Quick Answer: Every employee in Israel is entitled to paid annual leave under the Annual Leave Law 5711-1951 (Chok Chufsha Shnhatit). The minimum entitlement starts at 14 vacation days per year during the first four years of employment and rises to 21 days from the seventh year onward. Employers pay a special vacation rate equal to one full day's gross wage per leave day. Foreign nationals — including B/1 permit holders and expats on company assignments — have exactly the same statutory entitlement as Israeli employees. Unused vacation days that an employer fails to let you take must be paid out in cash on termination; an employer cannot simply cancel accrued leave.

Paid vacation is one of the most commonly misunderstood employment rights in Israel. Many foreign nationals arrive expecting a system similar to their home country and find the Israeli framework operates on different rules — the leave entitlement rises with seniority in a specific statutory staircase, the daily pay rate is calculated differently from sick pay, and the rules on carry-forward and forced leave protect both sides in ways that regularly surprise first-time Israeli employees.

If your employment contract says "vacation according to law," you receive the statutory minimum. If it says "20 days," that improves on the minimum and the statute still sets the floor. What it cannot do is give you fewer days than the law requires — any clause attempting to do so is void.

The Annual Leave Law 5711-1951 (Chok Chufsha Shnhatit, חוק חופשה שנתית) is the statute that sets minimum paid vacation entitlements for all employees in Israel. It applies to employees in an employer-employee relationship regardless of nationality, immigration status, or work permit type. Self-employed individuals and independent contractors are outside its scope.

The law has been amended several times since its enactment in 1951 to raise the minimum vacation entitlement. The current minimums, which reflect amendments up to and including the 2004 and subsequent revisions, are set out in the seniority-based table in Section 3 of the law. Extension orders (tzavei harchavah) issued by the Ministry of Labor can and do impose higher minimums in specific industries — the hotel and hospitality extension order, for example, grants more generous leave schedules to workers in that sector.

The law is kogentit (mandatory): it cannot be contracted away. An employment contract that gives employees fewer vacation days than the statutory minimum is void to that extent. Courts apply the statutory minimum automatically. The employer is always bound by whichever standard — the contract or the statute — is more favorable to the employee.

In Practice: The Ministry of Labor's labor inspectorate (Pikoah Avoda) audits employer vacation records and can issue administrative fines starting at approximately NIS 5,000 per violation for failure to maintain a proper vacation register under Section 26 of the law. Israeli employers are required to keep a written vacation register (pinkass chufshot) recording each employee's entitlement, days taken, and balance. Foreign employees who suspect their vacation balance is being miscounted should ask HR for their accumulated balance in writing — employers are obligated to provide it.

2. How Vacation Days Accumulate by Seniority

Israel's annual leave entitlement follows a seniority ladder. The more years you have worked for the same employer — or, in some circumstances, in the same sector — the more vacation days you receive each year. The statutory minimums under Section 3 of the Annual Leave Law are:

  • Years 1 through 4: 14 working days of paid vacation per year
  • Year 5: 16 working days
  • Year 6: 18 working days
  • Year 7 onward: 21 working days per year, as the permanent minimum for long-serving employees

"Working days" here means your regular working days — not calendar days and not including the weekly rest day (Shabbat or the day off for non-Jewish workers) or public holidays. For an employee who works five days per week, 21 working days is just over four calendar weeks of vacation. For an employee on a six-day schedule, the same 21 days translates to a shorter calendar stretch.

Seniority for vacation purposes counts from the start of employment with the current employer. If you change jobs, the counter resets at the new employer unless the employment contract explicitly credits prior seniority — which is uncommon but not unheard of in structured corporate relocations. Periods of military reserve service (miluim) and maternity leave count as continuous seniority under the law; they do not break or reset the seniority clock.

