Are tips considered wages for a worker in Israel?

The starting point is the Wage Protection Law 5718-1958, which defines wages broadly and requires payment to be properly recorded. Building on that, the National Labour Court (Beit HaDin HaArtzi LaAvoda) has held that a tesher (tip) which reaches the worker through the business, rather than directly from the customer's hand as a private gift, is part of taxable, pensionable wages. The practical consequence is that a restaurant cannot point to cash tips and claim its waiters are paid above minimum wage while running their recorded salary below the legal floor. Tips that pass through the till must be booked as wages, included in the payslip, and used to calculate employment entitlements like severance and pension. Genuinely private, undeclared cash tips occupy a greyer zone, which is one reason the law has pushed toward formalising service charges.

For foreign workers in hospitality this has real money attached, because it affects the base figure used to calculate severance pay at the end of the job, the employer's pension contributions, and the National Insurance and health contributions that fund future benefits. A common mistake is accepting a low recorded base salary "plus tips" and assuming the tips are a bonus, only to find at termination that severance was calculated on the artificially low figure. The safest approach is to confirm that service charges are processed through the employer, appear on each payslip, and feed into the pension and severance base. Where an employer under-records tips, a worker can claim the shortfall through the Labour Court, generally going back up to seven years. Keeping personal records of shifts and tips strengthens any later claim.

From the full guide: Employment Law in Israel for Foreign Companies and Expats: A Practical Guide

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