Categories
Business in Israel

Freelancing in Israel for Clients Abroad

As an immigrant to Israel, you have the advantages of speaking another language and connections in the country you came from. These advantages can be translated into a lucrative freelance career working with clients abroad who require your expertise. Here’s what you need to know about freelancing in Israel for clients abroad.

How do I price my services?

Price your services by investigating how much these services cost in the country where your clients are located. You may want to charge slightly less than that price, as an incentive for clients to use your services instead of someone more local. If the salaries in that country tend to be higher than they are here in Israel, you won’t feel slighted by taking less and you will get more business, ultimately leading to you making more money. 

Alternatively, charge the market price your clients are used to and give them other reasons to hire you – such as your unique expertise or your quick turnaround.

How do I create invoices and receipts for clients abroad?


You need to provide the tax offices with receipts for payments for all clients, regardless of where they are located. These receipts must be in Hebrew but you can send the client a version in another language. Many of the invoicing programs which are approved by the Israeli government will provide you with an English version of your invoices and receipts to send to the client, while simultaneously creating a Hebrew version for your reporting and accounting.

Do I need to charge VAT?

If you’re an Osek Murshe, you generally charge your clients VAT. However, the general rule is that clients abroad, with no presence in Israel at all, do not pay VAT. Sometimes individuals living in Israel have a corporation or nonprofit registered abroad and mistakenly think that they can pay you through that entity without having to pay VAT. If you are in any doubt about whether to charge a specific client VAT, consult with a knowledgeable accountant. You don’t want to get in trouble with the VAT office retroactively, so it’s best to get the correct information upfront.

How can clients abroad pay me?

There are a few ways that you can collect payment from clients abroad.

  1. Ask them to send funds via international bank transfer. There is a fee on both ends, so the client will pay to send the transfer and you pay to receive it. The funds can be transferred into shekels at the rate that the bank provides, which is not always the highest rate. The transfer can take up to 7 business days, although it often arrives sooner. Due to money laundering laws, you may be required to show the bank where this money came from before they allow you to access it. Alternatively, you can have funds transferred through Wise, which is the easiest, fastest and least expensive way to move money from abroad to Israel.
  2. If you have a bank account in the country your clients are located in, they can pay into that account. This is easy for your clients, but then you have to get the money here in order to pay your bills and buy groceries. If you have a credit card for that account with no fees or low fees, using it to pay for things in Israel can be a good solution. But be aware that not every company will accept every foreign credit card, so you need a shekel alternative as well. Also note that even if the money is in a foreign account, it needs to be accounted for and reported in Israel.
  3. Payment can be transferred through Paypal. There are fees here too (although they tend to be lower than the bank) and the conversion rate isn’t always in your favor. If you transfer small amounts into your bank account, you will be charged a fee, but if your client pays you a larger amount or you let a few payments build up, you can then deposit the funds in your bank account in shekels for free.
  4. Your client can mail you a check here in Israel, which you can take to a change place and exchange for cash or a check in shekels. Not all change places are willing to accept checks and those that do will give you a lower rate than they give for cash. This method is time consuming and dependent on an unreliable postal system, so we don’t recommend it as a first choice.
  5. You can register with an Employer of Record (EOR) service. You officially become an employee of the EOR company and they take care of fees and exchanging currency. There is a fee involved here too (a flat fee or a percentage of your income), but you also save on accounting fees and time spent on admin work for your business, so it may very well be worthwhile.

Is it better to freelance for Israeli clients?

The answer to this question is dependent on a number of factors. These include market prices in Israel vs. abroad, your level of Hebrew, where clients in your industry tend to be located and whether you need to work during the hours that your clients are in their office. 

Of course, you don’t necessarily have to choose one or the other – if your expertise is required internationally, there’s no reason why you can’t work both for clients in Israel and abroad. The important thing is to find a mix that works for you and to stay compliant with government regulations and proper reporting.

Categories
Employment in Israel

Are EOR services only for US citizens?

Employer of Record services are becoming more and more popular in Israel and for good reason! They have the reputation of being specifically for US citizens who want to avoid being self-employed and therefore required to pay 15% of their income to US Social Security. But this is far from the only purpose they serve, and EORs are definitely not only for US citizens.

Save the hassle and expense of accounting

When you get paid from abroad, you set yourself up legally and report your income to the Israeli government. If you do this by registering as a freelancer, you need to conform to all the rules of freelancing, including invoicing, sending receipts, reporting your income bi-monthly or annually (depending on how much you make), deducting expenses and paying VAT (if you earn more than 120,000 annually). 

If you’re employed by an EOR, the company you work for pays the EOR and the EOR provides you with an Israeli pay stub, with taxes and other payments automatically withheld. You don’t need to hire an accountant or spend hours on pesky office work that takes you away from your actual job.

Save on currency exchange

Getting paid in foreign currency? As a freelancer, you have to maintain a bank account abroad or have foreign currency deposited in your Israeli account. You live in Israel, which means your expenses are all in shekels, so it’s pretty inconvenient and expensive to be constantly converting foreign currency so you can pay your bills. International bank transfers can be expensive on both ends and the company abroad may not like paying extra each month for the privilege of paying you. Some companies will just flat out refuse to pay into a bank account outside of their country.

EORs take the burden off you. They may have bank accounts in other countries or accept the transfers into their Israeli account and take care of converting to shekels without your involvement. You get paid in shekels directly into your Israeli bank account and can pay your bills without any hassle.

Get a stable paycheck

With an EOR, you get paid the same time of the month every month. Taxes and other payments are already withheld and you don’t have to guess what your take home pay actually is. Freelancers are often unable to tell you how much they earn, since so many payments are taken off after they get paid by their clients and these payments aren’t the same every month. So there’s value in seeing it all spelled out clearly on your pay stub and only getting money in the bank which is actually yours to spend.

When you ask the bank for a loan or mortgage, it’s easy to show your income by producing your pay stubs. Banks sometimes look askance at freelance income, considering it less stable than income earned from a job, so having a pay stub can be a big advantage there.

Is an EOR right for you?

It’s hard to know if an EOR is right for you without knowing the specifics of your job, income and finances. We recommend booking a consultation with us to discuss the details of your particular situation. Whether you have already accepted a job, have been working abroad for a while or are considering accepting a new job, we can help you figure out the best way to structure this. At Route 38, we give you the best advice tailored specifically to you, with your best interests front and center. Email us at info@route38.co.il to book your consultation. 

Categories
Business in Israel

Switching from Employee to Freelancer in Israel – Is It Worth It? 

Are you dreaming of being your own boss, making your own schedule and choosing your own clients? Are you thinking of switching from employee to freelancer but are scared of making the leap? We’re here to help with a list of pros and cons so you can make an informed decision.

Advantages of freelancing in Israel

Being your own boss is a very attractive proposition. You don’t have to answer to an employer and can decide when you want to work and who you want to work for. It’s easy to take time off for a doctor’s appointment or for an errand you can’t do in the evening. You can work the hours that you’re most productive, whether you do your best work in the morning or are a total night owl. And you can create a schedule that works around your family life with maximum flexibility.

You get to choose your clients and if you’re not happy with a business arrangement, you are free to end it, whether the client is difficult or the project is not to your liking. This will lead to greater job satisfaction and more pleasant business interactions. 

Some professions lend themselves particularly well to freelancing, since companies or individuals tend to need these services sporadically or as a minor part of their budget and don’t need to hire someone in-house. Translation, marketing, website development, financial services and law are just some examples of service-based businesses that succeed in Israel. 

Disadvantages of freelancing in Israel

Lack of stability is a big disadvantage of freelancing. Your salary will probably be different every month and wars, economic downturns and pandemics can greatly affect a freelance business. If you want to get the same exact salary every single month, freelancing is probably not for you.

Billing is another challenge of freelancing. You need to send invoices to clients, check that they have paid, run after them if they haven’t and issue receipts once payment is received. You also have to figure out how to price your services, negotiate with clients and justify your pricing.

Being your own boss often means that you lose the division between work and home and end up working many more hours than you did as an employee. Demanding clients and work that builds up may have you working into the wee hours of the night, when you’d much rather be spending time with your family or just chilling.

Freelancing also means that you have no intermediary between you and the client, who would have your back and smooth things over. Yes, you can stop working with a difficult client, but you might have to finish the current project and end things on a positive note to preserve your reputation in the industry. That’s not always an easy thing to do!

As an employee in Israel, taxes and additional payments are deducted automatically from your salary and there is no need to report your income to the government independently. As a freelancer, you are obligated to report your income and pay taxes, Bituach Leumi and VAT (if applicable) directly to the government. This means that you need to keep meticulous records of your bills and your expenses. It is recommended to use the services of an accountant or tax advisor for reporting, so this is an extra expense that you need to take into consideration. If you are an Osek Murshe this will be more expensive than if you are an Osek Patur.

If you are an American citizen, you will also be charged 15% of your income to US Social Security as a self-employed person.

So, is it worth it?

There’s really no right answer. You have to consider whether the freelance lifestyle is right for you and whether you can handle the financial risks of running your own business. Some people prefer to start small, by freelancing on the side while still employed. This can be challenging, especially if you’re working full-time, but it’s a good way to test the waters and see if the clients are out there and whether you enjoy working for yourself. You can also take advantage of an unplanned period of unemployment to experiment with self-employment. 

It can take from three months up to a year or even longer to build up a steady stream of clientele, acquire a reputation and bring in substantial income, so don’t give up before you’ve really given it a try.

Want to know how to set yourself up as a freelancer in Israel? Osek Patur – Guidance for Your New Business has all the details.

Categories
Aliyah Bringing Your Existing Job to Israel

Keeping Your US Job after Aliyah

There’s lots to consider before making aliyah – where to live, schools for your children, learning Hebrew, and, of course, employment. Although many people quit their job and look for work or open a business once they get to Israel, an increasing number of olim are continuing to work remotely for the company they are already employed by.

Advantages of keeping your US job after aliyah

The main advantage of keeping your US job after aliyah is that you don’t have to look for a new one while you’re making many other adjustments in your life. With all the changes you have to look forward to (both the awesome and the challenging), knowing you have an income right off the bat at a job you know and like can really make a difference. You don’t have to look for and maintain a job in a different language and in a different culture, making for a smoother transition to life in Israel.

If you’ve always wanted to work from home but never had the opportunity, you are likely to love the flexibility of working from home. And if you were already working remotely, the transition to working from another country will not be such a big leap.

In case your Hebrew isn’t fluent, remote work for a US company has the advantage of not requiring you to learn Hebrew quickly. Although there are many jobs in Israel which are mostly in English, it’s hard to find one where no Hebrew is required at all. Even if correspondence and meetings are in English, lunch break and water cooler conversations are probably going to be in Hebrew. Staying in your English-speaking work environment is just easier, especially at the beginning.

Depending on your current salary, continuing at your job may be a big advantage. Check average salaries in your industry in Israel and compare with what you are making now. You may find that it is an economically sound decision to keep your US job.

Disadvantages of keeping your US job after aliyah


Working remotely for a US company isn’t for everyone. If your job requires you to work American hours, this may impede your family and social life, since you’ll be unavailable in the evenings. It will also be harder to integrate into Israeli society if you are working when other people are getting together. (Bear in mind that some Israeli jobs for English speakers will also require American hours, so this issue isn’t exclusive to remote work.) Plus, you won’t make friends with Israelis at work or improve your Hebrew naturally just by being surrounded by Hebrew-speakers all day.

You may also not be the type of person who works well from a home office. If you thrive in a busy office environment and need structure to keep you on top of tasks, you may find you are lonely and less productive working remotely.

Once you begin working remotely, there might be changes in your relationship with co-workers. When you were in the office regularly, you had a rapport with them and picked up information naturally, but now people need to remember to cc you on important emails, include you virtually in meetings (or update you afterwards) and trust that you are completing your tasks and working the required hours.

Convincing your company to keep you on

If you’ve decided that you would like to work remotely for your current employer, the next step is to convince them that this is a good idea. Here are some arguments you can make for keeping you on:

  • Demonstrate your value to the company. If they don’t want to lose you, they will be much more willing to consider remote work.
  • Are there other employees in the company working remotely? Use them as an example of how this arrangement can be successful. If there are some aspects that could use improvement, be prepared with answers on how you will avoid those pitfalls.
  • If you previously worked remotely (say, during Covid) or occasionally work from home, show how this has not negatively affected your productivity.
  • Demonstrate how the company can benefit from having someone working when others are asleep. Maybe you can take over customer support during the daytime in Israel or be on call for emergencies at times when others would rather not have to be.

How it works

When you work in Israel, you are liable for Israeli income tax, but unless your company has an office in Israel, they do not have a tax file and can’t issue you an Israeli pay stub or withhold taxes and other required payments. 

You can solve this in one of two ways. 

The first option is to become a freelancer (1099 worker) for the company which previously employed you. Then you register as a freelancer in Israel, send an invoice every month to the US company and report income to the Israeli government as a self-employed person. Most people do this by hiring an accountant for bi-monthly and annual reporting, an expense you need to consider when calculating your take-home pay.

As a registered freelancer and a US citizen, you will also have to pay 15% into US Social Security, so take that into account as well.

The other option is to become an employee of an Employer of Record service like Route 38. In this scenario, the EOR service invoices the company you work for. The company pays the EOR and then you are paid by the EOR with an Israeli pay stub and all deductions withheld. You don’t need to hire an accountant and you are not required to pay US Social Security. There is a registration and termination fee as well as a monthly fee, which can be paid directly by the company.

Signing up with an EOR is a process that can be started before aliyah, so that you can begin working as soon as you are settled in Israel and ready to get back to regular employment.  

Categories
Employment in Israel

How to Get a Job in Israel with No Network

Ask any Israeli how to get a job in Israel and they will tell you that connections and networking are a big factor. They might tell you a story about how they found out about a job through a friend of a friend, someone they served with in the army then pushed their CV to the top of the pile and when they got to the interview, they played Jewish geography and discovered that the interviewer was best friends with their former neighbor.

But what if you don’t know anyone in your field in Israel? What if you don’t have multiple relatives here and made aliyah after army age? Does this mean that your job prospects are doomed?

Of course not! Although some jobs are found through connections (what we Israelis call “protexia”) it’s also possible to find employment by applying the old fashioned way.

Here’s how to do it.

Create your Israeli CV

The first rule of thumb for an Israeli CV is to keep short and simple. Unless you’re in a specific industry where longer CVs are acceptable, keep yours to one page. Use bullet points and short sentences to describe your experience, starting with the most recent and working backwards. If you previously worked in a different field or in a job that’s not relevant to the one you are applying for, leave it off altogether, since it won’t help make your case.

Include your full name, phone numbers and email address. Some Israelis include their addresses on their CV but that opens up the possibility of potential employers thinking you live too far away or making assumptions about who you are based on where you live. It is not customary to include a picture and is no longer customary to add your marital/family status.

List your skills front and center, as they may not be obvious from your list of previous jobs. Include your education, but unless you are very young, don’t include where you went to high school.

Tailor each CV to the employer you are sending it to, emphasizing the skills and experience they will care about and de-emphasizing or excluding those which are less important. For instance, if you are applying for a teaching position, the fact that you are handy at using Word is not important, but if you are applying to be an office manager you want to include that and leave out your experience as a classroom teacher.

