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Do Israeli employers have to contribute to a keren hishtalmut (study fund) for employees?

For most white-collar employees in Israel, keren hishtalmut (study fund) contributions are mandatory under collective agreement extension orders (tzavei harchava) issued by the Ministry of Labor. The standard rate under the Senior Employees Extension Order is 7.5% employer contribution and 2.5% employee contribution of gross salary. The employer's contribution is a deductible business expense, and within a statutory salary ceiling the employee's contribution is tax-free. Manual workers are covered only if a sector-specific extension order applies to their industry.

A keren hishtalmut is a savings and study fund unique to Israeli employment law. Unlike pension funds, which are regulated by dedicated legislation, keren hishtalmut obligations derive from collective agreements that the Ministry of Labor has extended to entire sectors by ministerial order. The most widely applicable is the Extension Order for Senior White-Collar Employees (tzav harchava livaalei mishrot bachir), which covers managerial, professional, and administrative staff. Under this order, the employer must contribute 7.5% of the employee's monthly salary and the employee contributes 2.5%, with both amounts deposited monthly into a designated fund managed by one of the licensed keren hishtalmut providers. The fund invests the contributions, and the employee may withdraw the accumulated balance — including investment returns — after six years for any purpose, or after three years for approved educational or professional development uses. An employer who fails to make the required contributions is liable for the unpaid amounts plus interest, and the employee can recover them through the Regional Labor Court within the standard seven-year limitation period.

The tax treatment of keren hishtalmut makes it one of the most valuable components of an Israeli compensation package for foreign employees. The employer's contribution of up to 7.5% is fully deductible as a business expense. The employee's own contribution of up to 2.5% is tax-free at source, subject to a monthly salary ceiling of NIS 15,712 (2026). Contributions above that ceiling are taxed as regular income. On withdrawal after six years, the entire fund balance — principal and gains — is tax-free for the employee, making the keren hishtalmut effectively a tax-sheltered savings vehicle on top of its original study-fund purpose. Foreign employees working in Israel on work visas are entitled to the same keren hishtalmut contributions as Israeli employees if the relevant extension order covers their sector, and employers cannot exclude foreign staff from mandatory contributions by contractual agreement.

⚖ In Practice
  • Governing law: Extension Order for Senior White-Collar Employees (Tzav Harchava LiBa'alei Misrot Bachir); Collective Agreements Law 5717-1957 (basis for extension orders)
  • Standard contribution rates: Employer 7.5%, Employee 2.5% of gross monthly salary
  • Tax-free ceiling (employee): contributions on the first NIS 15,712 of monthly salary are tax-free for the employee (2026 figure, adjusted annually)
  • Withdrawal rules: full tax-free withdrawal after 6 years; early withdrawal for education/professional development after 3 years; early withdrawal for any other reason is fully taxable
  • Enforcement: unpaid contributions claimed in the Regional Labor Court (Beit Din Ezori LeAvoda); 7-year limitation period from each missed payment date

From the full guide: Keren Hishtalmut in Israel: The Complete Guide for Employees and Employers

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Get a Free Consultation with Adv. Eli ShimonyPrepared under the direction of Adv. Eli Shimony, Eli Shimony Law Office · Editorial policy

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