Can an Israeli employer withhold an employee's final salary until company property is returned?

The Wage Protection Law 5718-1958 (Hok Haganat HaSachar) treats wages as protected money that must reach the employee promptly and in full. Section 25 sets out an exhaustive list of permitted deductions, covering items such as income tax, national insurance, pension and union contributions, and a debt the employee has acknowledged in writing. Withholding the last salary to pressure a departing worker into returning equipment does not appear on that list, so it is not a lawful deduction. The law also fixes when wages are due, by the ninth day of the month following the month of work, and Section 17 attaches an escalating wage-delay compensation (pitzuyei halanat sachar) to late payment, which can quickly exceed the value of the disputed equipment. The Regional Labor Court enforces these rules and tends to read them strictly in the employee's favor.

For a foreign company employing staff in Israel, the practical takeaway is to separate the two issues. Pay the final wages, including accrued vacation and any severance, on the normal schedule, then pursue the unreturned laptop or phone through ordinary channels, such as a written demand and, if needed, a civil claim for the item or its value. A set-off against wages is possible only inside the narrow Section 25 framework, typically a specific, agreed debt rather than a disputed estimate of equipment value, and even then there are caps on how much can come out of any single payment. Building a clear off-boarding process, with a signed asset list at hire and a return checklist at exit, prevents most of these disputes. Our guide to employment law in Israel for foreign companies and expats sets out the wider wage and termination rules.

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

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