Doing Business in Israel 2015

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Employment

and Labor Law

Overview

Employees enjoy a constantly evolving level of protection in Israel through

a web of labor laws and regulations created by the Israeli legislator, working

together with an active labor judiciary. Doing business in Israel therefore

requires a thorough understanding of these laws and the legal framework

around them, the need for updates regarding any new developments and

the ability for an employer to quickly adapt.

Basic rights granted to Israeli employees under Israeli labor law

Minimum Wage Law:

Enacted in 1987 the law provides a minimum hourly rate, which

is updated from time to time. Currently, the hourly rate is NIS25, however it is due to

gradually rise at July 1st 2016 and again at January 1st 2017, then it will be updated

to NIS26.88

Mandatory Pension Fund:

The Mandatory Pension Insurance Expansion Order - 2008,

provides that all employees (with few exceptions) are entitled to pension insurance.

Previously, the obligation to provide pension insurance only applied to employees who

were subject to collective bargaining arrangements or pursuant to the terms of one’s

employment agreement.

Pension funds require employers to contribute for the “remuneration” of the employee,

an amount equal to 5%-6% of the employee’s monthly salary, up to a maximum amount

determined based on the average monthly salary in Israel (approximately NIS9,300 as

of August 2015). These contributions will constitute the employee's pension fund at

his retirement, along with additional statutory contributions for severance payments

(6-8.33% of the employee’s salary).

Israeli pension funds also include a disability insurance component, part of the

aforementionedcontribution,whichcan

addition,theemployer

is obligated to deduct 5.5-6% from the employee’s monthly salary and transfer such

amount to the employee’s pension fund.

Severance Payment:

Pursuant to the Israeli Severance Payment Law – 1963,

upon dismissal (and under certain circumstances in connection with an employee’s

resignation), an employee is entitled to receive severance payment equal to the amount

of the employee’s latest monthly salary multiplied by the number of years of continuous

employment with the same employer or at the same place of employment.

Each month employers may set-aside an amount equals to 8.33% of the employee’s