Bituach Leumi explained: a 2026 guide for foreign employers.

What is Bituach Leumi?

Bituach Leumi (ביטוח לאומי, literally "national insurance") is Israel's social security system. It covers old-age pensions, unemployment, maternity and parental leave, work-injury, long-term care, disability, survivor benefits, and a host of smaller programs. It's run by the National Insurance Institute (NII), a statutory authority sitting under the Ministry of Welfare.

For an employer, Bituach Leumi shows up as a monthly contribution alongside payroll, deducted from the employee and paid by the employer, with the employer also paying its own slice. Together they go to the NII via a single monthly payment, due by the 15th of the following month.

This is separate from Health Insurance (Bituach Briut Mamlachti) which funds the national health system — that one is employee-only. We'll cover it briefly below since it travels alongside Bituach Leumi on the payslip.

The 2026 rates and thresholds

Bituach Leumi uses two breakpoints — a reduced-rate threshold and a maximum insurable income cap. Both update annually based on the average wage. For 2026:

Income up to the threshold is taxed at the lower rate. Income between the threshold and the cap is at the higher rate. Income above the cap is not subject to Bituach Leumi at all — which is why highly-paid employees actually have a lower effective NI burden as a percentage of total salary.

Employer rates (resident employee)

Employee rates (resident employee)

Health insurance (employee only)

The math, with an example

Take an employee earning ₪25,000/month gross. The bracketed math:

Employer Bituach Leumi:

• First ₪7,703 × 4.51% = ₪347.41
• Next ₪17,297 (from 7,703 to 25,000) × 7.60% = ₪1,314.57
• Total employer NI: ₪1,661.98

Employee Bituach Leumi:

• First ₪7,703 × 1.04% = ₪80.11
• Next ₪17,297 × 7.00% = ₪1,210.79
• Total employee NI: ₪1,290.90

Employee Health Insurance:

• First ₪7,703 × 3.23% = ₪248.81
• Next ₪17,297 × 5.16% = ₪892.52
• Total employee Health: ₪1,141.33

So on a ₪25k gross paycheque, the company pays ₪1,662 to Bituach Leumi (employer side) and withholds another ₪2,432 (employee NI + Health) from the employee. The combined NI burden on this paycheque is ~₪4,094.

What does Bituach Leumi actually cover?

It's a real safety net. Your contributions fund:

• Old-age pension (Kitzbat Zikna): a state pension on top of any employer pension fund. Income-tested.
• Maternity allowance: 15 weeks of paid leave at up to ₪51,910/month capped, paid directly to the employee by NII (not the employer).
• Paternity / partner leave allowance.
• Unemployment benefits (Dmei Avtala): requires a qualifying period of contributions. Capped daily rate.
• Work-injury (Pgia BaAvoda): medical treatment and income replacement for injuries at work, including commute injuries.
• Disability benefits.
• Long-term care (Sicud).
• Survivor benefits.
• Reservist reimbursement: when an employee serves Miluim, the NII reimburses the employer for the salary paid during service, at a capped rate.
• Child allowances (paid directly to parents, but funded from NI).

Four common mistakes

1. Treating allowances as if they're pension-base only

Pension and severance are calculated on base salary only (unless the contract says otherwise). But Bituach Leumi is calculated on overall gross — base salary plus car allowance, phone allowance, meal cards (above the tax-exempt cap), and any other taxable benefit. Forgetting to apply NI to allowances is the #1 audit finding.

2. Misclassifying contractors who should be employees

Israeli courts apply substance-over-form tests. A long-term contractor doing core-business work under company control is an employee — full stop. When reclassified, the company owes back NI contributions (employer + employee shares), back pension, back severance, and penalties. We've seen $200k+ reclassification bills.

3. Wrong rates for non-residents

Non-Israeli-resident employees (e.g., a foreign expert on a B/1 visa) pay much lower NI rates: employer 0.75% / 2.65%, employee 0.10% / 0.87%. Health insurance does not apply. Applying resident rates to a non-resident overcharges everyone; applying non-resident rates to an actual resident underpays and gets you a back-bill at audit.

4. Missing the 15th payment deadline

Bituach Leumi for the prior month is due by the 15th of the current month. Late payment triggers penalties and interest that compound monthly. We've seen late-paying employers accumulate thousands of shekels in fines on a single oversight. Automated payroll services (including any EOR like EORIL) handle this for you.

Bituach Leumi for foreign employers via EOR

If you hire through EORIL or any other Employer of Record in Israel, all of the above is handled. Your monthly invoice from EORIL includes the employee's gross salary, the employer contributions (pension, severance, NI, Keren Hishtalmut if elected), and the EORIL service fee. We register the employee with NII, file monthly, pay NII on time, manage reservist reimbursements, and handle the audit if one ever comes.

If you run your own Israeli entity, you'll need either an Israeli payroll bureau (Hilan, Malam, Synel) or an internal payroll professional who understands NI mechanics. Don't try to compute it manually in a spreadsheet — the brackets and edge cases (mid-year hires, allowances, retroactive adjustments) will eat your finance team's time.