Do you have an employee moving to Israel who you really don’t want to lose? Have you found the perfect person to fill your open position but that person currently resides in Israel? Is your company accountant telling you this will be complicated and costly?
You’re right to be concerned about the tax implications of hiring an employee in a country where you don’t have a tax presence. If you’re only employing a small number of people in Israel, you don’t want the hassle of establishing an entity and incurring obligations to the Israeli tax authorities.
You may have been advised to engage this worker as a freelancer instead of as an employee. While this solves your legal problem, it weakens the bond between you and the worker. And it’s expensive for the worker who needs to be registered as a freelancer in two countries and (in the case of a US citizen) pay 15% Social Security as a self-employed person.
If your worker doesn’t have a bank account in your country, you will have to pay into their Israeli bank account. Transfer and conversion fees can get expensive for both the employer and the worker.
Enter Route 38’s Employer of Record services. The way Route 38 works is that we are the official employer of the worker you wish to retain. You pay us each month (into our US bank account, if you wish) and we take care of paying their salary and withdrawing all legally obligated payments, including income tax, Israeli social security and pension savings.
In this system, you have no entity in Israel and do not incur any obligations. Your worker doesn’t need to go through the complicated process of becoming a freelancer and dealing with all the expenses related to that. Your worker gets a regular Israeli pay stub and you pay for his or her services through Route 38.
There is a registration and termination fee as well as a small monthly fee in exchange for a smooth and hassle-free arrangement that ensures that your worker is properly taken care of and that your company has no tax obligations in Israel.
Interested in finding out more? Email us at info@route38.co.il with details on your company and the Israeli worker.