Search for job postings

Once you have a CV that’s market-ready, start looking for potential jobs. Social media is a great source of job postings. There are a number of Facebook and LinkedIn groups that are dedicated specifically to job posts. 

Remember that if you can find jobs on social media, potential employers can find you there too, so ensure that all your profiles are professional looking. If your profile picture shows you drinking beer with your friends, now is the time to change that. Check that your LinkedIn accurately represents your skills and experience, as it effectively serves as a second resume.

There’s no shame in posting on your social media that you are looking for work. You can state that you have just made aliyah or that you are looking for your next challenge. The more people that know you are looking, the more likely that someone (sometimes even the most unexpected someone) will send a relevant job post your way.

Aside from groups that aggregate job posts, there may also be groups for professionals in your field. That’s a great way to find out about available jobs as well as connect with people in your industry.

Job postings can also be found on Israeli job boards. Nefesh B’Nefesh manages a job board specifically geared toward olim, including many positions that don’t require much, or any, Hebrew. You can also search job listings in English on the Janglo website. Search in Hebrew on sites such as Jobnet, Drushim and AllJobs.

Write a cover letter

Never send an email that just includes an attachment! Instead, write a cover letter and send it in your email to the employer or recruiter. Don’t make the cover letter part of the file with your CV, send it directly in the email. A good cover letter is no more than four or five lines and stresses which skills and experience make you perfect for this specific job. 

If you know the name of the person who will be reading this letter, start with Dear [first name] to personalize your message. If you don’t, leave off the salutation. Do not write “Dear Sir/Madam” or “To whom it may concern.”

Consider using an AI tool such as ChatGPT to improve your cover letter. Write a draft and then run it through AI software to make it even better. Don’t forget to check it for mistakes (they do occasionally happen) and tweak it if it comes out a little bit too generic.

Proofread your CV and cover letter

Before sending, proofread, then proofread and proofread again. Even better, ask a few friends to look over your CV and cover letter before you send them. Typos and grammatical mistakes make you look sloppy, and if you are applying for a position in which language is important (like teaching, sales or marketing), mistakes are even more off-putting. Pay attention to the tenses as well. Choose either past or present but don’t zigzag between the two. You don’t want your CV thrown away because it didn’t look professional! 

Follow up

Immediately after applying, send an email or LinkedIn message to the recruiter to check that your CV was received and to reiterate your interest in the position. The first reason to do this is because most companies have bots filtering the CVs before they even reach the recruiter, so it’s possible that your CV was never actually seen by a human being. The second reason is that this will help you stand out. Most people never follow up, so when you reach out to the recruiter you demonstrate your drive and determination.

Job searching is not like dating

You don’t have to see where one job application goes before applying to another. In fact, the more jobs you apply to, the better your chances of getting called for an interview and getting the job. Devote a certain part of each day to reviewing the job listings and applying to whichever jobs seem relevant. 

Sometimes job posts will add requirements that they might be flexible on for the right candidate. They might prefer to hire someone with 3-5 years experience but your skills and two years might just be enough to impress them. They might list proficiencies in certain technologies but be willing to train you in the one you don’t know, if everything else seems right. So be bold and apply even if you don’t meet every single one of the requirements. 

Be aware that the opposite is true as well. If you are overqualified for the job (for example, the ad asks for 2-3 years of experience and you have 10), don’t be surprised if you don’t get a response to your application. That’s because the recruiter wants to hire someone less qualified and pay them a lower salary. He knows that even if you compromise on a lower salary in order to get that first Israeli job, you won’t be satisfied with the compensation for long and won’t stay in the job for the long haul.

Give networking a chance

If you’re seriously looking for a job, there’s no reason to stick to just one method. Cold applications certainly have their place, but it’s also a good idea to start networking. Even if you don’t get your next job through a connection, you never know when that network will come in handy. Connect to people in your field or related fields on social media and at in-person meetups. One-on-one coffees with relevant connections and attendance at general networking events will create that community that will help you further your career. And you might even make some new friends! Check out our article on How to Build a Network in Israel for more information on how to do this well.

Job searching is a little bit like dating

There is one similarity between job searching and dating – you only need one to work out. That right job is out there somewhere. It might take a little while and some effort to find it, but perseverance pays off in the end.

Categories
Business in Israel

Freelancing without an Osek Murshe

Question: I’ve been working for a few years as an employee here in Israel but I want to switch to freelancing for the added flexibility and the ability to choose my own clients. But I’m concerned because I’m an American citizen and I understand that it’s very expensive to be an Osek Murshe and I will end up owing taxes in both Israel and the US. Is there another solution I haven’t thought of?

Answer: Thank you for your question! Owning your own freelance business as an Osek Patur or Osek Murshe does in fact open you up to owing money to the US government. This is because when you file your US taxes, the government will charge you 15% Social Security as a self-employed person.

As a US citizen, you are required to file a US tax report if you have an income, regardless of whether you are employed or self-employed. As an Israeli, you generally will not owe taxes on earned income to the US government, due to the tax treaty between the two countries, according to which you are taxed first in your country of residence. However, Social Security is not included in this treaty. If you’re self-employed, you will be charged 15% Social Security, just like any other self-employed person in the US.

Paying into Social Security

This is not necessarily a bad thing. If you earn 40  Social Security credits you will be eligible to receive a monthly payout from the US government after you retire. Under current laws, you can receive this money even if you are living in Israel. Many retirees find this amount a welcome addition to their retirement funds.

On the other hand, you need to make a living right now. If the payments to Social Security, Israeli income tax and Bituach Leumi are too high to leave you much in your bank account at the end of the month, freelancing might not be the best idea.

Employer of Record service

But that doesn’t mean you should give up your dream of a flexible lifestyle and career. If freelancing is what you want, you can sign up with an Israeli Employer of Record service. Some of these companies specialize in employing freelancers who maintain creative control over their business, while getting an Israeli pay stub from the EOR service. You can still choose your clients and decide how much and when you want to work, but at the end of each month, the company will invoice your clients and pay you a salary according to the amount received from them. 

Legality of EOR services

EOR services which comply with Israeli government requirements are perfectly legal and a good solution for many people. If you go this route, check that the company is compliant and that it has good customer service, so that you receive your salary in a timely fashion and get a quick response when you have a question or issue. 

Categories
Business in Israel

Israeli A-1 Resident and Freelancer – Can It Be Done?

Are you a temporary resident of Israel looking to freelance? It can be done! Here’s what you need to do to set yourself up legally:

Obtain an A-1 visa

In order to obtain an A-1 visa, which gives you permission to work in Israel, you need to go in person to Misrad Hapnim (Interior Ministry). You will need your passport, marriage certificate, birth certificate, proof of your parents’ birthdates, a letter from your school if you are a student, proof of Jewishness (if relevant), criminal background check from your country of origin and an application for visa extension. Be sure to ask specifically for a visa that allows you to work, since it is not offered to you automatically.

Open a file at the VAT office

Before you open your business, you must open a file at the VAT office. You need to do this even if your projected income is that of an Osek Patur (sole trader who is exempt from collecting VAT for the government). As a temporary resident, you can only open a file at the VAT office if you have an Israeli representative who takes responsibility for your business dealings. This representative can be an Israeli spouse, a friend or a relative. The Israeli representative will fill out VAT Form 22, which may need to be notarized by an Israeli notary. 

This representative is not involved in business decisions or management, but is fully responsible for timely and correct payment of all taxes. The purpose of having an Israeli representative is to prevent a situation where a foreign national leaves the country with debts, unpaid taxes, wages owed to workers etc.

If you don’t have anyone you can ask to take on this responsibility, you can open your business through a trust company. This company will act as your Israeli representative for a fee. Some of these companies offer additional services, like registering the business for you, preparing and submitting tax reports and opening a corporate business account at the bank.

In order to open a VAT file, you need proof that your bank account belongs to you. You can use a checkbook or ask the bank for an ishur nihul cheshbon (letter stating that you manage this account). If your bank account is shared, both account holders need to be present with proof of identity (Teudat Zehut or passport).

Print receipt books or sign up for an online receipt service

There is a legal requirement in Israel to provide receipts for any business transaction. You can print receipt books with your business name and information at a printing house, or you can sign up for one of the multiple online services that provide you with electronic receipts. Not all receipt services are accepted by the Israeli government, so it is crucial to choose one that has the government’s stamp of approval.

Open an income tax file

Take your documents from the VAT office to the income tax office (Mas Hachnasa) and open a file there as well. You are now obligated to file an annual tax return, reporting your income and expenses to the government. Avoid problems by keeping meticulous records and backing up any documents that aren’t already in the cloud.

Your business is now open! Now’s the time to get the word out, invest in marketing and get your first clients. We wish you great success in your new endeavor!

For more information on opening a business in Israel, see: Osek Patur – Guidance for Your New Business.

Categories
Resources for Employers Outside of Israel

How Can a US Company Hire Israeli Employees?

An American company employing Israelis is no longer the rarity it once was. Israelis living and working in the US often want to hire other Israelis. Many companies want to support immigrants and native Israelis. And other companies don’t want to lose good employees when they move to Israel.

Remote work has become the norm around the world and Israel is no exception. This makes it easier for Israelis to accept jobs that are based abroad or bring their job with them when they make the move. So, how can your US company hire Israeli employees?

If your employee is currently working on a W-2 basis, you will likely want to change this. Employing someone with a W-2 requires your company to open a tax file in Israel and brings with it various tax obligations you probably don’t want to deal with. 

If your worker is working as a 1099 (independent contractor) or can switch to 1099, your company will not have to open a tax file in Israel. As a 1099, your employee will be responsible for paying Israeli taxes and Israeli Social Security, as well as any tax obligations in the US. 

In order to be compliant with Israeli taxes, your worker may register as a freelancer in Israel.

The disadvantages are that if your employee wants to be paid in shekels, you will need to deal with international wire transfers and their accompanying fees. Additionally, being self-employed in Israel means that your employee will have to pay 15% Social Security in the United States. This can be a big burden, on top of paying Bituach Leumi (National Insurance)  in Israel, so this is not necessarily the best deal for your employee.

Enter Employer of Record services. EOR companies make employing Israelis a piece of cake. Your employee becomes an employee of the Israeli EOR company and you are billed by them for consulting services. They will send you an invoice each month and you transfer payment to them (in some cases, directly into their American bank account). They then pay the employee, withdrawing taxes and other payments as necessary.

This process is easy to set up and maintain from your perspective. There is a registration and termination fee, as well as a monthly fee, but this is a small price to pay for a happy employee, and likely less expensive than giving your employee a raise to cover all their new expenses as a freelancer.

At Route 38, we specialize in providing EOR services for Israelis working anywhere in the world, and we work with hundreds of US companies paying for consulting services in Israel. We are experts in US and Israeli tax obligations and will guide you and your employee on how to best structure your employment arrangement. Email us at info@route38.co.il to set up a consultation and get personalized advice.

Categories
Aliyah Employment in Israel

Can I Get an Israeli Job before Making Aliyah?

If you’ve started consulting with people about aliyah, you may have noticed this phenomenon. Jews living outside Israel often state unequivocally that it’s irresponsible to make aliyah without having a job, while Israelis tell you that it’s almost impossible to get a job here until you are physically in the country. Who’s right?

The advice you’re getting abroad is based on the fact that it can be hard to manage your finances here, especially since there are a lot of adjustments you need to make. Banking, salaries, expenses – it’s all different here. And in a country where salaries are relatively low but expenses aren’t, it can be a real challenge to successfully navigate your finances here. This will, of course, be exacerbated if you are unemployed for the first few months, or longer, of your aliyah. So yes, it would be great to have a job waiting for you before you get on the plane.

Unfortunately, Israelis very much live by the seat of their pants. This is a country in which stability is a rarity, and we never know what’s coming next. We tend to hire employees who can start as soon as possible (after they work off their notice in their previous place of employment) and we may not trust that someone will actually move here until they have arrived. That makes it harder to get a job before you have made aliyah.

It’s not impossible, though! If you have an expertise that’s rare or you have connections in your field, you may be able to get a job offer before aliyah. It’s not likely to be before you make the commitment to come, so you can’t really make the decision to come only after you have a job. Instead, take the leap of faith, decide to come and start looking for a job close to your aliyah date. 

Start networking and putting feelers out there. Get to know Israelis in your field who reside in Israel or in your country of origin. Let friends and family know that you are making aliyah and what kind of work you are looking for. Beef up your LinkedIn profile and revamp your CV to fit with the Israeli style. Even if these measures don’t get you a job before you get here, they will certainly help once you arrive. 

Categories
Aliyah

US Taxes for American Expats in Israel 

Moving to Israel doesn’t end an American citizen’s tax obligations to the US government. If you’re an American expat in Israel, you need to understand  how US tax reporting affects you, so that you can make financially smart decisions.

US-Israel tax treaty

The US and Israel have signed a series of tax treaties which prevents dual citizens from being taxed in both countries. What this means practically is that you will be taxed in the country which is deemed to be your primary residence. This is determined based on many factors, primarily:

  1. Your habitual abode -You will be considered a resident of the country where you have the closer personal and economic relationship.
  2. Nationality – If you are a citizen only of one of the countries, you are considered a resident there. If you are a dual citizen, there are other factors that are brought into play.

If you are considered a permanent resident of Israel but maintain your American citizenship, you will likely not have to pay income tax on earned income in the US (there are exceptions on very high salaries), but you will have to file an income tax report each year. There are accountants in Israel who specialize in filing taxes for Israeli and American dual citizens, and it is generally preferable to work with them as opposed to hiring an American CPA who is not familiar with the issues facing dual citizens. (We have a long-standing relationship with Yosefa R. Huber, CPA, who assisted in the preparation of this article.)

Child tax credit

The United States government offers a tax credit per child which reduces the amount of tax that a citizen pays. For many dual citizens who are reporting income but not paying income tax, this can translate into a refund from the US government. At one time, it was popular for Israelis to go to great lengths to obtain American citizenship for their children in order to benefit from this payout, in situations where one parent was an American citizens but neither parent had ever lived in the US. However, due to the obligations these children will have to the US government in their adult life (starting with having to file an income tax report each year), parents should think carefully before going down that road.

FBAR

The FBAR (Foreign Bank Account Report, also known as FinCen Form 114) is a report that must be filed annually if you have an aggregate of over $10,000 in one or various non-US accounts, including savings accounts such as your pension fund, Keren Hishtalmut or Kupat Gemel. It is important to fill out this form before the deadline to avoid heavy fines. You can fill this form out yourself if you know exactly what needs to be declared. Otherwise, it is recommended to hire an expert to file on your behalf.

There is an additional report that you may need to file as part of your tax return if you exceed certain other higher thresholds. We advise you to speak to an Israeli-based US CPA if you think you may qualify for this requirement. 

US Social Security for the self-employed

If you’re a self-employed American citizen, the US requires that you contribute 15% of your income to Social Security. If you accrue 40 credits, you will get a monthly payout upon your retirement. The Social Security tax can be quite challenging for dual citizens, who are also required to contribute to Bituach Leumi (Israeli social security) and a private pension plan. These regulations can discourage people from opening a small business or freelancing. An alternative is to be employed by an Israeli company which issues your invoices and pays you a salary each month (Employer of Record service), while you maintain creative control over your business. 