In Practice: A foreign employee who joins an Israeli company in Year 1 and stays five years reaches the 16-day tier in Year 5. If they are simultaneously covered by an applicable extension order — for instance, the extension order for hi-tech workers, which many employees in that sector are subject to — the order may grant 18 or 20 days from an earlier point in their career. Ask HR which extension orders apply to your role. The National Labor Court has held in multiple rulings that employers who fail to inform employees of applicable extension orders bear the shortfall themselves.

3. Calculating Vacation Pay: The Daily Rate

Vacation days are paid at the employee's gross daily wage. Calculating that daily rate depends on how the employee is paid.

Monthly salaried employees: The daily vacation rate is the monthly gross salary divided by 25, not by 30 or by the actual number of working days in the month. This divisor of 25 is embedded in Section 10 of the Annual Leave Law and reflects a legislative decision to base vacation pay on an average working month. An employee earning NIS 20,000 per month receives NIS 800 per vacation day (NIS 20,000 ÷ 25).

Hourly or daily wage employees: The daily vacation rate is the average daily wage earned in the three-month period immediately before the vacation begins, calculated by dividing total gross earnings in that quarter by the number of actual working days.

What is included in the base: The base for vacation pay typically includes the regular monthly salary. Variable components — commissions, overtime premiums, irregular bonuses — are treated differently depending on whether they form a fixed recurring part of the employee's pay. The National Labor Court has held that a commission that is a constant, predictable part of total compensation must be factored into the vacation pay base. One-off or discretionary bonuses do not count.

In Practice: An employee earning NIS 25,000 per month who is entitled to 21 vacation days per year takes a two-week vacation (10 working days). Their vacation pay for that period is: NIS 25,000 ÷ 25 × 10 = NIS 10,000. In practice, most Israeli employers simply continue to pay the monthly salary during vacation without separate calculation — which is fine as long as the monthly amount fully covers the legal daily rate for the days taken. Issues arise when employees take vacation mid-month or when their salary has variable components. Always check that your payslip reflects the correct vacation deduction and vacation payment.

4. The Vacation Fund (Keren Chofesh / Otef Vacatsia)

In many sectors covered by collective agreements or extension orders, employers contribute to a vacation fund (keren chofesh or otef vacatsia). This is a separate fund — often managed by the same provident fund institution that handles pension contributions — into which the employer deposits a monthly percentage of the employee's gross wage, typically around 2 percent. When the employee takes vacation, the fund pays their vacation pay and the employer is discharged from that obligation for the days covered.

The vacation fund model is common in construction, manufacturing, cleaning services, and certain other sectors. It is less common in the hi-tech, finance, and professional services sectors, where employers typically pay vacation directly from payroll without a separate fund structure.

On termination: Any balance remaining in the employee's vacation fund account that has not been used for actual vacation days taken must be paid out to the employee. The fund administrator handles this payment directly. It is separate from the employer's own obligation to pay out unused leave days (discussed in Section 6 below) and from the severance pay and notice pay owed under the Severance Pay Law and the Notice Law.

In Practice: Foreign employees joining an Israeli employer for the first time should ask HR on day one: (a) Is there a vacation fund? (b) Who administers it? (c) What is the contribution rate? Many employees discover on termination that their employer has been deducting a vacation fund contribution from payroll but never actually remitting it to the fund — a violation that exposes the employer to claims by the Enforcement and Collection Authority. Check your payslips monthly: a line marked keren chofesh deduction should correspond to an employer contribution of at least equal value appearing on the same slip.

5. Scheduling and Taking Your Annual Leave

The Annual Leave Law gives the employer the primary right to determine when vacation is taken, subject to constraints designed to protect the employee.

Employer-initiated vacation: Under Section 7 of the law, an employer can require employees to take vacation at a time that suits the business — for example, during a factory shutdown, a slow season, or a national holiday period. The employer must give at least 14 days' advance notice before the vacation period begins. For a vacation period of fewer than six days, the notice requirement drops to seven days. Many employers in Israel schedule a mandatory collective shutdown around the Jewish high holidays in September-October, during which all employees take their accrued vacation simultaneously. This is entirely lawful as long as the employee has enough accrued days to cover it.

