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Israel's world-class tech talent ecosystem demands payroll fluency in keren hishtalmut, Section 14 pension arrangements, and Bituach Leumi. Rippling runs Israeli payroll with full NII compliance and tax-advantaged benefit configuration.
Israel is one of the world's most important technology talent markets — Tel Aviv, Herzliya, and the Jerusalem corridor host a disproportionately high density of cybersecurity, deep tech, and software engineering talent per capita. Israeli payroll is characterized by mandatory keren hishtalmut (study fund), Section 14 pension arrangements, Bituach Leumi contributions, and a Jewish calendar holiday schedule. thePeopleStack serves multiple Israel-headquartered clients and has deep Israeli payroll configuration expertise.
Israeli Ltd. (Chevra Baam) requires Companies Registrar registration (~2 weeks), VAT registration with Rashut HaMasim, and NII (Bituach Leumi) employer registration. Payroll must operate under a Section 14 pension arrangement (standard in tech — directs pension contributions to serve as severance). Manakal invoice allocation required for invoices above ILS 25,000.
Rippling runs Israeli payroll through a local Ltd. entity. Configuration essentials: Section 14 pension arrangement in contract; keren hishtalmut fund selection and 7.5%/2.5% contribution setup; withholding certificate collection; travel reimbursement (tashlumet nesia) as non-taxable component; recreation pay (dmei havraa) annual payment; and Hebrew-language employment contract. Lead time: 1–2 weeks.
Bituach Leumi (NII): ~3.55%. Pension: 6.5% minimum (most tech employers contribute 7.5–10%). Keren hishtalmut: 7.5% (standard in tech — tax-advantaged up to ILS 20,520/year). Recreation pay provision: ILS 2,650–4,500/year depending on sector. Total employer on-cost: approximately 15–22% of salary.
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Bituach Leumi (NII): approximately 3.5% of salary (up to NII ceiling). Health insurance tax (mas briʺut): 3.1% up to ILS 7,522/month; 5% above. Pension: 6% of salary (mandatory). Keren hishtalmut: 2.5% (employee share — if enrolled). Income tax (mas hachnasa): progressive 10%–47%. Total employee deductions: approximately 25–35% of gross.
Israeli income tax (mas hachnasa) 2024 rates: 10% up to ILS 81,480/year; 14% ILS 81,481–116,760; 20% ILS 116,761–187,440; 31% ILS 187,441–260,520; 35% ILS 260,521–558,240; 47% above; 3% surtax above ILS 698,280. Rippling withholds income tax monthly using employee's withholding certificate rate (or default rate if no certificate). Annual tax clearance (shnat mase) filed by March.
Annual leave: 10 days (years 1–4); scaling to 20 days (year 8+). Sick leave: 1.5 days/month accruing (uncapped); day 1 unpaid, days 2–3 at 50%, day 4+ at 100%. Maternity: 26 weeks (15 paid by Bituach Leumi). Recreation pay (dmei havraa): annual ILS 2,650–3,300. Public holidays: 9 national holidays (Jewish calendar — dates vary annually).
Notice: 1 day/month (year 1); 1 month from year 2. Severance (pitzuei piturin): 1 month's salary/year of service — funded via Section 14 pension contributions (standard). Vacation and recreation pay accrued balance paid on termination. Non-compete clauses enforceable up to 24 months if reasonable. Rippling manages full termination process including Section 14 settlement.
Annual tax clearance (shnat mase — שנת מס): employer reconciles income tax for all employees in March for the prior calendar year. Form 106 (equivalent of T4/W-2): issued to each employee by April 30. Annual Bituach Leumi employer report. Rippling generates all year-end filings including Form 106 issuance.
Statutory: pension (employer 6.5% minimum); Bituach Leumi NII (employer ~3.55%); keren hishtalmut (study fund — employer 7.5%; tax-advantaged, near-universal in tech); recreation pay (dmei havraa — annual ILS 2,650–3,300); travel reimbursement (tashlumet nesia); sick pay (1.5 days/month accruing). Market standard: supplemental health insurance (top-tier Kupat Holim or private plan), meal allowance, company mobile. Total employer on-cost: approximately 15–22% of salary.
Keren hishtalmut (study fund) is a tax-advantaged savings arrangement standard in Israeli tech employment. Employer contributes 7.5% and employee 2.5% of salary. The fund is locked for 6 years (tax-free withdrawals) or accessible after 3 years for approved educational expenses. Employer contributions up to ILS 20,520/year are income-tax exempt. This is the most valued non-salary benefit in Israeli hi-tech.
The Section 14 arrangement (under the Severance Pay Law) directs pension contributions to cover the employer's severance obligation. This means pension fund balances serve as severance pay on termination — eliminating the need for a separate cash severance payment. Section 14 must be agreed in writing in the employment contract. Virtually all Israeli tech employers use this arrangement. Rippling configures Section 14 from day one.
Israeli employer Bituach Leumi (NII) contributions are approximately 3.55% of gross salary up to the NII ceiling (approximately ILS 49,030/month in 2024). Employees contribute approximately 3.5% plus a health insurance tax component. Contributions are remitted monthly to the NII. Rippling manages NII registration and monthly payments.
Since 2024, Israeli invoices above ILS 25,000 must be submitted to the Tax Authority's invoice allocation system (Manakal) and receive a validation number before issuance. This applies to tax invoices issued to businesses. Rippling's Israeli payroll operations account for Manakal compliance. Employees receiving contractor invoices for services must include the Manakal number.