Renouncing US citizenship

Some dual citizens feel that US citizenship is too much of a burden and that the privileges of voting in a US election and holding a US passport aren’t worth the headache of complying with US tax laws. Renouncing US citizenship is done by appearing in person at the US consulate, signing an oath of renunciation, filling out paperwork and paying a fee. It also requires giving up one’s green card, where applicable, not just letting it expire. You may also be liable for an exit tax, depending on your assets and past tax compliance. Renunciation is irreversible, so you need to be really sure before taking this step. 

Categories
Employment in Israel

How to Build a Network in Israel

It is often said that job-hunting in Israel is heavily based on “protexia” (connections) and there is definitely some truth to this. As an oleh, you might think that you are at a disadvantage, not having old school and army friends to rely on for support. And if you’re experienced in your field but have no former colleagues to help you find a job, that can be concerning as well.

But here’s the good news: Networks can be built at any age and at any point in life, and the prevalence of social media in our lives means that connections can be created virtually as well. Connections with people often begin online and become real friendships later on. Israelis are hard-wired to help others, as we have all grown up on values of chesed and kindness, so even a distant connection can be the one who will help you land a job.

You can start building your network even before you start actively looking for a job in Israel. Connect to people in your field and related industries on LinkedIn. Comment on their posts, ask questions and show interest in what they share online. Join industry-related and general job groups on Facebook and LinkedIn. Contribute where you can and connect personally to people in these groups who you would like to know in real life.

Israelis that are currently in the US are a great resource as well. Reach out to founders and ask them to meet for coffee and attend events happening in cities around the US. For instance, Israeli Mapped in NY and Israeli Mapped in Boston list Israeli startups in those cities and hold get-togethers for their members.

Once you are in Israel, it’s a good idea to attend networking events. These take place all over the country and many of them are in English (although you can always go to the Hebrew ones and find people who want to practice their English with you). Get to know people, write down who they are and what they do and ask them how you can be of service to them. When you get home, search for the people you met on social media and connect to them there. Write them a note about how much you enjoyed meeting them and will keep them in mind when you hear of someone needing their services, hiring in their field etc. 

Ask to meet some of them one-on-one for coffee, to continue the conversation you started at the event or to dive deeper into how you can help each other. (Remember, if you issued the invitation, coffee is on you.)

You can also join small networking groups that have regular events and where members try to help each other out as much as possible. There are BNI groups all over Israel and there are a number of English Speaking Networking groups as well. ESN combines professional development with networking support and also hosts occasional large events.

Don’t underestimate the power of “friends of friends.” Ask your friends who they know in your field and request they introduce you, so that you can connect to those people and be mutually helpful to each other. If you’re applying to a company, it pays to ask your friends whether they know someone who works there and can help get your CV seen. If a friend asks them to use their protexia as a favor to them, they might do it even if they don’t know you personally. 

When you’re actively looking for work, let people know what kind of job you seek and ask for leads of places that are hiring. You won’t find every relevant job ad on your own, so it’s great to have people looking out for you and sending you relevant ads that they spot. There are also jobs that aren’t widely advertised or haven’t been publicized yet, which you can find out about from connections. Don’t be afraid to look “desperate” by letting people know you are on the job hunt. It’s just like dating; if you don’t tell people you want to be set up, it won’t happen. Put the word out there that you are looking and you will get help from friends and strangers alike.

Lastly, don’t neglect your network once you have a job. You never know when you will have to rely on it again. And even if you never need it yourself, you will have the privilege of helping others advance their professional careers by utilizing your own protexia, just like a true Israeli.

Categories
Employment in Israel

The Hiring Process in Israel

Finding a job in Israel is often the biggest hurdle in the aliyah process and it’s compounded by the fact that the hiring process can be quite different from what you are used to. We’re here to clear up some of that confusion and provide clarity on what to expect. If you haven’t read our post on how to get a job in Israel, start there and then come back here to read about what happens when you apply for a position.

Step 1: Your CV lands in a pile

When you send your CV to a company, first a robot goes through the CVs to weed out totally irrelevant applications. Then, your CV lands in a pile of resumes from all the appropriate job seekers who have applied for the same position. An HR employee and the hiring manager on the team will skim through all the CVs to see who seems suitable. Notice that we said skim and not read, because they tend to glance at each one and make an almost-instant decision about whether to contact you. Your CV must have all the important information on top, be easy to read and be tailored to the job you are applying for. Make sure your skills and experience are easy to spot and relevant to the position.

Step 2: Phone interview

If your CV stood out, you will get a call or e-mail from an HR representative asking you to interview for the position. Companies will often start with a 15-20 minute phone interview before asking to meet you in person. Sometimes, you will get a call out of the blue and be expected to interview on the spot. If this is inconvenient, let them know very politely that this isn’t a good time to talk and schedule a time where you can be fully present. 

To prepare for this call, research the company online, review the job description and be ready with an answer to the question, “What are your salary expectations?” It’s best to give an honest answer when asked, so that you don’t waste your time or theirs continuing in the process with a company which won’t satisfy your salary needs. 

Because each company has a slightly different hiring process, this is the time to ask what the next steps are so you are prepared for whatever comes next.

Step 3: In-person interview

If the phone call went well, you will likely be invited to an in-person interview. This is the time to showcase what you bring to the table as well as to ask questions about the job expectations and get a feel for whether this job is the right fit for you. You’ll want to understand the hours required, the tasks you will be expected to complete and who you will be working with. For instance, if you’re being hired to interface with people in the US, will you be required to work American hours? This is an especially important question if you are interviewing for a position in sales, customer support, customer success or marketing. 

You also want to pay attention to the general atmosphere of the company to determine whether this is a place where you will feel comfortable and enjoy working.

Olim are often unsure what to wear to an interview in Israel, since the more formal wear they might have worn in their country of origin seems out of place here. The best way to determine what to wear is to look online at the company website and their social media to see how their employees are dressed. You want to dress similarly, but look as if you made a bit of an effort to look put together.

Step 4: Assignment and/or presentation

Companies in Israel sometimes ask you to complete an assignment in a fairly short deadline and/or prepare a presentation for your potential team members. The purpose of this “homework” is to determine whether you have the skills necessary for the job. You can look at this as another way to see if this job is a good fit for you. If you can complete the task with relative ease and enjoy doing it, you’re on the right track. But if it’s totally out of your wheelhouse, boring or frustrating, you may not want this job.

If you are asked to give a presentation, prepare for it so you go in confident and knowledgeable. If the presentation is in English, keep in mind that you may be presenting to people who are not native English speakers. They likely know all the professional terminology in English, but might not know other complex words, so stick to vocabulary they are likely to understand. 

Step 5: Checking your references

If the hiring team is seriously considering you, they will reach out to the references that you have mentioned on your CV. It’s important that you choose references who will say positive things about you, so make sure to list people you had a good relationship with. Ask them beforehand if they are OK with being listed as a reference. If they hem and haw, choose someone else!

If you can, let them know that you are in the advanced stages of a hiring process and they might be contacted in the near future. Tell them what job you are applying for and what skills are crucial for it. This gives them a chance to prepare and raises the likelihood that they will give a good impression of you. 

Step 6: Interview with the CEO

Depending on the size of the company, you may be asked to interview with the CEO of the company. In a small startup this is more common than in a big company, since you are likely to have an ongoing relationship with the CEO if you take the job. Find out what you can about him or her beforehand, ask about the company and show that you are excited about what the company does and how you can be a part of that.

Step 7: Negotiations

If you’ve made it this far, the next step is negotiating the contract. You will be offered a salary as well as other perks, such as number of vacation days and how sick days are paid. You don’t have to accept the first offer; negotiations are acceptable and expected. There are some companies that won’t budge, but there are definitely cases where asking for more – either salary or perks – can be successful. It’s important to negotiate politely and to decide for yourself what the minimum is that you will accept. It’s OK to walk away if their best offer is not acceptable to you. 

Once negotiations are over, you will get a contract to sign. Whether the contract is in English or Hebrew, it’s always a good idea to have a lawyer look over the contract and ensure that you aren’t signing anything you aren’t aware is written there. If you find something objectionable, ask for an explanation and possibly ask for it to be removed. Again, don’t sign just because you got this far. Only sign if you are satisfied with the contract and want the job.

Step 8: Start working

If you are currently employed, you will have to give notice at your previous place of employment and start working only after that. You can ask to start work a bit after that, if you feel that a short vacation will help you transition and start the new job with more energy. Depending on the company’s needs, they may be more or less flexible on start dates. In any case, they generally expect that you will start working pretty soon after the contract is signed.
The first days at a new job are always going to be challenging. Focus on learning the job, interacting with your colleagues and fitting into the company culture. Update your CV with information about your new job and maintain your professional network, since you may need it again sometime down the line. Most importantly, enjoy your new job!

Categories
Bringing Your Existing Job to Israel

How to Work from Israel for a US-based Company

Here at Route 38, we often get asked, “Why can’t I be a W-2 in Israel?” Many olim assume that they can simply work for an American company while living here, in exactly the same way they did before they made aliyah. Unfortunately, this is far from the truth.

What Is a W-2 employee?

A W-2 employee is someone whose employer deducts taxes from their paychecks and reports on this to the government. At the end of every tax year, the employer must send its employees their Form W-2, which delineates all the income earned and taxes withheld. This form is also sent to the IRS. W-2 doesn’t apply to contracted or self-employed workers.

There is no law in the United States against hiring employees in other countries, but the US company would have to comply with Israeli labor law as it relates to taxes, employee rights and other statutory commitments. They would also have to open a payroll tax file with the Israeli Tax Authority.

If you’re a recent oleh and physically work in the US while commuting back and forth to Israel, you can work as an employee of a US company with a W-2. You will need to pay taxes on any income earned while in Israel, but will be exempt from Israeli taxes on money earned while physically in the US.

Sounds simple, right? Unfortunately, the US company now has a potential Israeli tax exposure on its Israeli source profits. Additionally, the company must operate Israeli tax withholding, pay taxes to the Israeli government and register at the VAT office and pay VAT. Most American companies don’t want to take on these responsibilities, so they won’t employ an Israeli on a W-2.  

Alternatives to working as a W-2 employee

You may be wondering, if it’s so complicated to work for a US company, how is it that I know so many Israelis/dual citizens who are doing it? There are three popular alternatives to working as a W-2 employee:

  1. Freelancing 
  2. Employment by an Israeli Employer of Record service (payroll company)
  3. Open your own Israeli company (Chevra Ba’am)

If the company you want to work with is open to both these options, consult with an accountant who understands US and Israeli tax law to figure out which is best for you. It’s possible that you may decide that it’s more beneficial to seek employment with an Israeli company, or you might find a solution that works for you and for the US company, and enjoy a fruitful business relationship with them for the long-term.

Ways to work from Israel for a US-Based company

As you can see, a foreign employer can’t directly employ you overseas without setting up a payroll tax file or legal entity here. Since this opens the company up for tax exposure issues, they are unlikely to want to do this for only one employee. Let’s look more deeply at the other ways that you can work from Israel for a US-based company and consider the pros and cons of each option so you can choose the one that’s best for you.

Become a freelancer

You can set yourself up as a freelancer in Israel and the employer will then contract you as a consultant. 

Freelancing can be a blessing and a curse. If you were a classic freelancer working for more than one client, you would enjoy the advantages of making your own schedule, deciding which clients to work for, setting your own prices and not having a boss-employee relationship to contend with. On the other hand, you wouldn’t get vacation or sick days, you would pay more into Bituach Leumi and you would have no steady income.

When you set yourself up as a freelancer for the purpose of working with an American company, you still have no legal rights such as vacation and sick days, you will have to pay Bituach Leumi as a freelancer and will most likely need an accountant to manage your books. If you are an American citizen, you will also have to pay Social Security taxes in the US. But if you are working for a US company, you likely won’t get to make your own schedule, decide who to work with or be on an even footing with your boss. In some ways, you are taking on the obligations of a freelancer without enjoying the benefits.

Before you take this step, it’s important to weigh the advantages and disadvantages as they pertain to your individual situation.

  1. Is the salary being offered to you high enough to offset the extra costs?
  2. Is your US company offering you flexibility, such as work during Israeli hours or at any time you choose?
  3. Are your bosses bothered by your designation as a freelancer, since it weakens the employee/employer relationship?

Use an Employer of Record service

If freelancing seems like a bum deal to you, but you really do want to work with an American company, you can choose to be employed by an Employer of Record service such as Route 38.

In that scenario, your employer pays Route 38 monthly and Route 38 pays your salary in accordance with Israeli law. This is simple for your employer to set up, since Route 38 takes care of all the bureaucracy. It’s easy for you as well, since you get a pay stub (tlush maskoret) like any other Israeli employee, can get paid in shekels in Israel or dollars in the US and all necessary deductions (pension, health insurance and income tax) are withheld for you.

What is an Employer of Record (EOR) service?

An EOR is a company which takes on the responsibilities of employment for employees who are providing services for other businesses. In the case of Route 38, we employ people working in various fields, usually for companies based abroad. We provide our employees with an Israeli pay stub (tlush maskoret) and we deduct all the legally required deductions. 

How is this different from a Professional Employment Organization (PEO)?

A PEO doesn’t take full responsibility, rather shares responsibility with another employer. This is a solution that only works if the hiring company has an entity in the relevant jurisdiction (in this case, Israel). This is a solution that works well for a company that has 5-10 employees in Israel, although their main office is abroad. It must cover all the employees belonging to that company in the country.

An EOR such as Route 38 takes full responsibilities for the employee. The company doesn’t have to have an entity here in Israel. It can cover some of the employees and doesn’t have to cover them all. There is no minimum number of employees, so this is a great solution for a business which wants to work with only one person in Israel. We take care of HR, taxes, payment terms, payroll funding, workers compensation and unemployment claims.

What are the associated costs?

There are registration and termination fees as well as a flat monthly processing fee. It’s best if you can get your US employer to cover these fees, otherwise it will be deducted from your salary.

Advantages of Working through Route 38

  • Easy to get paid by employers abroad. We maintain a US bank account, so it’s easy for the employer to pay invoices. Your salary is then paid directly into your Israeli bank account. You don’t have to deal with the headache of exchange rates and change fees and they are automatically deducted from your salary.
     
  • Simple for employers to navigate.
  • No need to become an Israeli freelancer and deal with the effort and expense of reporting. The disadvantage of freelancing is that you are required to report your income annually or bi-monthly. Most freelancers find that this is complicated to do independently and hire an accountant or tax advisor to assist them with reporting. This is an added expense that comes off their salaries.
  • Avoid self-employed status in the US and its consequences vis a vis Social Security payments. Self-employed Israelis who are also US citizens are required to deposit 15% of their salaries in Social Security.
  • Office space. We maintain an office in Jerusalem, where our employees can come to work. Bring your laptop and enjoy our wifi, kitchen and friendly atmosphere. Book our conference room for meetings.
  • Collaboration opportunities. Because we employ many different types of professionals, you can easily find colleagues to provide services that you need. 

