.