How does Israel payroll tax work in 2026?
Two numbers shape every Israeli payslip. National Insurance and Health contributions jump from a low band to a full band once monthly pay passes ILS 7,703/month, then stop entirely above the ceiling of ILS 51,910/month. On top of that, Amendment 288 widened the 2026 income tax bands back to 1 January, so the 20% band now runs much higher than it did last year.
· Israel guide
Illustration · Tel Aviv, Israel
Israel employer payroll in 2026 has two main parts. You pay National Insurance and Health contributions to Bituach Leumi. The rate is 4.51% on pay up to ILS 7,703/month, then 7.6% above that.
Both rates stop at the ceiling. No employer or employee contribution is charged on monthly pay above ILS 51,910/month. So the contribution cost is capped, even on high salaries.
The employee pays National Insurance and Health too. The rate is 4.27% on the lower band and 12.17% on the higher band. Income tax is then deducted on a sliding scale from 10% up to 50%.
There is no statutory 13th-month salary in Israel. Wages are paid monthly, and the law treats pay as late once it is unpaid 9 days after the due date (Wage Protection Law, 5718-1958).
What does an employer pay in Israel payroll taxes?
You pay National Insurance and Health contributions to Bituach Leumi on each employee. The rate is 4.51% on monthly pay up to ILS 7,703/month, then 7.6% above that.
Both rates stop at the ceiling. No contribution is charged on pay above ILS 51,910/month (National Insurance Law, 5755-1995).
| Employer contribution | Rate | Applies to |
|---|---|---|
| National Insurance + Health, lower band | 4.51% | Monthly pay up to ILS 7,703/month |
| National Insurance + Health, upper band | 7.6% | Monthly pay from ILS 7,703/month up to ILS 51,910/month |
How the two bands work
Bituach Leumi is the National Insurance Institute. It collects both National Insurance and the National Health levy in a single combined rate. The employer pays 4.51% on the part of monthly pay up to ILS 7,703/month, and 7.6% on the part between that figure and the ceiling of ILS 51,910/month. The bands apply to the slice of pay, not the whole salary, so a higher earner pays the low rate on their first slice and the higher rate only on the rest.
Where the cost stops
The ceiling matters. No employer contribution is charged on any monthly pay above ILS 51,910/month. For a senior hire on a large salary, the National Insurance cost is fixed once pay clears that line. There is also a separate mandatory pension contribution under the national pension extension order, paid into a pension fund rather than to Bituach Leumi. The exact 2026 pension percentages are set by extension order and are not part of this Bituach Leumi rate.
What does an employee pay from their Israel salary?
The employee pays National Insurance and Health at 4.27% on the lower band of pay. The rate rises to 12.17% above ILS 7,703/month.
Like the employer side, the employee contribution stops at the ceiling of ILS 51,910/month (National Insurance Law, 5755-1995).
| Employee deduction | Rate | Applies to |
|---|---|---|
| National Insurance + Health, lower band | 4.27% | Monthly pay up to ILS 7,703/month |
| National Insurance + Health, upper band | 12.17% | Monthly pay from ILS 7,703/month up to ILS 51,910/month |
The health component sits inside the rate
The combined employee rate carries a National Health levy as well as National Insurance. The health part alone is 3.23% on the lower band and 5.17% on the upper band. The combined employee figure of 4.27% and 12.17% already includes that health levy, so it is not a separate line on the payslip.
Then income tax comes off
National Insurance and the health levy come off before the income tax calculation lands. Income tax (mas hachnasa) is then charged on a sliding scale, with tax credit points that reduce the final amount for residents. Every employee starts with a base number of credit points, and more apply for parents, new immigrants, and other categories. The minimum monthly wage that anchors the low end of the scale is ILS 6,443.85/month from 1 April 2026.
Israel income tax bands for 2026
Income tax runs on a sliding scale of seven bands. It starts at 10% on the lowest pay and rises to 50% on the highest.