Is it legal? I heard that Bituach Leumi doesn’t like these companies.

In 2014, a key player in the industry in Israel was sued by Bituach Leumi, because its clients were paying lower Bituach Leumi fees as if they were employees, while acting as freelancers. The company lost the court case and had to change its business model as a result. Employer of Record companies which have been established since then follow the new business model which is in accordance with Bituach Leumi’s regulations.

Opening your own business

Another solution is to open your own Israeli company, called a Chevra Ba’am in Hebrew. In this situation, you become an employee of the company and are issued a regular Israeli pay stub. Accounting fees are higher than in the other options, because reporting income to the Israeli government is more complex. If your company is small, a freelance CFO can take care of all financial issues, but this is still a significant expense. The biggest advantage of creating a Chevra Ba’am is that you can scale your business and easily employ others to help you grow and expand.

Getting the right advice

The employment structure you choose will affect your finances as well as your relationship with your employer, so it’s important that you get the right advice in order to make an informed decision. One common mistake many olim make is consulting with an American CPA living in the United States about their finances in Israel. Because the average CPA is, understandably, unfamiliar with Israeli tax laws, their advice is often misguided and can lead to issues later on. The better choice is to consult with an American CPA living and working in Israel, who is an expert both in American and Israeli tax law. It is also possible to consult with a firm which employs both American and Israeli accountants, who work in collaboration with each other to give their clients the service they need. 

We at Route 38 are extremely knowledgeable about tax law in both the US and Israel and we offer paid consultations to people who are trying to figure out how to structure their employment arrangement with an American employer. If relevant, we will suggest our Employer of Record service, but we will also tell you if this is not in your best interest, and you would be better off with a different type of arrangement. Book a consultation with us by emailing info@route38.co.il.

Categories
Business in Israel

What’s the Best Way to Take on a Short-Term Freelance Project in Israel?

All freelance work performed in Israel must be reported to the Israeli government and is subject to tax. If you own a business, there’s a system in place for generating receipts and reporting your income to the tax authorities. But what if you are an employee that wants to take on a short-term consulting gig? Or a student helping a professor with a research project? What if you’re currently unemployed and have been offered a few weeks of work on a timely project?

One option is to report to the government that you have made a business arrangement called “Iskat Akrai” – a temporary business agreement. This is done directly on the Tax Authority website or by filling out Form 8356 and bringing it in person to the offices of the Tax Authority. You will then receive an official tax receipt which you send to the entity which hired you as a consultant. The payment you receive is liable for Bituach Leumi (Israeli Social Security), income tax and VAT. This option is only available for a one-time payment, so if you provide a service for a few months, you can’t use multiple Iskaot Akrai to be paid each month, and will have to accept payment in one lump sum.

Another option is to ask the entity that hires you to put you on their books as an employee and pay you with a Tlush Maskoret (pay stub), in which taxes and Bituach Leumi are withheld automatically. If you have another job, you will need to notify the Tax Authority, by performing a Teum Mas (tax adjustment) online. In the absence of a Teum Mas, each employer will withhold the highest tax rate. When you report both incomes, the Tax Authority instructs each employer how much tax to withhold. 

Not all employers will agree to put you on the books for a short time, due to the extra paperwork involved, so this is not always a possibility. 

The third option is to register as an employee of an Employer of Record service. That company will then issue an invoice to the entity hiring you and send them a receipt once payment has been made. This option is easier for the hiring body, but you will still need to fill out a Teum Mas, since you will be considered a person with more than one job. 

How do you know which option is best for you? The deciding factor may very well be the employer’s preference, since it has to be worth their while to hire you. You want to make it easy for them to pay you, otherwise they might choose to hire a different consultant, who already has a registered business. If you are able to choose, consider whether you expect to receive more than one payment and whether you prefer the bureaucracy involved with an Iskat Akrai or with a Teum Mas.

Remember that a one-time consulting gig may very well turn into something more long-term or give you a taste for freelancing that you want to pursue. If that happens, you may find yourself opening a business after all.

Categories
Aliyah Bringing Your Existing Job to Israel Outsourcing to Israel Podcasts

Make Aliyah and Work for a US Company

Baruch Swinkin, CFO of Route 38, was interviewed by the famous Nachum Segal about how Americans can make aliyah and work for a US company. Listen to it here:

Just want the cliff notes version of the interview? Here you go!

Want to make aliyah but concerned about how to make a living in Israel?

Route 38 provides a simple and seamless solution for American olim working for companies in the US. Our Employer of Record service is perfect for:

  • Americans who want to make aliyah and keep their American jobs by working remotely
  • Olim who have been living in Israel for a while and want to transition to a remote job in the States
  • US companies who want to tap into the talent and resources of the “Start-Up Nation”
  • Religious Jews who want to grow their business with American ex-pats they feel comfortable with and support the Israeli economy at the same time

An Employer of Record service helps navigate the challenges of tax reporting for dual American-Israeli citizens, so that they can concentrate on their work, secure in the knowledge that their income is being reported in Israel and that they aren’t being “double-taxed” in both countries.

Feel free to reach out to us at info@route38.co.il to hear more about how we can help make your dreams come true.

Categories
Employment in Israel

The Termination Process

The process of firing an employee in Israel is set out clearly by the law, and the termination process seeks to protect the rights of the employee. 

An employer can’t fire an employee without a hearing (shimua). The employer will send a notice to the employee inviting him or her to a hearing. This notice must include the reasons that the employee is being fired and be sent with enough advance notice for the employee to prepare for it. The employee can come alone to the meeting or bring a lawyer or other representative. He can refute the claims and make the case for his continued employment. Alternatively, he can waive his right to a hearing, if he so chooses.

If there is a legal reason why the employee can’t be fired, such as pregnancy or pending army service), this is the time to bring that up.

The hearing is not meant to be a formality, and the employer is supposed to seriously consider the employee’s argument before making a final decision. Nonetheless, most people who have attended a termination hearing do end up getting fired.

After the company has decided to go ahead with termination, a written notice will be sent detailing the date on which the employment is terminated. An employee who has worked at the company for at least a year is entitled to a month’s notice.

Within 14 days of termination (or 7 days after the employee requests it), the employer must send a letter of termination which states the start and end dates of employment. 

An employee who has been at this workplace for a year or more is entitled to severance pay upon being fired. Severance is one month’s salary for one year of work, unless the employee’s contract promises more. If the employer fires an employee shortly before the end of the first year of employment, this is likely to be seen by the labor courts as an attempt to avoid paying severance. If this happens, the fired employee should seek legal counsel.

If the employee has unused vacation days, the employer is required to pay a regular day’s salary for each one.

Now is the time for the employee to find out whether he is eligible for unemployment from Bituach Leumi, and if so, to apply for it. He should also tweak his CV and begin the search for new employment. 

Categories
Business in Israel

Maternity Leave as a Business Owner

Maternity leave and maternity pay are a basic right in Israel, whether you are an employee or a business owner. While on paid maternity leave, you are not allowed to work. 

But wait… What will happen to your business if you abandon it entirely for months? The law does allow a woman on maternity leave to maintain her business if she gets special permission from Bituach Leumi. Unfortunately, there is no uniform definition of maintenance as opposed to work and each case is judged on its own merit. 

If you’re worried that your clients and customers will start working with your competition during your maternity leave and choose to stay with them even afterwards, consider hiring a replacement or outsourcing the work so that your clients get what they need from your business without your involvement.

Are you eligible for maternity pay?

If you have paid into Bituach Leumi for 10 out of the 14 months prior to your maternity leave, or 15 out of the previous 22 months, you are entitled to maternity pay for 15 weeks. If you have paid Bituach Leumi for 6 months of the past 14, you are eligible for 8 weeks of maternity pay.

Before you give birth, check whether you owe money to Bituach Leumi. If so, you will want to pay those debts so that your right to maternity pay isn’t curtailed.

How is maternity pay calculated?

Because entrepreneurs tend not to have steady income, maternity pay is calculated in two phases. In phase one, your income is determined based on the assessment from the previous year or your estimated assessment for this year, whichever amount is higher. Remember that your total income is calculated based on what you bring in and what your expenses are. If you have a lot of expenses, maternity pay will be a lot lower than you might be expecting.

At the end of the year, when all income for the year is reported, the amount of maternity pay is adjusted, sometimes to your benefit and sometimes to your detriment. If you think that your income will decrease significantly over the course of the year, it’s recommended to keep some money on the side so you can pay back what you will end up owing the government for overpaying you during maternity leave.

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Uncategorized

E3 Event with Rifka Lebowitz

HOW TO USE THE COUPON WHEN YOU RSVP

Apply Coupon
When you get to the payment screen – (see image above)- click on “apply coupon” and enter ROUTE38 here for 100% discount – valid for the first 35 guests.

RSVP Below

Categories
Employment in Israel

Quitting your job: What are your rights and obligations?

If you are not happy with your job or you have found a better one, it may be time to quit your current job and move on. Israel is a small country and almost everyone is connected in some way, so it’s important to leave in a professional way and on the best terms possible. 

Make sure that you give proper notice according to the law. Israeli employment law states that an employee who has received a monthly salary in an organization for up to one year must give notice as follows: one day for each of the first 6 months of employment and two and a half days for each additional month of employment. If you have been working at the same company for over a year, you must give one month’s notice. 

An hourly or daily worker who has worked up to one year must give notice of one day per month of employment. A worker of 1-2 years needs to give notice of 14 days plus one day for each two months of work in the second year, with a cap of 20 days. A worker of 2-3 years gives notice of 21 days plus a day for each two months worked during the third year. After 3 years, the notice period is a month.

If your contract says that you must let your employer know that you are resigning earlier than the legal requirement, you can still give notice according to the law and no legal action can be taken against you. Of course, this might anger your employer, so consider whether you want to do this.

You will work as usual during the notice period and receive your regular salary. You and your employer have the right to agree mutually to shorten the notice period, but it can’t be forced on either of you. If you have vacation days saved up, you can use them during your notice period, unless your employer needs your services and insists that you work. 

You will want to let your senior bosses know in person that you are leaving before you write an official resignation letter. They will almost certainly ask why you are quitting. This is not necessarily the time to tell them every single thing you hate about working at their company. You can give one or two reasons that are true but not accusatory. Or you can simply say that you have found a better opportunity or want to change directions in your career. Mention some of the things you enjoyed or learned at the company to soften the blow and leave a positive impression.

Work out your notice in the best way you can. If the company has already hired a replacement, train the new employee to make the transition as smooth as possible. 

Once you have left, beware your instinct to badmouth your previous employer in public or on social media. Your comments may very well get back to your bosses and leave a bad taste in their mouths. Remember that you may need a recommendation from them someday or that they may be asked about you in the future by potential employers. Israel is, after all, a very small country.

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Business in Israel

Show Me the Money

Pension Tips and Investment Risks with Motty Handler

Our second networking event was a huge success! We learned all about saving for retirement from Motty Handler, while enjoying sushi, fresh fruit and candy. Most importantly, we met other professionals, traded advice and dreamed up new collaborations.

Check out these pictures from the event:

Categories
Employment in Israel

Resources on Employee Rights

Do you know your rights as an employee? We recommend having a general working knowledge of the employment laws in Israel. Employees who are not well-versed in their rights can be taken advantage of, and this can easily happen to olim who don’t ask the right questions (or ask the right people).

Additionally, there can be specific issues that you need in-depth information on, such as the intricacies of termination, maternity pay and pensions. Our goal here is to provide as much helpful information as possible, but if you need greater detail, here’s how to get it.

The Kol Zechut (All Rights) website is partially translated from the Hebrew site and includes many articles on all aspects of legal rights, from health and disability to immigrants and old age. There are numerous articles about employment issues, such as pensions, National Insurance, income tax, labor laws and more.

Kav LaOved is an Israeli nonprofit organization which provides individual help to employees who suspect that their rights have been violated or who want to better understand their circumstances. The organization has office hours and a hotline and can also be contacted via email. The website provides some English language brochures about topics such as work accidents, hourly workers and women’s rights in the workplace.

For more general information, see Nefesh B’Nefesh’s online article on Employee Benefits. This article covers some of the basics of the employee-employer relationship and Israel labor laws.

The Human Resources representative at your company is also a useful resource. In larger companies, there may be an entire HR department, but even in smaller companies, someone is in charge of HR. If you don’t know who that is, ask. The HR representative should be able to explain your pay stub, assist with specific questions and provide you with necessary forms. 

There is strength in community. You can easily get answers to employment questions by posting on olim social media groups, especially those that are dedicated to career discussions. Of course, not all these answers will be accurate, so take them with a grain of salt, but there is often a consensus on legalities and processes which can point you in the right direction. These groups can also provide firsthand experience of other olim, which is often invaluable.

Knowledge is power and this is certainly true in the realm of employee rights. Awareness can help you choose the right job, get what you deserve in your job and leave a job in the right way.

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Business in Israel

Office Space in Har Chotzvim

Route 38’s office space in Har Chotzvim, Jerusalem is available for rent. Choose a dedicated desk or a private office. Take advantage of the conference room, internet, printing facilities and free hot drinks.

Additionally, members of the Route 38 family may come and enjoy any of our hot desks for free , up to 20 times a year.

Prices for monthly rentals are as follows:

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Business in Israel

Networking at Route 38’s New Offices in Jerusalem

On March 9, 2022, Route 38 celebrated the opening of its new offices in Jerusalem with its first networking event. A light dinner was served in the lobby of the new co-working space in Har Hotzvim, accompanied by lots of schmoozing. This was followed by short presentations by Baruch Swinkin and Yael Frydman and a networking session by Helena Baker, in which she taught everyone how to give an unforgettable elevator pitch. And we will certainly not forget Mike Kashnow’s pitch!

Here are a few pictures from the event:

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Uncategorized

Podcast: Israelis, Remote Work and Your Business

Are you a business considering hiring Israeli talent? You don’t want to miss this interview with Baruch Swinkin, CFO of Route 38. You’ll get the whys and the hows of hiring Israelis when you don’t have (or want) an office in Israel.

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Business in Israel

Osek Patur – Guidance for Your New Business

Mazel tov on setting up your new business! If you’re just starting out, chances are that you will be an “Osek Patur,” a business which is exempt from collecting and paying VAT. The following is a brief overview of what you need to know for your new Osek Patur.

  • Mas Hachnasa- Your tik (file) in Mas Hachnasa (Israeli Tax Authority) is registered on both your name and your spouse’s name.
    Every year a Doch Shnati (annual report – tax return) is submitted which should include all income earned both in Israel and abroad for both spouses. If you work with an accountant or tax consultant (and we recommend that you do), send your receipt book, expense invoices and any other documents you have to your accountant in January of the next year for preparation of the Doch Shnati.
  • Bituach Leumi (National Insurance) – If, according to the definitions of Bituach Leumi you are required to make payments to National Insurance, you have the choice to pay via credit card or a monthly set payment (horaat keva). You should set this up as quickly as possible so you don’t end up with back payments.
  • Ma’am (VAT) – Your file at the VAT office is only under your name and doesn’t include your spouse. The updated ceiling for your income in 2021 is 99,893 NIS per year. Please check your income during the year making sure you are not approaching the ceiling, and if you are please update the VAT office as soon as possible.
  • Revenue recognition (receiving payment from a client) –  Israeli accounting requirements dictate that an official receipt (kabala) must be issued immediately upon receipt of payment from a client, or as soon as you become aware of a cash receipt (in the case of a bank transfer). It is important that this practice is strictly enforced. Non-issuance or late issuance of invoices may cause accounting complications and headaches, even possibly fines.

