Spotlight on Israel

Port at Eilat, Israel

Israel, despite its relatively small geography and population size, has become a choice destination for foreign direct investment (FDI) largely thanks to its deep footprint in technology and innovative workforce. Over the years, Israel’s economy has proven to be resilient and diversified, whether facing the global financial crisis or the COVID-19 pandemic shockwaves. Leading multinational brands from around the globe have strategically selected Israel for hiring and operations, including Microsoft, Google, Apple, Unilever, GM, IBM, Philips, Intel, Citi, Flex, CK Hutchison Holdings and more. 

Why FDI in Israel?

  • Israel has recorded consecutive years of significant GDP growth ahead of the OECD average and its unemployment rate consistently ranks among the world’s lowest.
  • Israel has been distinguished as one of the world’s most innovative countries, ranked #7 by the Bloomberg Innovation Index
  • Israel scores at the top for research and development (R&D) expenditures, venture capital flows and innovation ecosystem, according to the Global Innovation Index.
  • The economy is diversified across an array of industries, with a significant global presence in high tech/semiconductors, cybersecurity, fintech, aerospace, cleantech, agricultural technology, water technology and automotive. 
  • The country’s workforce is renowned for being creative, skilled and ambitious, with the Israel workforce receiving top marks for digital skills according to data from the World Economic Forum

What do (MNCs) need to know when expanding or hiring employees in Israel?

When considering hiring employees in Israel, it’s important to know there is extensive mandatory employment legislation protecting employees’ rights there, which may be more stringent and specific than provisions in other countries. Israeli labor legislation provides for minimum mandatory requirements and benefits (which cannot be waived by employees) and covers all types and ranks of employees.

How does employee termination work in Israel?

Termination and layoffs can be difficult in Israel. A hearing process (‘shimua’) must be conducted before making the final decision about termination and redundancies. This happens so the employee can hear the reasons for his or her intended dismissal. The employee also has the opportunity to express an opinion regarding the dismissal. This process allows the employer to reach an informed decision about terminating the employee. 

Failing to properly conduct the hearing procedure can result in the annulment of the dismissal or entitle the employee to payment of damages.

What are employers liable for when it comes to the Israel’ pension system?

There are statutory benefits for employers when it comes to pensions. Under the Supervision of Financial Services Regulations (Provident Funds) implemented in 2016, the employer is responsible for operating employee pension schemes. Required pension operations include submitting data and payments to the pension producers (insurance companies, pension funds, advance study funds and provident funds) and receiving feedback and error reports concerning the accuracy of the amounts and the data remitted to the employees.

What are some of the challenges MNCs face in expanding into Israel?

MNCs want to capitalize on Israel’s diversified economy and world class workforce but setting up an entity may not be the most feasible option for global expansion. According to the Global Entrepreneurship Monitor, 82.1% of respondents report it is difficult to start up a business in Israel. The report also found that Israel ranks third among developed countries in the ‘fear of failure’ category with a 60.2% rate. 

What makes the Employer of Record (EOR) hiring model an attractive option in Israel?

Rather than establishing a legal entity MNCs often find the Employer of Record Israel model to be a more effective, nimble solution for hiring employees in Israel. 

By engaging an Israel Employer of Record like GoGlobal, the MNC avoids the challenging process of setting up a company and also relieves the HR team from learning the regulations for administering payroll in Israel. 

Simultaneously, the EOR hiring model also helps the company circumvent many of the risks, requirements and restrictions that typically come along with hiring employees in Israel – while still being able to tap into the country’s skilled, entrepreneurial workforce. 

How can partnering with GoGlobal help MNCs with hiring employees in Israel?

When an MNC works with GoGlobal, we assume the legal risks of having an in-country entity. We also take on the burdensome tasks of administering payroll in Israel and managing a workforce. For example, terminating or laying off an employee in Israel entails a specific process. In cases where a termination must move forward, GoGlobal will handle this process on behalf of our client and work with the employee and the labor authorities to ensure end-to-end compliance.

What makes the GoGlobal experience different?

At GoGlobal, we approach HR with a global mindset while maintaining a dedicated team of local experts on the ground in each of the markets we serve. Our team in Israel fully understands the local regulatory environment as well as cultural customs in the workplace. This makes for a positive and customized hiring experience for both our clients and client workers.

How does the hiring process with GoGlobal work?

GoGlobal will help bring your employee experience to Israel. Before we onboard the new worker, GoGlobal’s team in Israel will meet one-on-one with him or her to outline the specifics of how the EOR arrangement will operate. Once the worker is onboarded, that same dedicated team remains the point of contact for both the client and client-employee. We are always ready and available to address questions and concerns that come up in taxation, benefits or payroll in Israel. 

What is the goal of GoGlobal in serving clients and client workers?

When we service our clients and our client workers, our goal is to deliver agility, efficiency and peace of mind. By using our tested and proven EOR solution, MNCs free their internal HR teams from having to navigate Israel’s complex, niche labor landscape. We assume the risks and responsibilities of payroll and HR and payroll in Israel, including contributions to statutory benefits, tax withholdings and the administration of benefits. 

When clients engage our EOR services, they can focus on core business-growth activities and seize exciting opportunities in Israel. 

Find additional details on benefits and hiring employees in Israel, or contact us to talk with an international HR expert.