How to Hire Employees in Israel Without Setting Up a Company
Most foreign companies assume they need an Israeli entity before they can hire. They do not. In 2026, hiring employees in Israel without setting up a company is not only legal — it is the fastest, most cost-effective route for most businesses. Here is exactly how it works.
Why You Do Not Need an Israeli Entity to Hire in Israel
Setting up an Israeli company takes three to six months, costs between NIS 15,000 and NIS 40,000 in professional fees, and creates an ongoing compliance burden: a local accountant, monthly payroll filings, annual audited accounts, and Israeli corporate tax obligations. For most companies hiring their first one to eight employees in Israel, this overhead far exceeds the benefit.
Israeli law permits a foreign company to engage an Employer of Record (EOR) — a licensed Israeli entity that becomes the legal employer of your staff. The EOR handles every Israeli employment obligation on your behalf. You direct the work; the EOR handles the paperwork. Your company never appears on Israeli government registers as an employer.
This model is used by thousands of US, European, and global companies with Israeli employees, from seed-stage startups to Fortune 500 firms running Israeli R&D teams. CWS Israel is Israel’s specialist Employer of Record, and we can onboard your first Israeli employee within 48 hours.
What the EOR Handles So You Do Not Have To
Employment and Payroll
CWS Israel issues the employment contract under Israeli law, processes monthly payroll in NIS, files the mandatory Form 102 payroll report with the Israel Tax Authority, and handles all salary payments and payslips.
National Insurance (Bituach Leumi)
We register each employee with the National Insurance Institute, pay monthly employer contributions (3.55% to 7.6% of salary depending on earnings band), and file all required returns on your behalf.
Pension and Severance
Mandatory pension contributions (6.5% employer, 6% employee) are managed and remitted monthly. Severance reserves (8.33% under Section 14) are paid into the pension fund, eliminating your future liability.
Benefits and Compliance
Annual Dmei Havraah (recovery pay, approximately NIS 5,900 to NIS 6,400 per year), statutory annual leave accrual, sick leave tracking, and all other Israeli employment law obligations managed and documented for your records.
How to Hire in Israel Without an Entity: Step by Step
Contact CWS Israel for a Free Consultation
Reach out to our team with your hire’s role, salary, and target start date. We will send you a full cost breakdown within 24 hours. No commitment required.
Sign the CWS Israel Service Agreement
Your company signs a straightforward commercial services agreement with CWS Israel. This is the only document your company needs. No government registration, no Israeli bank account, no power of attorney required.
Your Employee Signs an Israeli Employment Contract
CWS Israel issues a fully compliant Israeli employment contract covering all mandatory terms: salary, role, notice period, pension, severance (Section 14), and annual leave entitlement.
We Register Your Employee with Israeli Authorities
CWS Israel registers the employee with Bituach Leumi, enrolls them in a pension fund, and sets up all required payroll filings within 48 hours of signing.
You Direct the Work; We Handle Everything Else
CWS Israel processes monthly payroll, files all government returns, manages annual leave and benefits, and sends you a single monthly invoice in your preferred currency.
EOR vs Israeli Entity: Which Is Right for Your Company?
Use EOR When
You are hiring 1 to 8 employees in Israel. You need to start within weeks, not months. You want to test the Israeli market before committing. You do not want to manage Israeli accounting, audits, and corporate filings. You may need to scale down or exit without the cost of dissolving a company.
Consider an Entity When
You are hiring 9 or more employees and the monthly EOR fee exceeds entity overhead. You need to hold Israeli IP or R&D grants in a local company. You are bidding for Israeli government contracts that require a local entity. CWS Israel handles entity setup when you reach that stage.
Not sure which applies? Read our EOR vs Entity cost comparison or book a 30-minute call with our team.
Israeli Employment Law: What Every Foreign Employer Must Know in 2026
Key Compliance Facts for Foreign Companies
Once you employ someone in Israel — even remotely — Israeli employment law applies in full regardless of where your company is incorporated. Key obligations in 2026 include minimum wage of NIS 5,880 per month; mandatory pension from month 6 of employment; severance (Pitzuim) of one month’s salary per year of service managed via Section 14; minimum 14 days annual leave per year; sick leave accrual of 1.5 days per month; Bituach Leumi employer contributions of 3.55% to 7.6% of salary; monthly Form 102 payroll report due the 15th of each month; and annual Dmei Havraah recovery pay of approximately NIS 5,900 to NIS 6,400 after one year of service. Non-compliance can result in fines, personal liability for directors, and retrospective employment claims. An EOR eliminates all of this risk from day one.
Permanent Establishment Risk: Why the Right Structure Matters
A common concern for US and European companies is whether having an employee in Israel creates a permanent establishment (PE) that triggers Israeli corporate tax. Under the Israel-US and Israel-EU tax treaties, PE risk arises when an employee habitually concludes contracts on your behalf or when your company has a fixed place of business in Israel. When CWS Israel is the legal employer of record, your company’s relationship with the employee is structured as a commercial arrangement, which significantly reduces PE risk. Our annual PwC compliance review confirms every client relationship is structured correctly. Contact us for a referral to a specialist cross-border tax adviser.
Frequently Asked Questions
Can a foreign company legally hire an Israeli employee without an Israeli entity?
Yes, through an Employer of Record. The EOR is the legal employer under Israeli law; your foreign company is the commercial client. There is no requirement to establish an Israeli entity to have staff working in Israel through an EOR. This structure is fully compliant with Israeli employment law, tax law, and National Insurance regulations.
How quickly can I hire through CWS Israel?
CWS Israel onboards new employees within 48 hours of receiving the signed service agreement. This includes issuing the employment contract, registering with Bituach Leumi, enrolling in a pension fund, and setting up payroll. Compare this to three to six months to incorporate an Israeli company.
Does my company need an Israeli bank account?
No. CWS Israel invoices your company in your preferred currency (USD, EUR, GBP, or NIS) and handles all NIS payroll payments to the employee in Israel. No Israeli bank account, tax registration, or VAT registration is required on your part.
What does it cost to hire in Israel through an EOR?
The total cost has two components: the EOR service fee (typically $399 to $599 per employee per month with CWS Israel) and mandatory Israeli statutory employer contributions: Bituach Leumi 3.55% to 7.6%, pension 6.5%, severance 8.33%, and Dmei Havraah approximately NIS 490 per month. Together, employer on-costs add approximately 19 to 23% above gross salary. Use our cost calculator or see our pricing page.
Can I offer equity or stock options to an employee hired through an EOR?
Yes. Israeli Section 102 options can be granted to EOR employees via an approved trustee, providing capital gains tax treatment on exit. CWS Israel co-ordinates the grant process alongside the employment arrangement, working with your legal counsel and an approved Israeli trustee.
What happens if I want to terminate the employee?
CWS Israel manages the full termination process: the mandatory Shimua hearing, the correct notice period, and final settlement calculations. Under the Section 14 severance arrangement, your company has no additional severance liability at termination.
Does CWS Israel support payroll in multiple currencies?
Yes. CWS Israel invoices clients in USD, EUR, GBP, or NIS. All Israeli statutory payments are made in NIS. You receive a single consolidated monthly invoice. Our payroll outsourcing service supports companies of all sizes.
Start Hiring in Israel Today — No Entity Required
Tell us the role, salary, and start date. We will send you a full cost breakdown and a sample employment contract within 24 hours.
Zero setup fees | Onboard in 48 hours | English-first service | PwC annual compliance review | SIA member