Receipts can be issued in two ways:

  1. Use of online programs or applications – many of which are easy to use and are readily available, including: Easy Count, Cheshbonit Yeroka, Cheshbonit Online, iCount and more. (Some are free and some come with a low monthly fee.)
  2. Manual receipt book – this book can be purchased and printed in a printshop. Ask them for a receipt book for an Osek Patur – Original + two copies per receipt.

The invoice must include the following details on the top:

Full name/Business name, Address, Phone number of the business and osek patur number (which is generally your teudat zehut number).

The receipt should provide information about the service provided and the method of payment (cash, bank transfer, check – including check number). If payment was in another currency, include the rate of exchange to shekels. 

  • Important highlights when filling out a receipt:
    • Receipts should be issued at the time of the receipt of payment, even if the service will be provided at a future date.
    • The dates and numbers of each receipt must be consecutive. Do not issue receipts out of order!
    • The original should be given to the client, and copies should remain with you (the business).
    • When a receipt has to be cancelled, or a numbered receipt was skipped, the cancelled/skipped receipt should stay in the book and you should write “cancelled” or “skipped” on it.
    • Receipts in the amount of more than 5,000 NIS should include the client’s teudat zehut or business number in addition to their full name.
    • In cases of receipts over NIS 11,000, per law, cash cannot be exclusively used – payment must be remitted via check or bank transfer.
  • Saving expense documents/paperwork:

It is strongly advised to keep as many expense documents as possible. Any expense that you submit will save you from higher income tax and Bituach Leumi payments.

It is also advised to keep donation receipts in order to reduce tax payments (or receive a tax payment refund), if you have any. Please note that receipts must be from Chapter 46 recognized organizations,and their status must be noted on the receipt. This applies even in years that one did not make any tax payments, as donation receipts may be used for 4 years.

The following are considered direct business expenses, and are 100% recognized and deductible:

  1. Furniture and equipment for business, office equipment
  2. Travel by taxi and public transportation
  3. Advertising, marketing, education, advanced training
  4. Accounting, professional advice/consulting
  5. Subcontractors (external consultants, professional temp positions)
  6. Credit card fees

Indirect/mixed expenses, partially recognized:

  1. Private car expenses (including insurance, license, fuel, maintenance/repair) – 45%
  2. Cell phone – 50%

Home expenses- 25%:

  1. Landline, internet
  2. Electricity, water
  3. Municipal taxes (Arnona) and Homeowner Association Fees (Va’ad Bayit)
  4. Renovations
  • Inventory

One is obligated to count all inventory in one’s possession on December 31st of every year, in the event that one has raw materials or equipment or other items for sale that require evaluation. 

  • Hatzarat Hon (Financial statement):

Sometime after the opening of your independent contractor tax file, Mas Hachnasa will request and require a Hatzarat Hon (financial statement) as of December 31st of the year that the tax file was opened. The statement details all the assets and liabilities of the business owner as of the date of the statement. Additional Hatzarat Hon requests are generally made once every 4-5 years.
It is generally recommended to submit this statement with the help of an accountant or tax consultant, since it can be complex. The first one should certainly be submitted with professional assistance, since it serves as the basis for all future statements.

Categories
Business in Israel Podcasts

Podcast: A Story That’s Worth a Thousand Words

Videographer and photographer Yirmiyahu Vann is an expert in visual storytelling. Listen to his tips on getting great headshots, creating meaningful videos to grow your business and mountain biking in Israel (VR camera in hand)!

Categories
Business in Israel Podcasts

Podcast: A Couples Therapist in Israel Shares Intimate Details

Abby Weisz, LCSW, M. Ed, tells us about her work as a marriage therapist focusing on sexuality and intimacy: What made her choose this field, why she’s sad to have so much work and what rabbis say about what she does. Oh yeah, she also tells us why she chose to work with Route 38 in their Wellness Center division and how that helps her run a successful therapy practice.

Categories
Employment in Israel

How to Get a Job in Israel

One of the biggest challenges of moving to any new country is finding a job and aliyah to Israel is no exception. It can be daunting to seek employment in a country where the norms are different from your home country, the primary language is Hebrew and everyone else seems to know each other. But have no fear; many olim are gainfully employed in Israel and you can be too.

Resume/CV

Your first step in your job search is to create a resume (or CV as it tends to be called here) that fits Israeli standards. CVs should be one page long and include a list of skills above your experience and education. If you’ve had many jobs, remove the oldest ones and the least relevant to the job you are applying for, so you can keep to the one page format. 

Whether you need a Hebrew CV is dependent on the industry you work in and the type of job you are looking for. Even many Israelis submit English CVs, especially in the hi-tech industry. It’s best to ask around in your industry (you can easily do this on a Facebook or LinkedIn group if you don’t personally know anyone who works in the field) to find out what language your CV should be in.

Until recently, CVs always included personal information like marital status, children and home address, so you might be told to add these to your CV. But most experts in job hunting are now recommending against this, since these personal details can cause prejudice.

When sending a CV to a company, include a cover letter in your email of up to 5 sentences, detailing why you are the right person for this job. Your cover letter should be tailored to the job you are applying for, so send a different one for each application. 

It’s important to have references prepared as companies will often ask for them. If there’s no room on your CV to list them, you can leave them out, but make sure that you have names ready and that you have asked for permission to share their contact information. Be sure to add a line on your CV that says “References available upon request.” If you are asked for references, provide names, phone numbers and email addresses.

Job Postings

One place to search for a job is online. There are a number of Hebrew job posting websites (some may require a paid membership) and the Nefesh B’Nefesh Job Board and Janglo website list jobs that are geared specifically to olim, many not requiring any Hebrew. Jobs are also listed on Facebook and LinkedIn groups, especially those catering to English speakers. Cities with large Anglo populations tend to have local Facebook groups which may have job opportunities and there are also groups devoted to job postings and career advice.

“Protexia”

It’s true that a lot of Israelis find jobs through relatives and old army buddies. You may not have those, but you might have friends who made aliyah before you, acquaintances who are willing to lend a hand and Facebook friends or LinkedIn connections who are happy to support fellow olim. Put yourself out there by calling and posting on social media about the kind of job you are looking for. This is commonly done by Israelis, whether they are looking for their first job or have left their previous job for whatever reason. You may hear about positions that haven’t been advertised yet or get your CV on the top of the pile because of a personal recommendation, so this is well worth doing.

Reaching Out to Companies Directly

If there’s a company you would like to work for, you can reach out directly to their HR department and ask if they are hiring. Even if they aren’t, they will often keep your CV on file and contact you later if an appropriate position becomes available.

Working for a Foreign Company

If you have previously worked in a company with offices around the world, find out if there’s an Israeli office you can apply to work at. You might even be able to transfer your existing position to the Israeli office. It is also possible to work for a company outside of Israel, if they are comfortable with hiring a remote employee. Many olim work from home or in a shared workspace for a company based in their home country. 

This won’t always work, since many local subsidiaries of global companies are not interested in putting an employee of a foreign subsidiary on their books due to factors such as budget, headcount restrictions and payroll imbalance. It never hurts to ask, though!

Headhunters, Career Consultants and HR Companies

Depending on your industry, you may find that a headhunter can help match you with a position that’s right for you. Headhunters specialize in helping companies (usually large ones) find the right employee. They are paid by the firm which is hiring and do not take payment from job seekers.

Career consultants help people navigate the job search. They are paid for their time and expertise, regardless of whether you find a job. According to Marna Becker of MRB Consulting, career consultants can help you by sharing their built-in network, improving your CV, boosting your networking skills and troubleshooting why you’re having trouble finding a job.

Career consultants are especially useful if you are looking for your first job in Israel, don’t have a strong network here and are not familiar with the norms and company culture in the country. They are also helpful if you’re just entering the workforce and need help deciding what profession to pursue based on your skillset, personality traits etc. Additionally, a career consultant can be of great assistance if you’re contemplating a career change and aren’t sure what you want to do or how to transfer your skills to a new field.

There are also human resource companies which specialize in placing employees in positions. Be aware that these companies are sometimes also the employers, and the salary and perks of the job may differ from those offered to the employees of the company proper. 

When to Apply

If you’re making aliyah now, be aware that Israeli companies tend to want their employees to start sooner rather than later, so searching for a job months before moving to Israel is likely to be futile. Use that time to check out the job market in your field and make some connections, and start applying shortly before aliyah or once you are already here.

If you are currently employed in Israel, make sure you know how much notice you need to give your current employer, so you don’t end up in a situation where you can’t take a job you were offered due to an early start time. (The notice period is generally a month if you have worked at a job for at least a year.) If you’re on maternity leave, start looking for work close to when you are willing to start a new job. 

An exception to this rule is if you are in a field where contracts are on a set schedule, like education. Conventional wisdom is to start searching for a position in education around Pesach time, in order to start in September.

The Interview

Job interviews are often less formal and this can take some olim by surprise. Questions might range from the professional to the personal, and don’t be surprised if there’s some Jewish geography mixed in. Candidates are often asked what their salary expectations are. You can sometimes turn the question on them and get them to tell you what they want to pay, but this won’t always work, so be prepared with a range and be open to negotiation. 

Job hunting in Israel may take some time, but the jobs are out there and you can certainly find one. Wishing you a successful and smooth job search!

Categories
Employment in Israel

Vacation Days and Sick Days in Israel

Israeli labor law has determined a minimum number of vacation and sick days, but company policies may differ and you may be entitled to more benefits than legally required. Here we delineate what is legally required.

National Holidays

Employees are entitled to up to 9 paid vacation days for national holidays, assuming these days fall on a weekday. These holidays are religion-dependent. For Jewish workers, the days are:

  1. First day of Rosh Hashanah
  2. Second day of Rosh Hashanah 
  3. Yom Kippur
  4. Sukkot
  5. Simchat Torah
  6. First day of Pesach
  7. Last day of Pesach
  8. Yom Haatzmaut
  9. Shavuot

Employees who usually work on Fridays or Shabbat get paid for these vacation days if they fall on a weekend, but employees who work Monday-Thursday are not paid extra for national holidays that don’t fall on a work day.

Additionally, there are other days which are not national holidays but which any Jewish employee can take as one of their accrued vacation days (up to one day per year). These are called “Yemei Bechira” (chosen days):

  1. Erev Rosh Hashanah
  2. Tzom Gedalya
  3. Erev Yom Kippur
  4. Erev Sukkot
  5. Hoshanah Rabbah
  6. Sigd
  7. Asarah B’Tevet
  8. Taanit Esther
  9. Purim
  10. Shushan Purim
  11. Erev Pesach
  12. Erev Shvii Shel Pesach
  13. Mimuna
  14. Lag B’Omer
  15. Erev Shavuot
  16. Shiva Assar B’Tammuz
  17. Tisha B’Av

Annual Vacation 

An employee’s allowance of vacation days depends on whether the job is full or part time, how long the employee has worked at the company and how many days a week the job requires. The minimum number of annual vacation days for a full time employee is 12. 

It is within the employer’s rights to determine when an employee can take vacation and it is legal for the office to be shut down for a specific time period and all employees required to take their vacation at that time. If the enforced vacation is for 7 days or more, the employee must be informed at least two weeks in advance.

Employees are entitled to take one vacation day a year at any time, without need for the employer’s consent, on the condition that the employee notified the employer thirty days in advance.

Days Off Which Aren’t Vacation Days

Employees who are absent for reserve duty, a worker’s strike (unless they are government employees), maternity leave, mourning/shiva or national elections do not have these days deducted from their annual vacation days.

Sick Days

A salaried employee who works full time at once place of employment is eligible for 18 sick days a year (1.5 per month). Sick days can be used for one’s own sickness or in order to care for a family member who is sick. Legally, the employee isn’t paid for the first sick day. The second and third days are 50% pay and the fourth and on are 100% pay. In order to be eligible for this payment, the employee must provide a sick note from a doctor.

Contract Negotiations

Some companies stipulate in their contracts that the employee is entitled to more sick days, that they pay for the first sick day as well or that they offer more vacation days than stipulated by law. When negotiating a contract (either for a new job or in the case of a promotion) these stipulations can often be negotiated. Sometimes, despite a company standing firm on the salary they are offering, they are flexible on vacation and sick days. It is considered acceptable to bring this up in salary negotiations and may result in an improvement in working conditions.

Categories
Employment in Israel Podcasts

Podcast: Employee Rights: What You Need to Know

Yael Frydman, COO of Route 38, knows almost everything there is to know about employee rights and she shares what you should be aware of. 

Categories
Employment in Israel

Israeli Company Culture (and Your Culture Shock)

If you’re just entering the workforce in Israel, you may find that the company culture here is different from what you are used to in your home country. Not every company in Israel is the same, and there are differences between industries and locations, but a group of working women in Israel who belong to the ImaKadima Facebook group have helped us compile a list of characteristics that you are likely to encounter in the Israeli workplace.

Bear in mind that Jerusalem offices tend to be more toned down than offices in the Tel Aviv area. Jerusalem offices are often more heavily religious and that affects workplace culture as well. Some of the characteristics described below are true across the board, while others are more likely to be experienced in the Merkaz (center of the country).

Formality (or lack thereof)

Israel tends to be less formal in general and this is never more true than in the workforce. It starts with the way people dress and talk and even affects management.

Most companies do not have a dress code and casual dress is the norm. There are very few companies where people wear suits to work and many workplaces where jeans and flip-flops are perfectly acceptable.

Israelis tend to speak at work in the same way they speak to their friends or random strangers on the bus. You might be surprised to hear people speaking loudly, very directly and even sounding like they are having an argument, but none of these things are considered rude in Israel. It’s likely that you will be expected to make your opinions known and not beat around the bush.

There is less deference to hierarchy at Israeli companies. Management tends to be more accessible and more open to socializing with employees. Bosses (or their HR departments) often organize mandatory “fun days,” which can be very informal. Alcohol is often served at company events and people are encouraged to let their hair down a bit.

Vacations and absences

Israeli law requires minimum vacation days, but employers can dictate when those vacation days take place. Some companies have mandatory shutdowns during periods when many employees want to take off or when productivity is low. So you may find that your company is closed on chol hamoed or during the last two weeks of August. In some companies that stay open, there is a much smaller staff since a lot of employees choose to take their vacation days at those times.

A large number of Israelis serve in the military reserves (miluim) until their early forties. So your colleagues might be off of work for an extended period while they are in the IDF.

International travel has become popular in Israel in recent years, and it’s not unheard of for employees to take off for a week or two in order to vacation outside the country.

Blurred Boundaries

If you’re used to very strict boundaries between your personal and professional life, aliyah is a good opportunity to let go of them. Coworkers tend to be open about their personal lives, discussing children, spouses and even politics. Colleagues invite each other to family simchas and give each other gifts for events.