Amendment 288 widened the middle bands for 2026, back to 1 January. The 20% band now reaches much higher than it did in 2025 (Income Tax Ordinance s.121).
| Monthly income band | Rate |
|---|---|
| Up to NIS 7,010 | 10% |
| NIS 7,011 to 10,060 | 14% |
| NIS 10,061 to 19,000 | 20% |
| NIS 19,001 to 25,100 | 31% |
| NIS 25,101 to 46,690 | 35% |
| NIS 46,691 to 60,130 | 47% |
| Above NIS 60,131 | 50% |
The scale is marginal. Each band applies only to the slice of income that falls inside it, not the whole salary. The figures above are monthly thresholds, taken from the enacted 2026 brackets. The top 50% rate is the 47% band plus a high-income surtax of 3% on earned income above the top threshold.
What changed for 2026
Amendment 288, passed under the 2026 Economic Arrangements Law, widened the 20% and 31% bands and applied the change back to 1 January 2026. The 20% band now runs up to NIS 19,000 a month, where it used to stop near NIS 16,150. The 10% and 14% bands were left unchanged. The effect was a small cut in tax for many middle earners from the March 2026 payslip onward.
How does Israel payroll filing and remittance work?
You run payroll monthly and pay the wage at the end of the month it covers. National Insurance and income tax are deducted at source and remitted to the authorities.
Pay is treated as late once it is unpaid 9 days after the due date, which triggers a delayed-wage penalty (Wage Protection Law, 5718-1958).
Employers deduct National Insurance and the National Health levy from each employee and remit them to the National Insurance Institute, alongside the employer share. Contributions are charged at 4.51% and 7.6% on the employer side, up to the monthly ceiling of ILS 51,910/month. Income tax withheld at source goes to the Israel Tax Authority on the standard monthly cycle.
Source: National Insurance Institute: National Insurance contributions
Israel payroll runs on a monthly cycle. The wage for a month is paid at the end of that month under the Wage Protection Law. Each run has the same shape:
- Income tax deducted at source and remitted to the Israel Tax Authority
- National Insurance and Health deducted and remitted to Bituach Leumi, with the employer share added on top
- Mandatory pension paid into the employee's pension fund under the national extension order
Miss the wage deadline and the cost is real. Wages still unpaid 9 days after the due date count as delayed wages, which carry a statutory late-payment penalty on top of the wage owed. The minimum monthly wage of ILS 6,443.85/month sets the floor every run is checked against, with an hourly minimum of ILS 35.40/hour.
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Collect pay data
Gather salary, hours, bonuses, and any taxable benefits for the month before the run closes.
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Calculate gross and credit points
Work out gross pay and apply the employee's income tax credit points, which lower the tax due for residents.
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Deduct employee contributions
Take income tax at source, then National Insurance and the health levy across the two bands up to the ceiling.
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Add employer contributions
Add the employer National Insurance and health share, plus the mandatory pension contribution into the pension fund.
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Pay and remit on time
Pay the wage at month-end and remit to Bituach Leumi and the Israel Tax Authority. Late wages trigger a statutory penalty.
Pension and social funds in the Israel payroll stack
Mandatory pension sits beside Bituach Leumi, not inside it. Employers and employees both contribute under the national pension extension order.
Bituach Leumi covers National Insurance and health. The pension fund covers retirement. They are separate payments on the same monthly run.
Two systems carry the social cost of an Israeli hire, and they are easy to confuse:
- Bituach Leumi collects National Insurance and the National Health levy. The employer pays 4.51% and 7.6% across the two bands, capped at ILS 51,910/month.
- Mandatory pension is paid into a private pension fund under the national extension order, not to Bituach Leumi. It funds retirement and includes a severance-allocation component.
The mandatory pension rates are set by extension order and split between employer contribution, employee contribution, and a severance allocation. The confirmed 2026 percentages were not available from a primary government source at the time this page was reviewed, so they are not stated here as a figure. Teamed applies the current extension-order rates on every Israel payroll run and shows them as a separate, itemised line.
