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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.

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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.