Hot topics like politics or religion are not taboo and heated discussions can happen, with everyone still staying on friendly terms. Coworkers may share their feelings and be more free with hugging and kissing. Sometimes personal discussions veer into gray areas, such as asking a woman about her plans regarding getting pregnant. You don’t have to answer any questions that make you uncomfortable or could lead to discriminiation, but it’s best to avoid them elegantly.

In many workplaces, it is acceptable for family and friends to come by to say hello. Even children are welcome in these offices, as long as they aren’t too disruptive.

Work Hours

The Israeli work week is fairly long. A full time job (without overtime) is 42 hours. Many companies work Sunday to Thursday, which translates into nine-hour days. Some companies (and especially governmental institutions) have shorter hours for working mothers.

If you get a job offer with a global salary, this means that you are expected to work overtime. The exact details must be laid out in your contract and adhere to the laws on compensation for overtime.

Some workplaces have electronic time-clocks, where you clock in when you arrive and clock out when you leave. The time clock protects both you and the employer in case of a dispute about work hours. Mas Hachnasa (Israel Tax Authority) requires that hours worked appear on your monthly pay stub.

Salaries and Benefits

Salaries are paid monthly (by law they must be paid by the 9th of the next month). This might be a culture shock if you are used to getting a paycheck every two weeks. Most employers will take your bank account information and pay you by direct deposit.

It is common for employers to give their staff presents before Rosh Hashanah and Pesach. These might be gift baskets, housewares or a gift certificate. Some companies allow their employees to choose a gift from a list of options. Other employers will not give gifts at all or will give something symbolic, like a bottle of wine. Note that gifts from employers are often taxable.

Breaks

Smoking is ubiquitous in Israel and with it cigarette breaks. Coworkers may use their smoking breaks as a time to socialize or to talk business. Lunchtime is also a social occasion at Israeli workplaces. Colleagues tend to eat together, talking, laughing and getting to know each other. Employees may order in, get takeout from a nearby restaurant or bring their own food. 

Some companies (especially in the hi-tech industry) provide their employees with lunch cards such as 10bis and Cibus, which give them free meals at certain establishments. (The amount on the cards is considered taxable income, since, after all, there is no such thing as a free lunch.) There are also workplaces which provide catered lunches for their staff. Some even stock the fridge with breakfast foods and snacks, so employees never have to leave the building during the workday.

Family First

Israeli employers are generally respectful of family obligations and events, such as bar mitzvahs, britot, weddings and funerals, and will understand when an employee takes off time to attend them. When there is a death in an employee’s family, this will be announced to all the workers and some of them will make the effort to attend the funeral and/or shiva. An employee sitting shiva is legally entitled to all those days off.

Judaism in the Workplace

Depending on the location and the people who work at the company, the environment might be more or less religious. But even the most secular workplaces are likely to hold holiday parties before major Jewish holidays. Most companies will make arrangements for kosher food at parties and other events if they know that this is important to some of their employees. Even if you are the only kosher-eating person in your office, there’s no need to be shy about asking for consideration of kashrut restrictions. Legally, Jewish holidays on which work is prohibited by Jewish law are considered paid vacation days.

Work Methods

Olim are sometimes surprised to find out that the customer isn’t always right in Israel. This is true as a consumer but also as an employee. You may find that your bosses are working under the impression that they know what’s best, even if customer feedback seems to be saying something different.

Organized methods and deadlines are not always a feature of the Israeli workplace. On the other hand, both management and employees tend to be extremely dedicated to getting the job done, even if it requires working crazy hours or pulling people off other projects to complete a goal.

Communication

We already mentioned the lack of formality in speech and this includes using casual army slang and references, swear words and divulging TMI (too much information). Israelis talk fast and interrupt each other and this is not considered rude. They do small talk and Jewish geography, but just as often will cut out the small talk to get to the main point as quickly as possible. Who you know is more important than what you know, so it’s important to establish connections, even if it’s as remote as your niece’s neighbor serving in the army with your colleague’s daughter. And don’t be surprised if your coworker offers to set you up with his best friend’s son.

You may find that your office relies less on email and more on WhatsApp and direct communication. A lot of offices prefer task management apps in order to cut down on email but important information may still be relayed informally. This preference for direct communication leads to meetings which may seem unnecessary to you, but which are considered vital by management. 

Adjusting Your Expectations

It will be much easier to get used to the differences in company culture if you come with an open mind and a readiness to learn. Let go of the ideas you brought from your home country and pay attention to how your colleagues behave. Before long, you will find yourself acting like an Israeli and wondering how you ever did business any other way!

Categories
Business in Israel Podcasts

Podcast: The Golden Rules of Networking

Helena Baker of English Speaking Networking shares the do’s, the don’ts and the OMGs of networking, as well as the trials and tribulations of a new olah restarting her career in Israel. 

Categories
Business in Israel

Business Culture in Israel

If you’ve owned a business in another country or seen firsthand how a foreign business is managed, you may be surprised at some of the business practices which are common in Israel.

Payment Terms

One of the most surprising (and challenging) aspects of doing business in Israel is the concept of shotef plus – delayed payment. Many organizations and businesses don’t pay immediately upon receipt of an invoice. In 2017, a law was passed in the Knesset requiring most institutions and businesses to pay up to 45 days from receipt of an invoice. If you expect payment sooner, this should be included in your service agreement/contract, but don’t be surprised if you are told that the institution simply can’t pay earlier. These payment terms are usually based on cash flow issues (i.e. they are also being paid late), so you may have to accept these terms if you want to work with certain clients.

Acceptable forms of payment are cash, bank transfer and checks. Checks have become less popular in recent years and they aren’t worth the hassle if you can avoid them. Your clients may want to pay with Paypal, Paybox or Bit. Check fees and ease of use to decide which of these you choose to accept. You can also sign up for a paid credit card processing app and accept payments through it. Keep in mind that the easier you make it for clients to pay you, the sooner you will receive the money.

Becoming a Supplier

If you supply services or goods to another business, they might ask you for your Nikui Mas BaMakor and Ishur Nihul Sefarim. The Ishur Nihul Sefarim states that you keep your books according to the regulations of the Israeli Tax Authority. Nikui Mas BaMakor instructs the paying entity whether they are required to withhold tax and at what percentage. These documents can be obtained from your accountant or via the Israeli Tax Authority website.

Communication

In keeping with the informality prevalent in Israeli culture, business culture can be pretty informal too. Clients often prefer to communicate via WhatsApp or Facebook Messenger and some eschew use of email entirely. If you find that this way of communicating wreaks havoc on your business processes and organization, consider signing up for a task management system. There are lots of free options out there, and you can keep everything organized in one place, regardless of the form of communication utilized by your clients.

Price Haggling

Haggling over price is a time-honored Middle Eastern tradition and Israelis are well-versed in the art. You can choose not to work with clients who bargain or you can quote a higher price and expect to lower it in negotiations. In either case, you don’t want to lower your price below what your work is worth or to an amount that doesn’t leave you enough profit after taxes and expenses. A strategy that reduces the chance that a client will haggle is to let them know what they are getting for this price so that suddenly the amount seems low. 

Meetings

Meetings at coffee shops are totally acceptable in Israeli business culture. It’s understood that you may work from home or have an office space that’s not set up for hosting and your client or colleague may be in a similar situation. Etiquette requires that if you are the one who has asked for the meeting, you pay for the drinks or meals. Location should be closer to the person who was invited to the meeting and the initiator should check about dietary restrictions, including kashrut, before choosing a cafe or restaurant.

Invoices

Most clients will ask you for an invoice before they send payment for a service. An official invoice is called cheshbonit mas, and it obligates the business owner to pay VAT once issued.  Therefore, many business owners will send a “drishat tashlum” or “cheshbon iska” which is not an official document, in order to avoid getting stuck with a VAT expense before receiving payment. However, your client may fear making a payment and then getting stuck tracking the official cheshbonit mas. They are allowed by law to request the official, numbered cheshbonit mas before issuing payment and you must provide it.   

Some clients are prompt in their payments but others may need a little nudging. Sometimes clients will even ask to pay in installments or reduce the payment that was already agreed on. Stand firm when necessary and choose clients wisely to avoid these issues as much as possible.

Receipts

Once payment is made, if you are an Osek Patur, a receipt (kabala) is issued. If you are an Osek Murshe, you will need to issue a cheshbonit mas, which is a legal document and must be numbered. The ORIGINAL is what has value, so when using officially printed books the original document must be given to the payee. A digital copy is not enough for the payee to claim the VAT back on the expense.

In many cases, especially when funds are exchanged at the time services are provided, these documents are issued together in what’s called a cheshbonit mas kabala.

If you are using an electronic invoicing system, it’s easiest to create the payment request in the system and transform it into a receipt once payment has arrived.

Receipts are legal documents and it’s important to use a government-approved electronic system or an official printed booklet. Clients generally prefer to receive receipts electronically, so if you use a printed book, take a picture or scan it to send immediately and then send the paper one in the mail afterwards.

Professionalism and Extenuating Circumstances

In some countries, the lines between work and life are sharply defined, but they are a bit blurrier in Israel. Business owners may tell you why they can’t provide a service as quickly as they usually do – for example, they are taking a vacation, their baby is sick or they are dealing with a family crisis. It is assumed that you will be understanding, and that, if your project isn’t urgent, you will wait a little longer. If you feel comfortable, you can also let clients know how life events affect your productivity. Constant excuses won’t go over well, but an occasional hiccup is understood and accepted.

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Employment in Israel

Working Two Jobs in Israel: Everything You Need to Know

One of the things you learn quickly in Israel is flexibility. Plans tend to change at the last minute, rules aren’t necessarily law and the food tastes nothing like it did in your home country. At the beginning of life here, these things can be frustrating, but soon you will start to see the benefits of agility and adjustment. 

One of the ways in which Israelis are flexible is in the definition of their careers. There are many Israelis who have one conventional career and stick to it, of course. But there are also a lot of Israelis who work more than one job in order to make a living. There’s the office worker who teaches exercise classes in the evening, the teacher who tutors on the side and the translator who also runs a marketing business, to name a few.

When you have two (or more) jobs, there are some Israeli laws you need to be aware of.

Coordination of Income Tax

If you are a salaried employee, the Income Tax Authority (Mas Hachnasah) provides guidelines to your employer for how much tax to withhold from your salary. Without instruction from Mas Hachnasa, when your employer becomes aware that you are receiving another salary, they are obligated to withhold the maximum amount of taxes.

In order to prevent most of your income going to taxes, you need to coordinate your income tax in a process called Teum Mas. You can apply for a Teum Mas online by providing information about your income sources, although it may be worth your while to stop by your local Mas Hachnasa office and walk it through with an agent. This may take more time, but oftentimes saves headache down the road due to misunderstandings or typos. You will need certain details from your employers, such as their Mispar Tik Nikuim (payroll tax number) and your expected annual income. Register at the Income Tax Authority in order to access the form for Teum Mas. The Teum Mas will arrive within a week or two of applying and you should then send this report to your payroll or HR department so they know the proper amount of taxes to be withheld.

In some cases, you may also need to communicate your dual income to Bituach Leumi. If you didn’t do so and you overpaid, you can request a return.

Unemployment Benefits

Working a second job doesn’t disqualify you from unemployment benefits. If you worked for two employers and one of them laid you off, you can continue to work at the second job and collect unemployment from the first one if you qualify. Your benefits will, of course, be lower than if you were laid off from your only job and were no longer working at all. You’ll need to submit pay stubs from your employer each month.

Entrepreneur with Multiple Clients

If you have multiple clients and don’t receive a salary, you must open a business with independent contractor files at the VAT office, Income Tax Authority and Bituach Leumi. You report your income and pay income tax, Bituach Leumi and VAT (if relevant) according to your total income from all your clients. This involves paperwork and it is recommended that you hire a tax consultant (Yoetz Mas) or accountant to help you with this. 

It is also possible to receive a salary from an Employer of Record such as Route 38. In that case, the clients pay the EOR and you receive a salary based on revenue collected. Payments and taxes are automatically withheld, just like they are for every other salaried employee.

Employee and Entrepreneur

If you’re supplementing a salaried job with a side business, you need to open files with the VAT office, the Income Tax Authority and Bituach Leumi. Your payments to Bituach Leumi will be deducted automatically from your salary and additional payments will be owed from your freelance income, taking into account what you have already paid as a salaried employee. 

As a freelancer, you are required to report your income to the Income Tax Authority. There is no need for a Teum Mas, unless you have more than one salaried position in addition to your freelance earnings. When filing your end of the year report, include your income as a salaried employee so your income tax is calculated correctly. This report should also include funds deducted from both the job and the business for pension or Keren Hishtalmut (education savings fund), as they will reduce your taxable income.

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Employment in Israel

Benefits for Pregnant Women

Israeli employment law protects pregnant women in several ways. In fact, there are some benefits that start even before pregnancy if a woman is undergoing fertility treatments. Full days off for fertility treatment are treated as sick days and individual hours can also be deducted (up to 40 hours a year for a full time employee). A woman cannot be fired or have her salary changed during an absence due to fertility treatments.

A woman is obligated to inform her employer of her pregnancy during her fifth month. Likewise, a woman who is hired at a new job while pregnant doesn’t have to disclose her pregnancy prior to accepting the job, unless she has reached month 5. Some women choose to let their employer know earlier, either because they are feeling sick and may not be performing at optimal level or in order to give their bosses more time to find a maternity leave replacement. The law allowing women to wait till five months protects them against discrimination, so each employee should consider carefully when the best time to disclose a pregnancy is.

Discrimination against pregnant women, in the hiring process or in the workplace, is illegal. A woman who was discriminated against can sue her employer in the labor court. This includes a prohibition of firing a pregnant woman because she is pregnant. If a company wants to fire a pregnant woman for a different reason, and that woman has worked at the company for more than 6 months, the employer must obtain special permission to fire her. A common case would be a company that is laying off many workers due to budget cuts and wants to include a pregnant woman in the general layoff. If a pregnant woman was fired without special permission, it is considered as if she was never fired.

Employers are also prohibited from lowering the salary or work scope of a pregnant woman, regardless of how long she has worked at the company. 

It is prohibited to require a pregnant woman to work overtime or night shifts. However, she can work overtime if she has consented in writing and provided a letter from her OB/GYN that there is no need to refrain from overtime. A woman can be asked to work at night (at least two hours between 10 PM and 6 AM) but she is within her rights to refuse in writing. 

If a woman has a documented high-risk pregnancy and is absent from work for 30 days or more, she is entitled to a Bed Rest Benefit from Bituach Leumi.

A pregnant woman can be absent from work for routine pregnancy tests for up to 40 hours (for a full time employee). These hours are paid for by the employer as if she worked.  A part time employee is entitled to this benefit as well, relative to the number of hours she works on a regular basis.

The spouse of a pregnant woman is entitled to use 7 days of their sick days due to her pregnancy or childbirth. This includes accompanying her to appointments and being present for childbirth. He can also utilize 3 vacation days after the birth of the child. If he wishes to take 4 or 5 days, those extra two days can be considered sick days. These days are not considered maternity leave and don’t negate the spouse’s right to split maternity leave with his wife.

