Payroll in Israel 2026: income tax, Bituach Leumi and payslips

In Israel the employer withholds income tax, National Insurance (Bituach Leumi) and health tax from each salary, and the employee's mandatory pension contribution. On top of gross pay the employer pays its own National Insurance, 4.51% up to NIS 7,703 a month and 7.6% above, plus its pension and severance contributions.

Payroll in Israel at a glance

National Insurance and health tax

The National Insurance Institute (Bituach Leumi) collects National Insurance and the health insurance tax. There are two bands: a reduced rate on monthly pay up to 60% of the average wage, NIS 7,703 in 2026, and a full rate on pay from NIS 7,703 up to the ceiling of NIS 51,910 a month. Pay above the ceiling bears no contributions. The figures apply from 1 January 2026; the ceiling is updated every year.

Non-resident employees pay much lower National Insurance (0.1% and 0.87%, with 0.75% and 2.65% for the employer) and no health tax.

Mandatory pension

Pension saving is compulsory for almost all employees under the general extension order on comprehensive pension insurance. The employer deducts the employee's share from salary and adds its own share and a severance component (pitzuim) to a pension fund. The rates, the waiting period before contributions start and the wage they apply to are set by the extension order or by a better collective agreement or contract. Employer contributions to approved pension schemes are exempt from income tax within set limits, and the employee's own contributions earn a tax credit.

Income tax on salaries

The employer withholds income tax every month on the monthly brackets, which are one-twelfth of the annual ones. The 2026 brackets for employment income are:

Credit points (nekudot zikui) reduce the tax itself, not the income. Each point is worth NIS 242 a month in 2026 (NIS 2,904 a year). Resident individuals get at least 2.25 points, NIS 544.50 a month; additional points are given for, among others, dependent children, new immigrants and single parents. The employee claims them from the employer on Form 101.

National Insurance and health tax are not deducted from taxable income. Payments to approved pension and provident funds are handled through exemptions and credits within limits, so they lower the tax a little.

Minimum wage, working time and mandatory pay

The minimum wage for workers aged 18 and over is updated on 1 April:

Israeli law has no 13th salary. Employees with seniority receive an annual recuperation pay (dmei havra'a) under a general extension order, based on years of service and the job percentage, and the mandatory pension contributions described above come on top of pay.

Monthly payroll calendar and filings

• Withholding: income tax withheld from salaries paid from the 14th of one month to the 13th of the next is payable on the 15th of the following month.
• Monthly report to the National Insurance Institute: the general report on Form 102 and the individual list of employees on Form 100 are filed online every month, through the employer's representation system or by uploading a file from the payroll software. Late reports are sanctioned.
• Annual report Form 126: the online report on each employee's pay and deductions for the tax year goes to the National Insurance Institute by 18 July for January to June, by 18 January for the previous full year, and in its final form by 30 April.
• Employees: collect each new employee's Form 101 to apply credit points, and give each employee the annual Form 106 summary of pay and deductions.

Employers who miss a report or a payment face fines and linkage charges, and the National Insurance Institute can claim from the employer the benefits it pays to employees who were not reported.

Worked example: NIS 15,000 a month

A single resident employee with no children and 2.25 credit points, paid NIS 15,000 gross a month in 2026. To keep the example clear, it shows the deductions before the mandatory pension contributions and the related tax relief.

The employee's pension contribution would then be deducted from the net pay, and the employer's pension and severance contributions added to its cost, at the rates of the extension order or the employment contract.

Common mistakes

1. 1Applying the full rate to all pay: National Insurance and health tax are charged at the reduced rate on the first NIS 7,703 of monthly pay.
2. 2Forgetting the ceiling: no National Insurance or health tax is due on monthly pay above NIS 51,910.
3. 3Ignoring Form 101: without it the employer cannot apply the employee's credit points correctly.
4. 4Using last year's minimum wage after 1 April, when the new rate applies.
5. 5Starting pension contributions late, or leaving out the severance component.
6. 6Filing Form 102 on paper or late: monthly reporting to the National Insurance Institute is online and late filing is sanctioned.

How Clientlly helps

Clientlly does not ship a built-in payroll profile for Israel. An administrator enters Israel's payroll rates once in the payroll tax settings: the income-tax bands, the personal allowance, the employee and employer contribution rates and the minimum wage. Clientlly then calculates gross to net and the employer contributions and produces payslips for each employee.

Alongside payroll, the human resources module handles leave requests and approvals with a leave calendar and keeps HR documents, and attendance and time tracking records working hours and overtime. To close the books after the payroll run, see our month-end close checklist.