An Israeli employer withholds income tax and employee contributions from each salary, pays its own share to the National Insurance Institute (Bituach Leumi), makes pension contributions and issues a payslip. The monthly cycle repeats without exceptions, so a clear calendar matters more than any single calculation.
Before the first payday the employer opens a withholding file with the Israel Tax Authority and registers as an employer with the National Insurance Institute. Each month the employer deducts income tax according to the employee's tax credits and brackets, deducts the employee share of national insurance and health insurance contributions, and pays the amounts over together with the employer share.
The employee's tax credit points depend on personal circumstances declared on a form at the start of employment. A wrong or missing declaration produces too much or too little withholding, so ask every new hire to complete the form before the first payroll.
Payroll software or a payroll service normally does the calculations. The employer remains responsible for the data entered and the timely transfer.
Contractors are a separate matter. A person who works under your direction, on your schedule and with your tools may be treated as an employee regardless of the contract label, with back claims for leave, pension and severance. Review such arrangements with a labour lawyer before relying on freelance invoices.
Israeli law requires employers to contribute to a pension arrangement for employees who have completed the qualifying period, and employees contribute as well through salary deduction. The contributions are allocated between pension, severance and other components, as set out in the arrangement and the applicable extension order.
Choosing the fund is the employee's right within the options, and the employer must route contributions to the chosen fund. Late or missed contributions are among the most common claims in labour disputes, so pay them on the schedule and keep the confirmations.
Severance pay rules and recuperation pay (דמי הבראה) add further obligations. Specialised advice on your sector's collective agreement or extension order is worthwhile before setting salary packages.
Employers submit a monthly report of income tax withheld, commonly known as Form 102, together with the payment, and report contributions to the National Insurance Institute for the same period. Each report has its own due date, and the amounts must agree with the payroll records.
After year end the employer reports annual wages and withholdings per employee and issues each employee an annual wage statement, Form 106, which employees use for their tax return or refund request. An annual employer report, Form 126, summarises the year for the authority.
Differences between the monthly reports and the annual figures trigger notices. Reconcile the year before submission.
Keep the payroll files for each year in one folder: monthly summaries, payment confirmations, pension transfer receipts and the annual statements. It saves days when an employee leaves and asks for confirmation of contributions.
Every employee must receive a payslip each month with the elements required by law: gross pay, deductions, employer contributions, days of leave accrued and used, and the details of the pension arrangement. A missing or incomplete payslip is a violation in its own right.
Leave and sickness balances are a legal entitlement that grows as the employee works, so keep them accurate through the year. Timesheets also matter when pay depends on hours worked, overtime or shifts.
Terminating employment triggers a final settlement with notice, unused leave, recuperation and severance as applicable. Plan it with the accountant or lawyer before the last day.
Salary advances, loans to employees and company cars or phones can create taxable benefits. Ask the payroll provider how each benefit is valued and reported before it is granted, not after the first payroll run.
Payroll is a loop that repeats on fixed days. Write the calendar once: the date by which timesheets and leave are final, the date payroll is prepared, the day the salary is paid, and the days on which the withholding report, the National Insurance report and the pension transfers fall due.
Then assign an owner to each step. The HR manager approves hours, the payroll provider prepares payslips, the finance manager approves the transfers. When a person is absent, the backup must be named, since a missed transfer is a violation even if it was only a holiday.
Keep an annual task list alongside the monthly one: wage statements to employees after year end, the annual employer report, updates to tax credit forms, and the review of pension arrangements and rates when the law changes.
The first employee changes the company from a customer of the payroll system to a participant. Before the first day, collect the employee's identity details, the tax credit declaration, the bank details and the pension fund choice, and prepare an employment agreement that states pay, working hours, leave and notice.
Check the minimum wage that applies on the start date. The figure is set by law and is updated from time to time, so verify it on the official website before drafting the offer.
Probation periods, notice and termination are governed by law and often by collective agreements or extension orders in the sector. Ask a labour lawyer to review the template once, so that the next ten hires can use it safely.
4softhr.net records employees, leave and timesheets, which feed the payroll process. It does not calculate Israeli payroll, withhold tax, compute Bituach Leumi or pension contributions, or file the reports. Payroll calculation in the ecosystem is available for Romania only, so Israeli payroll stays with your payroll provider or accountant.
Tax, Bituach Leumi, and pension rates are all computed manually — errors and late payments.
Calculate payroll with the current ITA income-tax tables, Bituach Leumi brackets and pension minimums outside 4b2b. 4softhr.net keeps employee, leave and timesheet records; it does not calculate payroll outside Romania.
Form 102 and pension fund remittances are prepared separately each month.
Prepare Form 102 and pension remittances yourself or with a payroll provider. 4b2b does not generate Form 102 or pension schedules.
Pension transfers are paid late and the employee complains to the authorities.
Put each transfer date in the employer calendar with an owner and a backup. 4softhr.net does not calculate or send pension contributions.
The employer deducts income tax according to the employee's declared tax credits, plus the employee share of National Insurance and health contributions, and the employee's pension contribution. The employer adds its own contributions and pays everything over by the due dates. A payroll provider usually performs the calculation. Verify rates each year.
Yes. Employers must contribute to a pension arrangement for employees who meet the qualifying conditions, and employees contribute through salary deduction. The exact rates and components follow the applicable extension order and the chosen fund, so confirm the current figures with your payroll provider or the competent authority. Late payments are a frequent labour dispute.
Form 102 is the employer's monthly report of withheld income tax. Form 106 is the annual wage statement each employee receives for their own tax purposes. Form 126 is the annual employer report to the Tax Authority. All three must agree with your payroll records, so reconcile before filing. Differences cause notices.
No. 4softhr.net records employees, leave and timesheets. It does not calculate Israeli tax, National Insurance or pension, and it does not file reports. Payroll calculation in the 4b2b ecosystem is available for Romania only, so an Israeli employer needs a payroll provider or accountant. Timesheets and leave records stay in the HR module.
A payslip must show gross pay and each deduction, the employer contributions, leave days accrued and used, and details of the pension arrangement, among other required items. Missing information is a violation in its own right, so check your template with the payroll provider against current legal requirements. Check it every time the law changes.
This page is informational. Confirm requirements with the competent authority; 4b2b tools cover general invoicing and records only.