For more information on the rights of pregnant women in the workplace, see the Kol Zchut website.

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Business in Israel Podcasts

Podcast: In Good Company

Shuey Fogel of Fogel CFO & Management Services gives some of the best advice you will ever get about aliyah, opening a business in Israel and pivoting your career. You’ll also hear how a bloody nose in a basketball game can change your life and how a book signing can make a lasting impression.

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Podcasts

Podcast: Is It Hard to Make a Living in Israel?

CFO Baruch Swinkin talks to financial consultant Rifka Lebowitz, about the opportunities and challenges of aliyah. Rifka reveals some of the results from her recent survey and Baruch tells us what happened when he accidentally told someone he was a taxi driver.

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Rosh Hashanah

The Joy of Repentance

In his incredible commentary on Rav Kook’s Orot HaTeshuvah, “Song of Teshuvah,” Rav Moshe Weinberger brings to light Rav Avraham Yitzchak HaKohen Kook’s groundbreaking approach to the concept and process of repentance. Rav Weinberger cites over and over again Rav Kook’s message that repentance is not intended to be a burdensome process, rather a joyous, restorative process. As our Sages state, the creation of repentance preceded the creation of the world and represents our soul’s desire and yearning to return to that point, to a place in time where there is an understanding and appreciation for Truth, to a place and time before the veil of the physical world shrouded us and obscured us from that Truth. It’s a healing process and not a punitive process. Kaparah is classically translated as atonement, but it literally means to wipe away. We are literally cleaning our souls and we should approach the repentance process not with trepidation, but with enthusiasm. It is a hard and rigorous process, but it should be embarked upon with a sense of renewal and hope. 

Additionally, a person’s desire to make the world a better place and specifically any activism, advocacy and efforts in the advancement of the Jewish people is a form of repentance. The Jewish people are different from any other nation. We are made up of individuals, but our heart also beats as one. When any part of the nation is suffering, we all suffer. We see examples of this all the time. Therefore, when one takes the lead in improving the lot of the nation, in any way, they are actively engaged in bringing us back to our original pure state, which is the essence of repentance. Every person who leaves his or her home country, makes aliyah to Israel and contributes to the welfare of the Jewish people and its homeland is engaging in a form of repentance.

The beauty is that Hashem created lots of us, each with our own personalities, character, strengths and weaknesses. We see this clearly in the myriad ways that you – our clients – choose to serve the Jewish people and boost the Israeli economy. No matter how you look at yourself, as long as your focus is on doing good, you can take whichever approach fits you best. Or, more practically, blend of approaches. As long as we recognize our True purpose in this world, we can then go about the process of working on ourselves in whichever way speaks to each of us. 

5780 was really challenging. COVID hit us like a brick wall. We had hoped for better in 5781. And in some ways it was. Because we learned to cope with this ever changing pandemic. But we also suffered tremendously as a nation. The losses that we endured this year were obviously meant as messages to us. Without a prophet, there is no way to know what that message is, but it’s clear that we have lots of work to do. If everyone takes upon themselves to make 5782 a year of repentance, step by step, day by day, baby steps each day – a year of positivity, a year of growth, a year of unity – not just 10 days or one month, but an entire year, then hopefully we can stand together on the eve of 5783 with a real call for everyone to return to our home in the land of Israel. 

We wish you a shanah tovah umetukah, a year of blessings and success, a year of health, of endless nachas from our families and only joy, a year in which all our wishes come true. 

The Route 38 Team

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Business in Israel Employment in Israel

Should I freelance, open a business or work as an employee?

One of the great things about living in Israel is that there are endless ways of making a living. Olim are often surprised to discover that their new neighbors are working in many different types of jobs and that they are not necessarily working full-time jobs at established companies. They may be freelancers, small business owners or founders of start-ups. The Israeli economy and social structure promote creativity, flexibility and out-of-the-box thinking about careers.

You don’t always have a choice on how to structure your career path, but there are some circumstances in which you will have to choose whether to be an employee, a freelancer or a business owner:

  • The Israeli company you work for wants to hire you as a freelancer
  • You work for a foreign company with no Israeli office
  • You work for multiple clients in Israel or abroad
  • You are starting your own company

Here are the some of the differences between employees, freelancers and business owners:

EmployeeFreelancer (atzma’i – osek patur or osek murshe)Business owner (b’am)
Taxes and social benefit obligations are deducted automaticallyTaxes and social benefit obligations are paid independentlyTaxes and social benefit obligation payments are set up as automatic deductions by the company accountant 
Minimum sick days and vacation days provided by lawNo sick days or vacation daysYou are your own boss. You make the rules.
Keren hishtalmut savings plan may be includedKeren hishtalmut savings plan can be set up independently Keren hishtalmut savings plan can be set up via the business
US citizens will not owe a 15% Social Security (FICA) tax for filing as an independent contractorUS citizens will be taxed 15% of their income to Social SecurityUS citizens will not owe Social Security
No accountant needed to file an annual return, assuming no other reportable incomeAccountant strongly recommended for the end of the year report. Osek murshe has additional, periodic reporting requirements over the course of the year (best done with an accountant).High accounting fees. Monthly, bi-monthly and annual reporting requirements
No additional administrative or accounting responsibilitiesMinimum level of administrative responsibilities in addition to tax reporting responsibilities indicated aboveSignificant additional administrative responsibilities and required understanding of Israeli corporate income tax requirements in addition to tax reporting responsibilities indicated above
Receives maternity leave and maternity payment (after accrual of minimum required months on payroll)Receives maternity leave and maternity payment (after accrual of minimum required months reported)Receives maternity leave and maternity payment (after accrual of minimum required months on payroll)
Work schedule determined by employerSelf-determined work scheduleSelf-determined work schedule
Payment generally deposited directly into employee’s bank accountPayment collected directly from client(s)Payment collected directly from client(s)

One of the reasons that we founded Route 38 was because being an employee in Israel is legally and financially simpler than being a freelancer or opening up a company. We are the employer of record for people who work for foreign companies or provide services to clients and are not employed by another Israeli company. Our solution allows people to focus on their work without spending time and resources on collection of funds, paperwork and government reporting. In many cases, the employees retain control over their schedule and choose which projects they want to work on, while enjoying the benefits of an Israeli pay stub.

There are career paths which don’t lend themselves to the Route 38 employer of record service. In fact, every case is different, and professional advice is highly recommended before making a choice that has long-term effects. We provide objective and professional advice to help you make the choice that’s best for you. Email us at info@route38.co.il with information about your situation and we will get back to you as soon as possible.

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Employment in Israel

How Do I File for Maternity Leave in Israel?

Mazel tov on your new baby! In between changing diapers and feeding this adorable munchkin, you may be worried about how you receive your maternity leave benefits. The good news is that you probably don’t have to do anything to make that happen, but of course, there are some exceptions.

Eligibility for Maternity Leave

Maternity leave refers to the amount of time your employer is obligated to hold your job for you. If you have worked for a year for the same company, you are entitled to a maternity leave of 26 weeks, only some of which is paid. If you have worked for your current company for less than 12 months, you are entitled to 15 weeks of maternity leave, all or some of which is paid. Your employer cannot prevent you from taking maternity leave or begin the termination process for a period of 60 days after your return. 

If you were employed by the same employer for a year before becoming pregnant, you will have pensions contributed on your behalf for the first 5 weeks of maternity leave. You must also deposit 6% during this time (usually laid out by the employer and deducted from your pay upon your return to work).

If you’re self-employed, you don’t need anyone to hold your job, so this is not relevant to you, but you do receive maternity pay from Bituach Leumi.

Maternity Pay

A woman who worked 10 out of 14 months or 15 out of 22 months prior to her birth is eligible for 15 weeks paid maternity leave from Bituach Leumi. A woman who worked 6 out of 14 months prior to her birth is eligible for 8 weeks paid leave.

According to the Kol Zchut website, “The maternity allowance is computed per day according to the gross salary of the employee in the three months preceding the first of the month in which the leave began, divided by 90, or according to the total income in the six months which preceded that day, divided by 180 (whichever is higher, up to the maximum established amount).”

If you’re self-employed, payment is based on the three months preceding your maternity leave or the same three months in the previous year, whichever is higher. If you’re both a salaried worker and self-employed, maternity pay will be based on both incomes.

How to File for Maternity Pay

If you’re a salaried worker and your employer has an arrangement with Bituach Leumi, you will automatically receive your maternity pay in a one time payment during your maternity leave. If you are self-employed, you will get a payment based on your advance payments to Bituach Leumi and adjustments will be made later if necessary. If you were receiving bed rest benefits or unemployment, you will also receive your maternity pay automatically.

If you don’t fall into any of these categories or you gave birth at home and not in the hospital, you will need to file a claim with Bituach Leumi. This can be done up to 9 weeks before the due date by mail, fax or at a local branch, or after birth online. These are some of the documents you may need:

  • Confirmation of birth from the hospital (if you gave birth abroad)
  • Newborn registration at Ministry of Interior (if baby was not born in a hospital)
  • Permit from the Ministry of Health or Ministry of Economy (if you received vocational training from the government)
  • Reserves book and certificate of discharge (if you are a newly released soldier)
  • Proof of National Service (if you have just completed it)
  • Bank account information (if you are a foreign worker or foreign passport holder)
  • A completed Form 355 from Bituach Leumi. Sections 8, 9 and 10 of this form must be completed and signed by your employer.

In most cases, maternity pay arrives automatically in a new mother’s bank account. If you fall into one of the categories that require filing, the process is fairly transparent and shouldn’t be too difficult. You’ll have plenty of time to focus on yourself and your new baby.

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Bringing Your Existing Job to Israel Podcasts

Podcast: You’ve Heard of Route 38. But What Is It?

Baruch Swinkin, CFO of Route 38, talks aliyah, succeeding financially and mountain biking as he explains what Route 38 is all about.

Categories
Employment in Israel

How Do Pensions in Israel Work?

Financial advisors will tell you that pensions are just as important as salaries, and for good reason. Although it seems counter-intuitive, retirement expenses are just as high if not higher than what you are spending now. This is because of new expenses such as medicine and medical treatments and increased spending on things like transportation and food. Taxis often replace driving, busing or walking and the ability to get to discount stores may be curtailed. Some retirees are still marrying off children or helping out their young adult kids. And basics like phones, electricity and home maintenance don’t change.

That’s why smart financial planning includes planning for retirement and luckily, the Israeli government has regulated this so that every citizen has some form of pension.

Bituach Leumi

All citizens who have contributed to Bituach Leumi for 12 years are eligible for a state pension. Israeli residents start paying into Bituach Leumi at the age of 18 (unless they are in the army or National Service). If you are working, this payment is deducted automatically from your paycheck. If you are a business owner, the government collects this payment from you directly. The basic pension starts at 1,558 NIS a month per person and 2,430 NIS for a couple, so while this is a nice amount to have, it’s not going to go very far in covering your living expenses. Furthermore, the amounts paid out by Bituach Leumi might be reduced due to actuarial issues.

Private Pensions

Your employer is obligated to set aside at least 6.5% of your salary or the average wage in the economy (whichever is lower) every month for pension insurance. You also pay into the insurance, at the rate of 6% of your salary. 

Your employer is also obligated to set aside severance pay to the amount of 6%, or 8.33% if you have signed a Chapter 14 clause. A Chapter 14 clause states that the employee is entitled to receive exactly what is in the fund (no more and no less) at the time of termination, regardless of whether the parting of ways was initiated by the employee or the employer. If you don’t use your severance pay, it becomes part of the pension paid out to you in retirement.

Just like Bituach Leumi, employees have their pension deducted automatically from their paychecks, while business owners have to set this up on their own.

Multiple Pensions

Many companies choose a pension provider for their employees and this may result in one person having several pension plans. In recent years, the government has mandated that an employee can choose which plan he wants to contribute to, regardless of the company’s official provider. So if you get a new job but already have an existing plan, you can continue to contribute to it and don’t have to open a new one.

If you do have multiple pensions, check whether you are paying fees on each one. If that’s the case, you may be better off consolidating them into one, although there are cases where it makes sense to keep them separate. If you merge the plans, make sure that your pension is now being paid into the consolidated plan.

Catching Mistakes

It’s important to check that your pension is actually being deducted, because if a mistake is made you may find yourself suddenly losing most of your salary to a retroactive pension payment. 

In general, we recommend looking at your payment stub (tlush maskoret) carefully each month, to check that everything is in order. Payroll mistakes can happen and if you’re only looking at the final number at the bottom, you may miss them.

How to Choose a Pension Plan

There are many pension providers and it can be extremely confusing to understand the differences between them. Revenues, management fees,  level of investment aggression, annuity vs. lump sum payments, various insurances connected with the policies and more differences need to be taken into account when choosing a plan. To complicate matters further, insurance agents are often representatives of one specific company, so they aren’t giving you objective advice. 

If you’re starting fresh or want to switch pension companies, it is advisable to consult with an independent insurance agent who can explain what your options are and recommend a plan that meets your needs.

Thank you to Motty Handler, registered insurance agent, hmotty@gmail.com, for his help in writing this article.

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Resources for Employers Outside of Israel

Pros and Cons of Outsourcing to Israel

As telecommuting has become more prevalent around the world, more American companies have begun to hire people in Israel to join their staff. There are four main reasons why companies choose to do this.

Tapping into Israeli talent

Israel is called the Start Up Nation because of the ingenuity and talent of its best and brightest. Many Israelis have learned specialized skills during their army service and have been taught to think out of the box and dream big. Companies looking for exceptional talent will often find it in Israel. This is especially true in the hi-tech industry but by no means limited to it.

Savings on salary

Israeli salaries tend to be slightly lower than American ones, so it can sometimes be less expensive to hire someone in Israel to do the same job. Of course, salary is very much dependent on industry and experience, and not every Israeli will work for a lower salary than his or her American counterpart.

Night workers

Certain industries, such as medicine and customer support, require staff to work overnight. Israel is 7 hours ahead of the US, so an Israeli employee can provide services during his daylight hours while his American colleagues get a good night’s sleep.

For instance, JTA reported that Dr. Warren Isakow, an intensive care physician, works from 4 AM to 4 PM Israel time for hospitals around the US. Using software developed for this purpose, he directs procedures from his home office in Modiin, Israel, half a world away.

Existing employees

Another reason that American companies employ Israeli workers is that they had an excellent employee who wanted to move to Israel and they didn’t want to lose him or her. Instead of giving up on an outstanding asset, searching for and training someone new, they prefer to switch to a remote work arrangement with their current staff member. This arrangement is often mutually beneficial to both employer and employee and can last for many years.

Outsourcing to Israel has all the advantages listed above but it also comes with challenges. These are some of the issues to consider:

Employer’s obligation to the Israeli government

An American company hiring an Israeli must take into consideration that the Israeli government may call this an Israeli office and tax the company accordingly. Some companies solve this by having the employee set himself up as an independent contractor or business owner in Israel, with the American company billed as a client.

