Employment or self-employment. Advantages and disadvantages

When deciding whether to be employed or start your own business, you need to consider legal and tax aspects, as well as your personal preferences.

So what are the benefits of being hired by someone else?

1. Relative stability, especially if your employer has labor union agreements.

2. Mandatory benefits:

A. Paid leave (דמי חופשה). An employee earns 10 to 28 days over the course of a year, depending on the length of service and the length of the work week (5 or 6 days).

B. Paid sick leave (דמי מחלה). An employee earns 18 days of sick leave per year (up to 90 days in total). When an employee is sick, they receive 0% for their first day of sick leave, 50% for the second and third, and 100% starting on the fourth day. The employer usually asks the employee to bring a medical certificate from a doctor.

C. Wellness pay (דמי הבראה). From 5 days of leave in the first year up to 10 days, depending on the length of service. In 2022, the cost per day of leave is NIS 378 in the private sector and NIS 432 in the public sector.

D. Severance pay (פיצוים). An employee merits severance pay if they are fired and in some cases when they quit voluntarily. The employer must pay the amount of the monthly salary for each year of work service. For example, if an employee works for 10 years before being fired, then they earn 10 months of salary as a severance pay.

E. Overtime pay (שעות נוספות).

F. Transportation costs (דמי נסיעה).

G. Pension fund (קרן פנסיה). In 2022, the employer was required to contribute at least 12.5% to the pension fund, including 6% for severance pay.

H. Other perks and benefits.

3. Voluntary payments:

A. Vehicle or vehicle expenses (רכב או הוצאות רכב).

B. Education fund (קרן השתלמות). The Interim Savings Program lets you withdraw money 6 years after the first payment to the education fund. Typically, the employer contributes 7.5% to the education fund, and the employee contributes 2.5% of their monthly salary.

C. Various types of insurance.

D. Other perks and benefits.

And here are advantages of being an individual entrepreneur:

1. Independence You don't have a boss. You don't have to work from 9 to 5. etc.

2. Ability to write off expenses.

3. Ability to conduct tax planning.

4. Raising your income is up to you, not an employer.

5. There is no danger of being fired.

However, many in Israel prefer to combine employment with entrepreneurial activities. This usually does not violate ethical and legal standards.