Health is inside Bituach Leumi, not the pension
The National Health levy is collected by Bituach Leumi inside the combined rate. The employee health component alone is 3.23% on the lower band and 5.17% on the upper band. It funds the public health system, not the pension fund, so it never appears in the pension line.
How does Teamed handle Israel payroll for you?
Teamed becomes your legal employer of record in Israel for from $599 per employee per month, with zero FX mark-up in any currency.
Income tax, National Insurance, the health levy, mandatory pension, and the full Israel employment law stack run on one platform.
Real HR and legal experts handle your Israel hires, from the first contract through every monthly run and every remittance to Bituach Leumi and the Israel Tax Authority. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Employer cost passes through at cost, itemised on every invoice, so you see National Insurance, the health levy, and the pension contribution as separate lines, never a blended figure.
EOR payroll, contractor onboarding, and entity setup all live on one platform. An Israel contractor who converts to payroll keeps their record. That same employee can graduate from EOR to your own Israel entity without switching systems. Run the Employer Cost Calculator to see the full picture, including the Bituach Leumi ceiling at ILS 51,910/month and the 2026 income tax bands. EOR is the right model for a first Israel hire, until it isn't. Start from the Israel hiring overview.
Key sources: Bituach Leumi National Insurance contributions, Ministry of Labor minimum wage, and the Wage Protection Law, 5718-1958.
Frequently asked questions
What does an employer pay in Israel payroll taxes in 2026?
The employer pays National Insurance and the National Health levy to Bituach Leumi at 4.51% on monthly pay up to ILS 7,703/month, then 7.6% on pay above that. Both rates stop at the ceiling of ILS 51,910/month. A separate mandatory pension contribution is paid into the employee's pension fund under the national extension order.
What is deducted from an Israel employee's salary?
National Insurance and the health levy come off first, at 4.27% on the lower band and 12.17% on the band above ILS 7,703/month, up to the ceiling of ILS 51,910/month. Income tax is then charged on a sliding scale from 10% to 50%, reduced by the employee's tax credit points.
What are the Israel income tax bands for 2026?
Income tax runs across seven bands: 10% on the lowest pay, then 14%, 20%, 31%, 35%, 47%, and 50% at the top. The top rate is the 47% band plus a 3% high-income surtax. Amendment 288 widened the 20% and 31% bands for 2026, back to 1 January.
Is there a 13th-month salary in Israel?
No. Israeli law does not require a 13th- or 14th-month salary. The Wage Protection Law mandates only the monthly wage, paid at the end of the month it covers. A separate annual recuperation payment (dmei havra'a) exists under extension order, but it is not a 13th-month salary.
When must Israel wages and contributions be paid?
A monthly wage must be paid at the end of the month it covers under the Wage Protection Law, 5718-1958. Wages still unpaid 9 days after the due date count as delayed wages and carry a statutory late-payment penalty. National Insurance, the health levy, and income tax withheld are remitted to Bituach Leumi and the Israel Tax Authority on the monthly cycle.
Is there a cap on Israel social insurance contributions?
Yes. National Insurance and Health contributions are charged only up to a monthly ceiling of ILS 51,910/month. No employer or employee contribution is due on pay above that line. The rate also switches from the lower band to the full band once monthly pay passes ILS 7,703/month.
The Israel payroll mistake we see most is treating Bituach Leumi and the pension fund as one thing. National Insurance and the health levy go to Bituach Leumi and stop at the ceiling. Mandatory pension is a separate payment into a private fund under an extension order. Blend them and the cost is wrong before the run even starts.
Israel payroll turns on two thresholds. The low-to-full band switch at ILS 7,703/month, and the contribution ceiling at ILS 51,910/month.
Amendment 288 widened the 2026 income tax bands back to 1 January, so the 20% band now runs higher.
Get the bands and the ceiling right before you model the cost.
