Freelancing in Israel: the 3 gaps not to leave open

When you leave employee status to become a freelancer in Israel, you lose three protections at once that you had stopped noticing: the supplementary health cover provided by the employer, the sick pay paid automatically, and the pension contribution topped up by the company. These three gaps, health, protection and retirement, do not close by themselves: it is up to the freelancer to identify them and deal with them, one by one.

For a francophone settled in Israel, this realisation often comes a little late, at the time of a sick leave or a tax return that reveals the absence of a pension fund. Better to anticipate it. Here are the three areas to check first, without drama, but without leaving them open too long either.

What an employer offers, without the employee really thinking about it

An employee in Israel generally enjoys a set of protections on top of the public base: an employer share paid automatically into a pension fund, sick pay paid by the company from the first days of leave, and sometimes supplementary health cover or a study fund (keren hishtalmut) offered as a fringe benefit. The freelancer starts from the same public base as everyone else, that of Bitouah Leoumi (National Insurance), but without any of these automatic extras. Everything an employer would have taken care of becomes, as a self-employed person, a personal decision to take yourself.

Gap no. 1: health beyond the public basket

The public basket of care (Sal Briout), financed by national health insurance, covers every Israeli resident in the same way, employee or self-employed. So this is not, strictly speaking, a gap in basic cover. The gap is rather in everything an employer added on top: easier access to certain specialists, dental care, extra-billing fees, a private room in hospital. A freelancer who wants to get back this level of comfort generally has to take out private supplementary health insurance themselves, whose scope varies greatly from one contract to another.

Gap no. 2: protection in case of work stoppage or death

This is often the least well identified gap, and the most costly if it materialises. A sick employee is compensated by the employer from the first days of leave. A self-employed person receives no public daily allowance for ordinary sick leave, and can claim the general disability allowance from Bitouah Leoumi only if their medical incapacity reaches a high threshold, around 60%, recognised as lasting. In between, a freelancer laid up for several weeks by an ordinary health problem generally finds themselves without any automatic replacement income. We explain this mechanism in a dedicated article on this blog, devoted specifically to income protection insurance for the self-employed in Israel.

Protection also covers, more broadly, what happens in the event of death or lasting disability: without a capital sum or annuity provided by contract, the burden falls entirely on the family. This is a subject we cover in more detail on our life insurance in Israel page, which explains how this type of contract can serve both as protection for your loved ones and, depending on the plan, as a savings tool.

Gap no. 3: retirement, a minimum obligation but not enough

Since January 2017, contributing to a pension fund is no longer entirely optional for an Israeli self-employed person: the law imposes a minimum payment, with a rate that rises with income, whereas an employee has had this obligation since 2008, with a share paid by the employer on top. The problem is therefore not so much the total absence of a legal framework as its level: the compulsory minimum for a self-employed person remains modest, with no employer top-up to complete it, and many freelancers in practice settle for this minimum, or even ignore it altogether in their first year of activity. Over an entire career, this gap with an equivalent employee can make a significant difference to the pension received in retirement.

In practice, two mistakes come up often among newly established francophone self-employed people: opening a pension fund several months, or even several years, after starting the activity, and settling for the legal minimum rate without ever reassessing that amount as income grows. An annual review with an accountant or adviser, at tax return time, generally avoids both pitfalls without any particular effort.

How to close these three gaps, in order

There is no need to deal with everything at once. A reasonable approach is generally to start by checking that the compulsory pension contribution is in place and paid regularly, since it is already legally due. Next comes protection, often the most urgent priority for a freelancer who lives mainly from their activity, as the absence of replacement income in case of work stoppage is the most immediate risk for a household budget. Supplementary health cover, finally, can generally be adjusted according to the available budget and each person's real needs, with no particular urgency.

This ranking is indicative and does not replace a review of your personal situation: age, family make-up, the nature of the activity and the level of fixed costs completely change a freelancer's priorities from one case to another. A broker can help you take stock of these three protections in one go, rather than dealing with them one after the other in an emergency. Do not hesitate to contact us to assess, with you, what really deserves to be covered in your case.