Employee-requested vacation: An employee who wants to take vacation at a specific time must apply to the employer. The employer can refuse if the requested dates create genuine business difficulties but cannot refuse unreasonably or chronically deny the employee any vacation at all. If the employer refuses a vacation request, the employee retains those days in their balance.

Carry-forward limit: The law requires that vacation for any given work year be taken by the end of the following work year. Section 9 provides that if an employee does not take their annual leave within that window — whether because the employer denied requests or because the employee simply did not request it — the employer loses the right to refuse a payout. Effectively, leave not taken within the carry-forward period converts into a cash entitlement. However, courts have been strict that employees must actually request leave before claiming the employer "refused" to grant it; an employee who never applied for vacation cannot sue for payout of unclaimed days simply because the year passed.

Vacation during notice period: An employer who places an employee on "garden leave" (paying salary during the notice period without requiring attendance at work) can apply accrued annual leave to the notice period if the employee has sufficient days and the employment contract or a collective agreement permits this. Absent such permission, the notice period and annual leave run separately.

In Practice: A recurring dispute in Regional Labor Court involves employers who tell employees "take whatever vacation you want, we are flexible" — and then deny every specific request for operational reasons. When the employee eventually leaves, they claim months of accumulated unpaid leave. Courts generally require the employee to show they made concrete requests that were refused; general employer encouragement to "take leave whenever" without a formal register does not discharge the employer's obligation to ensure the leave is actually taken. Keep a personal record of every vacation request you submit and the response you receive.

6. Annual Leave Payout on Termination

When employment ends — whether by dismissal, resignation, or mutual agreement — the employer must pay the employee the cash value of all unused vacation days that have accrued but not been taken. This obligation arises under Section 10(b) of the Annual Leave Law and is enforceable through the Enforcement and Collection Authority's Execution Office as if it were any other employment debt.

The payout is calculated at the employee's last daily vacation rate (monthly salary ÷ 25) multiplied by the number of unused days. If the employee's salary changed during employment, the payout uses the salary at the time of termination, not an average over the employment period.

What the employer cannot do: Section 13 of the Annual Leave Law explicitly prohibits paying money in lieu of vacation to a continuing employee. While the employment relationship is alive, the employer must let the employee take actual leave — it cannot simply add a cash supplement to payroll and say "consider your vacation waived." Any agreement to pay instead of grant leave, signed by the employee, is void. The only lawful time to substitute cash for leave is on termination.

Statute of limitations: Claims for unpaid vacation pay are subject to the general labor law limitation period of seven years under the Obligations Law in conjunction with Section 67 of the Courts Law. In practice, the Ministry of Labor's enforcement division will also pursue employers for vacation violations up to three years back in a targeted inspection.

In Practice: Consider an employee who worked for six years at NIS 22,000 per month and accumulated 18 unused vacation days at termination. The payout is: NIS 22,000 ÷ 25 × 18 = NIS 15,840. This sum is taxable income, subject to National Insurance contributions at the standard rates, and must be paid no later than the date of the employee's final paycheck — failure to pay on time triggers index linkage and interest under the Adjudication of Interest and Linkage Law 5721-1961, compounding at the Central Bank prime rate plus a margin. Employers who fail to pay are regularly pursued by the Enforcement and Collection Authority, which can attach bank accounts and real property without a separate court order once an employment tribunal judgment is obtained.

7. Foreign Workers and Expats: Annual Leave Rules That Apply to You

The Annual Leave Law applies to all employees in Israel without distinction based on nationality, citizenship, or work permit status. A worker on a B/1 work permit, a diplomat's family member with a separate work permit, or a multinational employee on a short-term assignment to Israel for a period exceeding 30 days is entitled to the same statutory vacation as any Israeli employee.