Employee’s obligations to the Israeli government

An arrangement where the employee becomes an independent contractor is beneficial to the American company, but it comes with serious drawbacks for the employee. This is because American citizens residing outside of the US are still obligated to file taxes and will have to pay 15% Social Security as independent contractors. Many dual citizens will balk at this arrangement and prefer to work for an Israeli employer in order to avoid these payments. 

A less expensive and more efficient solution to this problem is to hire Route 38 to provide services to the American company. A dual citizen wishing to work for this company becomes an employee of Route 38, which pays his salary and deducts all the taxes and payments required by the Israeli government. This is a win-win, because the employee doesn’t owe Social Security to the US government and has a smoother transition into Israeli life, while the American company doesn’t have to open an entity in Israel, with all its implications.

Communication challenges

Remote work is a different animal than office work. Particularly at the beginning, it may be difficult to communicate effectively in order to get things done efficiently and well. This problem is exacerbated by the time difference. Luckily, technology has advanced enough that task management software, virtual meeting platforms and social media make it easier to stay in touch. The 7-10 hour time difference does allow for some overlap between American and Israeli work hours, and Israelis are often flexible with their schedules in order to accommodate their overseas colleagues.

Is outsourcing to Israel a good idea? If the last few years have taught us anything, it’s that agility and flexibility are key to a successful business. If a company can tap into new talent pools, save money, cover nighttime hours or keep a good employee, outsourcing to Israel is certainly an excellent option.

Categories
Bringing Your Existing Job to Israel

Pros and Cons of Working Remotely in Israel

The 9-5 office of the past has gradually transformed into a much more fluid work environment, in which remote working has a place of honor. There are, of course, jobs that can’t be done remotely, and employers who don’t allow it even though it could technically work, so remote working in Israel isn’t an option for everyone.

But if you’re thinking about aliyah or are considering a career change in Israel, remote work might be on your radar. Let’s start with the ways it can be awesome:

  1. If you already have a job outside Israel and you’re pretty happy with it, remote work can be a great solution that allows you to move to Israel and continue working for your American company. If set up correctly, your employer doesn’t have to create an entity in Israel in order to employ you. You can keep doing what you know how to do at a company that appreciates you while enjoying life in Israel.

  2. Work/life balance is often off-kilter in a traditional office job, with much more time and energy spent on work than on life. But when you work remotely, you tend to have more flexibility with your schedule and find it easier to establish boundaries where you need them. Even if you’re working set American hours, you will find that having the mornings off for children, errands, chores or a leisurely breakfast out with friends can make a huge difference in your happiness.
  1. American companies tend to pay higher salaries and consulting fees than their Israeli counterparts. Working remotely in Israel means that you can enjoy better pay for the same type of work you’re already doing or want to do. You can also work for more than one client and for companies around the world and take home more money at the end of the month. Of course, a higher gross salary outside of Israel may end up not being so lucrative once exchange rates, bituach leumi and taxes are taken into account, so you need to investigate this on a case-by-case basis.

  2. Depending on your level of fluency in Hebrew and familiarity with Israeli culture, you may find it easier to work remotely in your home country.

Not everything is rosy in the world of remote working, of course. Here are some things to consider that make working remotely a little less attractive:

  1. Israeli companies deduct taxes automatically from their employee’s salaries, so there’s usually no filing necessary. If you’re working remotely, you are officially considered a freelancer in Israel and that means that you need to file taxes and pay them separately. Some remote workers in Israel prefer to be employed by an Israeli payroll company which deducts taxes for them in order to avoid this pitfall.

  2. Israeli employers are required by law to provide certain social benefits such as sick days and a minimum number of vacation days. Many companies also add extra benefits, like a tax-free savings fund (Keren Hishtalmut) or a leased company car. Freelance remote workers are generally not eligible for these benefits and must fend for themselves.

  3. When you’re not working in an office, you don’t get to chat with colleagues while making coffee in the morning or start a brainstorming session by walking past someone’s desk. You may find it harder to get quick answers to small questions (although WhatsApp or a task management system may help with this). And you might get left out of meetings and important updates. Of course, with some extra effort you can be a vital member of any team, even if you’re far away.

  4. If you’re working American hours (which are evening hours here in Israel) you may find the late evenings a challenge, especially if you don’t have the ability to sleep later in the morning. Work will also conflict with social events such as weddings, concerts and dinners out with friends who work during the day.

We’d love to hear from you. If you decided to work remotely, what were the deciding factors? What do you miss about working in an office and what aspects are you glad to be rid of?

Categories
Resources for Employers Outside of Israel

Your Employee Wants to Move to Israel — Now What?

The change in lifestyle and culture that the pandemic has brought to the world has brought much chaos and challenge to the world. But change also creates opportunity. One such opportunity that now exists is for employees to follow their dreams and move to locales never before possible while continuing to work remotely and provide even better service to their employers with a  balanced work/life model that fits their needs and keeps them satisfied and eager to prove themselves. Working remotely from Israel with a 7-10 hour time difference to the States has now become acceptable and brings about a preferred lifestyle for many.

If your employee would like to move to Israel, there are three ways that this can be accomplished.

The first option is that the employee continues to work for their US employers as a W-2. This option would require the employer to open a tax file in Israel – not a highly recommended course of action for any company who does not want to create nexus in a foreign country.

The second and more feasible option is for your employee to open a personal tax file as an independent contractor, requiring the service provider to hire an accountant to open the files with the relevant authorities and file an annual return, along with a small handful of other possible other reporting obligations. It’s pretty straightforward and may not take much time, but it can still be a burden on your employee. The financial downside to this approach for Americans is that, as they are reporting as an independent contractor, they will be required to report as such in the US as well, kicking in a 15% flat Social Security tax, that is not covered by the US-Israeli tax treaty, nor can any deductions be taken. Your employee may very well be reluctant to choose this option, due to the burden of reporting in Israel and paying Social Security in both countries.

The third way to continue to employ an Israeli resident is through our payroll service. Our service allows your employee to continue to work for you, but as an employee of our company, Route 38 Professional Services LTD. The benefits are that we take care of all of their accounting requirements here in Israel, helping them to continue to work seamlessly with you. Additionally, as an employee of our company (even though it is a foreign company) when the individual files their US return, they will no longer be liable for the Social Security tax. 

Our association with your organization will be through our US company, Route 38 LLC. This allows us to have a completely domestic relationship and act as a straight 1099. We invoice on a monthly basis and you can pay us via our BOA account using most electronic means. 

A brief run-down on mandatory Israeli employer costs might give you some reference point on the cost of employing someone in Israel. They are as follows:

 – National insurance  – approximately 7%-9% of gross salary

 – Pension – 6.5% of gross salary

 – Severance – 8.33% of gross salary

There are also a couple of optional benefit options, primarily a study fund benefit in which you could add an additional 7.5% of gross salary for funds to be deposited in an investment vehicle that can be tapped into after 6 years. 

You should also be aware of certain differences in employment law in Israel versus the US – specifically protections for employees for termination (a hearing needs to be proposed and happen and only after that can an up to 30 day notice period start) and maternity (pregnant women can almost never be terminated, job must be available upon return from leave and employer cannot start the termination process with the employee for at least 60 days upon return.) 

If there is any other information that we can provide, feel free to reach out to us at Route 38: info@route38.co.il. We look forward to hearing from you.

Categories
Bringing Your Existing Job to Israel

Putting the Pieces Together

I have a somewhat quiet passion for puzzles. My family just finished a 3,000 piece puzzle. It took around four months and lots of time spent trying to jab pieces into places that just didn’t fit. Some pieces you just know are supposed to go in certain spots and you try dozens of times to make them fit…to no avail. It’s only when the puzzle is complete that you can look back and find those “trouble” pieces and see that they actually belonged somewhere completely different. Sometimes, you can struggle to find one piece for days, and then someone else comes in and in twenty seconds, they say, “Were you looking for this?” With a look mixed with incredulousness and self-doubt you sheepishly respond “Uh, yeah…”

Life is obviously one huge ever growing puzzle that we are constantly trying to get ahead of and complete. There are some challenges that interlock neatly and we are able to move on from quickly and effectively and there are some challenges that we keep on trying to solve the same way over and over and over, until finally, we figure out that our approach was completely wrong. 

Making a living is a challenge that is constantly evolving and requires constant energy and focus. We are given many hundreds of “pieces” – resources and assets – in order to complete the puzzle. They are all multi-colored and many do not seem to fit anywhere and are left unused for long periods of time. We sometimes try to use the same resource, the same mindset over and over again and can’t figure out why it doesn’t “fit.” Oftentimes, we need to stand back and look at the picture from afar to see that we were way off in our assessment and we need to recalibrate.  Many times, we need an outside perspective to come in and direct us to where that piece should have gone the whole time. 

The world is rapidly changing and more and more people are starting to think about coming home. The aliyah process is a ginormous puzzle, with dozens, if not hundreds, of moving parts. One of the biggest sections of that puzzle is making a living in Israel. At Route 38, we can help you recalibrate your focus. Maybe the piece that you have been searching for is right under your nose. 

Could I really, possibly keep my job and just continue to work remotely (now that the pandemic has proven that it’s possible)? What are the ramifications for my employer and for me? How do I report and pay my taxes in either country? How do I approach my employer? What tools do I need to make this happen? If I absolutely cannot bring my job with me, what is the business landscape like in Israel? How do I operate a business? If I am looking for a new job, what do I need to know? What is accepted and how do I know that I am not being taken advantage of? 

There are so many questions. Route 38 has the answers. Our team of experienced American-Israeli professionals can help guide you through these concerns and map out a plan. Our vast network of service providers in dozens of industries can answer your industry-specific questions. We will give you the tools to take a step back and make guided informed decisions in order to complete the backbone of your aliyah parnassah puzzle. Contact us today to schedule an appointment.

Categories
Rosh Hashanah

A Message for Rosh Hashanah

As we all know, everyone falls and makes mistakes. The Talmudic commentator Rabbeinu Yonah points out that it’s one’s reaction to those transgressions that makes the person. If a person’s attitude is of horror and shame and he does teshuvah (he repents) then he has learned from his sin and will actually grow from it. If his reaction is – “this is cool, I’m going to try again,” or “I just can’t deal with this desire or need and I am just giving up on this battle,” well, for that our sages have some pretty tough words. 

G-d knows that he created us as fallible human beings. We make mistakes. We have our ups and downs. We are going to trip and do things that we are not proud of. That’s not good, but it’s acceptable, as long as we learn from those mistakes and grow from them. Hashem wants our hearts. He wants us to be focused on the true purpose of our existence, the true essence of our being, which is to serve him, build positive loving relationships in this world and create and build lasting sustainable good.  That is what He desires from us. Those are all part of a long journey, replete with hiccups along the way. If we stumble and get back up, we are viewed with the same loving kindness. If we fall and sink, Hashem still gives us an opportunity to get back on track, but we are now going to have to work much harder to get ourselves there.

Elul and Tishrei are usually times to look back at the year and focus on many of the things that we would like to change. 5780 was really, really challenging (understatement of the year). Many lost loved ones after long and protracted battles. Many went through their own health battles, whether COVID-19 related or not. Many lost their livelihoods or faced extreme uncertainty as to how they were going to move forward. Many had ambitious projects and plans that were collateral casualties of the pandemic. Anxiety and depression were probably more common than not. And no one has any idea what tomorrow or next month or 5781 will bring. We’ve all made some mistakes and said things that we really would like to take back. Many of those were born out of maddening frustration and dread.

But introspection also requires us to look back and appreciate all of the good that happened in 5780. We had the opportunity to really focus on our families. We remembered both the importance of our community, but also that we are individuals who can manage on our own. Many that were not able to be with their children received constant reminders of their families’ love. Zoom made us want to throw away our computers, but also brought family reunions with long lost cousins that we had not connected with in years. We had opportunities over the year to do things we never thought possible. Many began to realize that the borders of Israel were closed and began the journey of planning or at least considering Aliyah so that they could be inside instead of out. Countless acts of tzedakah and chesed that never would have come to the fore were enabled by the challenges that we faced. Many difficult interpersonal relationships were mended. And on and on.

See, we can focus on the daily drama and challenge and reflect on 5780 as a nightmare. Or we can choose to focus on what went right. We can focus on our overall outlook. 

We generally focus during this time of year on all of our faults. We do still need to work on those. But maybe it would be healthy this year to focus on all of the good that we have accomplished. Not to be haughty. But to present to Hashem – See? I’m growing. I’m learning. I’m striving. I’m doing my very best to fight through the hurdles that You have presented me so that I can be the best spouse, parent, sibling, friend, neighbor, community member, Jew that I can be. Here are my credentials. Please allow me to continue on this path, only maybe lighten up the hurdles in 5781. Please. I might stumble again, but I will not waiver in my commitment to You. Because ultimately, this is what Hashem wants from us. 

We wish you a sweet new year, full of blessings, success, health and joy from your family. May this be the year that the entire Jewish people find their home and livelihood in Israel.

Categories
Employment in Israel

Understanding Israeli Salaries

Whether you have lived in Israel for a number of years, are considering aliyah or are packing up to make the big move, one of your biggest concerns is surely how to make a good living in Israel. Stanley Fisher, former President of the Bank of Israel, famously remarked that he couldn’t understand his own salary slips. Salaries in Israel are made up of a number of components and understanding them is key to analyzing your financial situation. 

Let’s clarify some of the basic terms that are used to describe the required and optional tax and social benefit obligations in Israel. 

Ø  Bruto – Gross salary. Generally the base salary that is offered to you in a contract.

Ø  Neto – The amount of money actually deposited in your bank account on a monthly basis, after deductions of income tax and other required payments are removed. Note that the Israeli standard is to be paid monthly, not bi-weekly or bi-monthly.

Ø  Mas Hachnasa – Income tax. Incurred at a graduated rate. Income tax is removed automatically from your salary, and in most cases, there is no need to file taxes at the end of the year. Income taxes are calculated on an annual basis, yet paid out on a monthly scale. We will dissect this area in a later post.

Ø  Bituach Leumi – National Insurance coverage. Often compared to US Social Security benefits, but they are actually very different. (I’ll compare these two institutions in a future article.)

Ø  Keren Pentzia – Pension fund deposit. This is a mandatory benefit requiring the employer to pay a minimum of 6.5% of the monthly bruto total and the employee to deposit a minimum of 6% of bruto. Each employee has the ability to choose the investment option they prefer. This will also be the subject of a later post.

Ø  Kupat Gemel – Mutual fund investment. Similar to a pension fund in structure and purpose, but not mandatory.

Ø  Bituach Menahalim – Pension for managerial positions and above. 

Ø  Keren Hishtalmut – Translated as a “Study Fund.” The initial purpose was for an employee to accumulate a base in order to apply for continuing education. In reality, it now acts as an additional, optional short term tax free savings vehicle. Some employers offer this as an added benefit, but it is not available across the board.

Ø  Ovdan kosher avodah – Additional, optional long term disability insurance. This perk is generally only offered in the hi-tech sphere.

When you are offered a job in Israel, you will be told what the bruto salary is and what additional benefits (if any) are provided. An employer will not be able to tell you what your neto take home pay will be, since this is based on many factors outside his control. You can get an idea of what your neto salary will be by using this calculator.

Got any more questions about how your neto salary is determined? Comment below and I will respond.