What are the mandatory local allowances and benefits in Israel?

Employees in Israel are entitled to a range of mandatory allowances and benefits under local labor law, along with some commonly offered perks that reflect market practice.

Minimum Wage

As of April 2024, the statutory minimum wage in Israel is:

ILS 5,880 per month, or
ILS 32.3 per hour, based on a standard 182-hour work month.

Employers must comply with these minimum thresholds based on actual hours worked.

Pension Contributions (Mandatory)

Pension contributions are mandatory under Israeli law and apply to all eligible employees. Contributions are calculated based on the pensionable salary and are shared between the employer and the employee:

Employer contribution: 12.5%
Employee contribution: 6% (deducted from salary)
Total contribution: 18.5%

This typically includes severance and long-term pension savings.

Severance Allocation

Employers are required to allocate funds toward severance pay as part of monthly payroll:

8.33% of the monthly salary
Equivalent to one month’s salary per year of service

This contribution is generally included within the pension arrangement.

Social Security Contributions (Bituach Leumi + Health Tax)

Both employers and employees contribute to Israel’s national insurance and healthcare system:

Employer contributions:

4.51% on monthly income up to ILS 7,522
7.6% on income from ILS 7,522 to ILS 50,695

Employee deductions:

4.27% on income up to ILS 7,522
12.17% on income from ILS 7,522 to ILS 50,695

These rates are updated periodically and apply to most salaried employees.

Transportation Allowance

While not fixed by law, a transportation allowance is typically required when employees commute to a physical office:

ILS 323 per month is a commonly used benchmark
The allowance should reflect actual commuting expenses and must be documented if required

Study Fund (Keren Hishtalmut)

The study fund is not a legal requirement but is a common and valued benefit in many sectors, particularly in tech and professional services:

Employer contribution: 7.5% of base salary
Employee contribution: 2.5% (deducted from salary)
Contributions are subject to legal income caps

Although optional, offering a study fund is considered a strong market standard and a key element of competitive compensation in Israel.

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Israel