B/1 permit holders: Foreign workers on employer-tied B/1 work permits are particularly vulnerable on vacation pay because their ability to change employers is restricted. If the employer fails to provide leave or carry out the required payout on termination, the foreign worker may leave the country with an unsatisfied claim. The Enforcement and Collection Authority can pursue the employer after the worker departs, but the process takes time. Foreign workers who plan to leave Israel should obtain a written vacation balance statement from HR before their last working day and insist that the settlement letter itemizes vacation payout separately.

Expats on intra-company transfers: Many multinationals manage expat assignments under a split-pay arrangement where the employee is on the home-country payroll and receives a supplement from the Israeli entity. In these structures, the Israeli entity bears the obligation under Israeli law regardless of how internal accounting treats the payment. If the total compensation package does not deliver at least the statutory vacation entitlement per Israeli law, the Israeli entity is in violation.

Extension orders and collective agreements: Foreign employees in sectors covered by extension orders — construction, hotel, cleaning, security — are entitled to the benefits of those orders even if they were unaware of them when they signed their employment contract. The National Labor Court has consistently held that employer awareness of the applicable extension order is presumed and that ignorance is not a defense.

In Practice: A foreign construction worker from Ukraine on a B/1 sector permit who works for 18 months before their employer terminates the engagement has accrued 21 days of vacation (14 days in year one plus 7 days pro-rated in year two). At an hourly wage equivalent to a monthly gross of NIS 8,000, the daily vacation rate is NIS 8,000 ÷ 25 = NIS 320. The vacation payout on termination is NIS 320 × 21 = NIS 6,720. This amount is separate from severance pay. The Israeli Absorption Department and the foreign worker's recruitment agency are jointly liable with the employer under the Foreign Workers Law 5751-1991 if the employer fails to pay — a provision specifically designed to protect migrant workers who have no leverage once they leave Israel.

Frequently Asked Questions

No. Section 13 of the Annual Leave Law 5711-1951 explicitly prohibits substituting cash for actual vacation during an ongoing employment relationship. While you are employed, the employer must give you the time off — paying a cash supplement instead is not permitted. The right to receive cash in lieu of unused vacation only arises at the end of employment, when any accrued but untaken days must be paid out on termination. Any agreement to waive actual leave in exchange for a salary supplement, even if signed by both parties, is void.

Unused vacation days that have accrued must be paid out in cash when your employment ends, whether you were dismissed or you resigned. The payout is calculated at your daily vacation rate (monthly gross ÷ 25 per day) multiplied by the number of unused days. The sum is taxable and subject to National Insurance deductions. It must be paid on your final paycheck date. If your employer refuses or disputes the balance, you can file a claim with the Regional Labor Court or the Ministry of Labor's enforcement division within seven years.

No. Israeli public holidays — Rosh Hashanah, Yom Kippur, Sukkot, Passover, Independence Day, and the others listed in the Hours of Work and Rest Law 5711-1951 — are separate paid days off and do not reduce your vacation balance. If a public holiday falls during a period of scheduled vacation leave, that day does not count as a vacation day; your leave balance is credited back by one day. Non-Jewish employees are entitled to observe their own religious holidays under the Hours of Work and Rest Law, and those days similarly do not reduce the annual leave balance.

Yes, with notice. Section 7 of the Annual Leave Law gives the employer the right to set vacation dates that suit the business, provided the employer gives at least 14 days' advance notice (seven days for vacations of fewer than six working days). Many Israeli employers require all employees to take leave during the high-holiday period in September-October or during summer shutdowns, and this is fully lawful as long as the employee has enough accrued days to cover it. If you do not have enough accrued days, the employer cannot force you to take unpaid leave without your agreement.

Yes. The Annual Leave Law draws no distinction based on nationality, citizenship, or work permit type. A B/1 permit holder who has worked for four years accrues 14 vacation days per year at the same rate and daily pay rate as any Israeli employee in an identical role. The relevant extension orders that apply to your sector also apply to you. If your employer has failed to grant vacation or has miscalculated your balance, you can file a complaint with the Ministry of Labor's Foreign Workers Division, which has authority to investigate and issue fines without you needing to file a court claim.

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