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70 The US-Israel Legal Review 2019
ISRAEL: EMPLOYMENT
WHAT ARE THE MAIN AREAS OF DIFFERENCE
WITH REGARD TO EMPLOYMENT LAW IN
ISRAEL AND THE UNITED STATES?
A. The sources of Israeli labour law include extensive
labour legislation, which establish minimum
terms and conditions of employment; collective
agreements; extensionorders bywayofwhich the
Minister of Labour and Industry (the “
Minister
”)
can extend the application of general collective
agreements to an entire industry or nationwide;
and Personal Employment Agreements, which
may be either written or verbal.
B. Employers are entitled to dismiss employees for
legitimate reasons only, subject to complying
with the conditions set out in legislation, case
law, workplace practices, contractual terms or
collective agreements which may apply to the
employment relationship, and therefore, the
concept of “at will” employment does not exist
in Israel. An employer’s right to terminate an
employee’s employment is also subject to the
employer performing a hearing procedure,
providing prior written notice and exercising
good faith when making the decision to dismiss
the employee. Upon termination (following
the completion of 12 months of employment),
employees are entitled to mandatory severance
pay, at a rate of one month’s salary (at the time
of termination) multiplied by the number of
years of service. Employees are also entitled to
a prior notice period based on the length of their
employment (although payment may be made in
lieu of such notice period).
C. According to an extension order which came
into effect on January 1st, 2008 (as amended on
August 3, 2011), almost all employees in Israel
are entitled to minimum pension contributions
under a pension arrangement. The contribution
rates have increased progressively and as of
2017, employers are required to contribute
14.83% of the employee’s salary up to the
average market salary and to deduct 6%
from the employee’s salary (on account of the
employee) giving a total contribution of 20.83%
per month. The pension arrangement includes a
severance component, which accrues a portion
(and in certain cases the entire amount) of the
employee’s severance pay, if terminated in the
future. Certain additional extension orders may
be relevant to specific industries.
WHICH ARE THE KEY ISSUES TO BE AWARE
OF AS A FIRST-TIME EMPLOYER IN ISRAEL?
A. Not consulting with local counsel or reliance
on previous Israeli employment advice. Israeli
labour and employment law is unique and
constantly evolving. Therefore it is important
to consult with local counsel and not to rely
on previous advice or advice from other
jurisdictions, which might be outdated or
irrelevant to the particular circumstances.
B. Reliance solely on employment contracts
in determining employees’ entitlements.
Employment contracts do not necessarily
Employment Law in Israel
Israel’s labour and employment law is extensive, unique and
constantly evolving. Especially for first-time employers in Israel,
consulting with local counsel is essential.