Got a Job Offer Through an EOR? 5 Things Israeli Employees Should Check Before Signing

More and more foreign companies are hiring employees in Israel without opening a local entity. Instead, they hire through an Employer of Record (EOR) (such as Deel and others): a company that acts as the formal employer in Israel, runs payroll and makes pension contributions, while the actual work is done for the foreign company.

It's a convenient solution for the company, but it puts the candidate in an unfamiliar position: instead of one employment agreement, you receive two documents. One is an offer or letter from the company itself; the other is an employment agreement with the EOR. They were drafted separately, and they don't always match.

Here are five points worth checking before you sign.

1. Who is your employer, and what happens when that changes?

Legally, your employer is the EOR, not the company you actually work for. This affects questions such as who is responsible for paying your entitlements and who you deal with if a dispute arises.

It's just as important to think ahead: many companies use an EOR only at first, and later set up an Israeli subsidiary that employs staff directly. Such a transition can put seniority-based rights at risk, including accrued sick leave and vacation days, seniority for severance and notice purposes, and options that have vested or are in the process of vesting. Make sure in advance that the agreement provides for your seniority and rights to carry over in full to any future employer within the group, including if the company switches EOR providers.

2. Are you a "regular" employee?

Yes. Anyone working in Israel is entitled to the protections of Israeli employment law, including pension contributions, severance pay, advance notice, vacation and sick pay. This is true even when the agreement is governed by foreign law. Make sure the agreement doesn't include provisions that contradict these rights, and that pension contributions are calculated on your full salary.

3. Options: what's the tax track?

This is one of the most important points, and the one that gets checked the least. The options are granted by the foreign company, but your formal employer is the EOR. In this situation, the options may not be granted under Section 102, which has a material effect on the tax you'll pay when you exercise or sell them. It's also worth checking what happens to vesting if your employment ends, and how long you have to exercise options after you leave.

4. Intellectual property and non-compete

Agreements drafted abroad often include IP and non-compete clauses that are much broader than what is customary in Israel. For example, a clause that assigns to the company inventions you developed on your own time, or a sweeping non-compete for a long period. Israeli labor courts tend to narrow such restrictions, but it's better to define them properly upfront than to litigate them later.

5. What you were promised – is it in writing?

Salary, bonuses, options and benefits come up in job interviews. Make sure everything that was agreed is actually in writing, and in the right document. A commitment that appears only in the company's letter, and not in the EOR agreement, may be harder to enforce.

Can you negotiate?

The EOR agreement itself is usually standard and hard to change. But the terms with the company, such as salary, options, continuity of seniority and your rights in case of a move to direct employment, and sometimes the non-compete as well, can definitely be negotiated. The time to do it is before you sign.

Received a job offer and want to consult about it? Contact me and I'll be happy to see how I can help.

More details: Employment Agreements & Employment Law

This article provides general information and does not constitute legal advice. Each case should be examined on its own merits.