Frequently Asked Questions
Contracting in Israel isn’t always straightforward. There are similarities to other countries but there are some differences you need to know about. Here are some of the questions people ask, when inquiring about the process of Contracting in Israel.
Onboarding new employees is a simple process, which includes asking for the following:
- Personal details
- Contact details
- Banking details
- Copy of passport and / or local ID (Teudat Zehut)
We collect these details using our online onboarding tool.
Onboarding a new employee should take less than 1 week. CWS’s process is very quick and efficient, yet to onboard someone new we require the cooperation of both client and employee. The following steps are required for a new employee onboarding:
- Client provides employee contact details.
- Client verifies all employment details (salary + perks)
- CWS issues SOW
- Client Signs SOW.
- We send out an onboarding form
- Employee submits form with all relevant attachments.
- CWS sends out an employment contract,
- Employee signs contract
- CWS Onboarding team completes onboarding onto our system (1 business day).
- CWS onboarding team liaises with pension funds / insurance / other perks and benefit providers (1-2 days).
As for invoicing and payments, it’s a little different than other countries.
In Israel, companies don’t invoice for payment in advance, but issue a combined Receipt / Tax Invoice, only AFTER receiving the funds.
This means, that salary payments will be received BEFORE invoice is issued.
Our salary payment date for all contractors is the 10th of every month. We allow 21 days payment terms, (taking into account public holidays, bank holidays and weekends) to make sure employees are paid on time, every time.
Since every employee situation is different, we need to look at their personal circumstances to ensure compliance.
In general, we need:
- 2 forms of ID,
- Work permits and visas, when applicable.
- Complete forms for tax, social security, health and insurance authorities
Our system keeps track of all of the documentations, including expiration dates, and alerts us when things are about to expire and need to be renewed.
In the name of simplicity, we’ve calculated a percentage of Employer Cost which covers our risk and associated expenses. We have a sliding scale model of percentages, based on number of employees per client.
For employees earning over 40,000 NIS per month, we cap our fees and charge a deposit, equals to one month’s employer cost. That deposit is fully refundable at termination of employment, after all related expenses are paid.
Please consider the following requirements and associated costs:
- Set up – Accounting and tax registration fees – 9,000 NIS + VAT (17%) – 10,530 NIS
- Legal Set up costs – 12,000 NIS + VAT (17%) – 14,040 NIS
- Registered office (including mail handling, and translation services when needed) – 7,500 NIS + VAT per month – 8,775 NIS
- Director, company secretary fees –15,000 NIS per month gross salary.
- The Director will be a representative of the company for banking and government authorities.
All costs include professional fees and applicable government fees.
As for compliance:
- Payroll Tax – depends on the number of employees, on a progressive tax scale.
- Employer statutory expenses– Social Security (about 7%) and pension by law (about 12%), Pay sick leave, recovery allowance and vacation days upon termination of employer-employee relationship, various insurance policies.
- All Employer Taxes obligation– Withholding income tax, withholding Social Security, withholding pensions, paying pensions, paying income tax and Social Security, paying Education fund.
- Financial year – 1st of January to 31st December
- Financial Auditor period– from company commencement date
- Annual Leave– minimum 20 days
- Sick leave– min. 1.5 day per month (up to 90 days accumulative)
- Min capital– not required.
- Mandatory benefits– Sick days, vacation days, recovery fees, holiday gifts. This is a lot more complicated than that, and depends on the employee, place of work, industry, work conditions, and many other factors.
Compensation (Severance Pay) charge is a mandatory charge for every employee. It is a mandatory insurance policy, taken by the employer as a form of a saving account, in case of firing the employee.
We do not get to choose whether or not we put it aside, it is our obligation as employers to deposit 8.33% of the salary into a special purpose fund.
In some cases, the employee can receive the compensation funds when they resign, providing they’ve shown good conduct, and the employer agrees to release those funds to the employee.
One of the most common questions we get asked, is how long is an employment contract for.
In Israel, every employment contract is signed without an end date. It is an open ended contract, with only the starting date.
- National Insurance – equivalent to “social Security” in the US.
- Pension Contribution – Superannuation. a percentage of the salary deducted for pension.
- Compensation – this is a mandatory cost, which is collected by an insurance company (insurance companies also manage pension funds in Israel), which is designed to compensate workers when they get fired.
- Recuperation – the law in Israel provides an additional resource for workers to allow them to take a proper vacation – not just their holiday pay, but an additional amount to pay for hotel accommodation and additional activities. Sometime this is translated as “recovery”.
- Holiday pay – mandatory – holiday pay, minimum 20 days per year,
- Gifts – customary, 2 gifts per annum to employees given before the Jewish high holidays (Rosh Hashana, Jewish New Year, and Passover).
CWS Israel offers EOR solutions for white collar, high level employees. As such, on top of the standard (award rates) salaries, our clients and employees require additional benefits to be included in their compensation package. Some of the most common benefits are:
- Education fund – very common for employees of all levels. It’s another form of pension / savings account for the employee, whereby the employee contributes 2.5% of their salary, and the employer adds 7.5% to that fund. see more details here – https://cwsisrael.com/education-fund-in-israel/
- Meals – an allowance for meals is very common for the high-tech industry, and professional services. it’s generally around the 1000 NIS per month, and is given as a voucher/app.
- Loss of income insurance – Employer contribution of 1% of salary.
- Travel allowance – 400-800 NIS per month. when an employee has to travel for work, they are entitled to a travel allowance of 22.6 NIS per work day. That is mandatory for lower level employees to pay for public transport.
- Car Leasing – Higher level employees who generally drive to / from work, either get a leased-car with all expenses paid, or a taxi allowance / reimbursement of expenses. Costs between 2000-3000 NIS per month, + an initial payment between 8000-13000 NIS. see some example here – https://www.shlomo.co.il/car/מסלול_ליסינג_פרטי (numbers in orange – monthly fee, number underneath – initial deposit).
About CWS Israel
- Advance Payment – CWS Israel issues an itemised monthly invoice in advance, for the month of Employees’ work.
- Payment Clearance – Payment will be transferred and cleared in CWS Israel’s account within 14 days of Invoice.
- Remittance Advice – The Client will issue Remittance Advice on the date of payment.
Our percentage-based pricing model is anchored on global pricing structures, which allows us to have global industry participants as clients and partners, such as Randstad, Kelly Services, TopSource WW, People 2.0, CXC Global amongst others. Those clients work well with a percentage-based model, as they understand the complexity of providing a complaint EoR service.
We can, of course, offer a fixed-rate pricing structure. You’ll need to qualify for this pricing structure, which will be based on a large volume of employees, high level executive salaries, or a combination of the above.
CWS Israel is the In-Country Partner of choice for many of the worlds’ largest PEOs, MSPs and Payroll platforms, and working directly and indirectly with some of the world’s largest corporations and household names (see our partners and client’s list). For close to a decade, we have not lost one client to our competitors, and that is largely due to our company values.
We act as the Employer of Record for employees working in Israel for international companies . Our services include payroll, benefits (both mandatory and discretionary), distributions to the authorities, compliance consulting to our clients, and ancillary services as required.
CWS Israel doesn’t charge Contractors, or hold any fee from the contractor. Our clients are the employer (directly and indirectly) of the contractor, and therefore we charge our clients a percentage of the Contractor’s Employer costs.
Our management fees are charged monthly, at the same time as the Employer Costs charge.
In addition, we charge a small Off-Cycle fee, for last minute (or later) changes in remuneration.
At the beginning of the engagement, we charge a deposit, which is equal to a one-month employment costs.