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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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