Israeli Payroll Calculator

Instructions

Step 1: Gather Employee Information

Collect from user:

• Gross monthly salary (bruto) in NIS
• Tax credit points (nekudot zikui): Default 2.25 for male resident, 2.75 for female
• Pension arrangement: Yes/No, contribution percentages
• Employment type: Employee (sachir), Freelancer (atzmai)
• Age: Affects NI rates (under/over 18, retirement age)

Step 2: Calculate Income Tax

Apply progressive tax brackets to monthly gross salary:

1. Calculate annual equivalent: monthly_gross * 12
2. Apply brackets progressively (see references/tax-brackets.md)
3. Subtract tax credit value: credit_points * 242 NIS/month
4. Monthly tax = max(0, calculated_tax - credits)

IMPORTANT: Tax credits cannot create a negative tax (no refund through payroll).

Step 3: Calculate Bituach Leumi (National Insurance)

For employees:

• On first 7,522 NIS: 0.4% NI + 3.1% health = 3.5%
• On amount 7,523 to 50,695 NIS: 7.0% NI + 5.0% health = 12.0%
• Maximum insurable salary: 50,695 NIS/month

Step 4: Calculate Pension Deductions

If pension applies (mandatory for most employees):

• Employee: 6% of salary (up to pension ceiling)
• This amount is deducted from gross but provides tax benefits

Step 5: Calculate Net Salary (Neto)

Net = Gross
    - Income Tax
    - Bituach Leumi (employee share)
    - Health Tax (employee share)
    - Pension (employee contribution)
    - Other deductions (union dues, etc.)

Step 6: Calculate Employer Total Cost (if requested)

Employer Cost = Gross
    + Employer NI (~7.6%)
    + Employer Health (~3.45%)
    + Employer Pension (6.5%)
    + Employer Severance (6%)
    + Vacation accrual
    + Sick leave accrual

Step 7: Present Clear Breakdown

Present results as a payslip-style table:

Item	Amount (NIS)
Gross Salary	XX,XXX
Income Tax	-X,XXX
Bituach Leumi	-XXX
Health Tax	-XXX
Pension (employee)	-X,XXX
Net Salary	XX,XXX

CAVEAT: Always note "This is an estimate. Actual amounts may vary based on specific tax rulings, additional credits, or employer agreements. Consult a certified Israeli accountant (roeh cheshbon) for exact figures."

Examples

Example 1: Standard Employee

User says: "Calculate net salary for 20,000 NIS gross, male, no special credits" Result: Detailed breakdown showing approximately 15,800-16,200 NIS net

Example 2: Employer Cost

User says: "How much does it cost an employer to pay 15,000 NIS gross?" Result: Total employer cost approximately 19,500-20,000 NIS including all contributions

Example 3: Salary Comparison

User says: "Compare a 25,000 NIS offer with a 22,000 NIS + car offer" Result: Side-by-side comparison accounting for car tax benefit (shovi rechev)

Bundled Resources

Scripts

• scripts/calculate_payroll.py — Calculates Israeli gross-to-net salary with progressive income tax brackets, Bituach Leumi, health tax, and pension contributions. Supports employee and employer cost views. Run: python scripts/calculate_payroll.py --help

References

• references/tax-brackets.md — Israeli income tax brackets (annual and monthly) with progressive rates from 10% to 50%. The 2025-2027 brackets are frozen per Knesset legislation. Also referenced in Step 2 and Troubleshooting below. Consult when computing income tax or verifying bracket thresholds.
• references/bituach-leumi-rates.md — Bituach Leumi (National Insurance) and health tax rates for employees and employers, covering the reduced and full brackets and the monthly insurable salary ceiling. These figures update periodically; verify the current-year values against btl.gov.il before relying on exact amounts.
• references/credit-points.md — Israeli tax credit points (nekudot zikui) value and full eligibility table covering base credits, gender, new immigrants, children, single parents, and disability. Consult when determining a taxpayer's total credit points beyond the defaults in Step 1.

Gotchas

• Israeli income tax brackets, Bituach Leumi rates, and health tax rates are updated annually by the Knesset. Agents may use brackets from a previous year, causing significant calculation errors. Always verify the tax year.
• Keren Hishtalmut contributions (2.5% employee + 7.5% employer) are tax-exempt up to a ceiling that changes yearly. Agents may omit this benefit or apply an incorrect ceiling.
• Israeli payroll has a mandatory pension contribution (6% employee + 6.5% employer minimum since 2017). Agents may calculate payroll without pension deductions or use pre-2017 lower rates.
• The Bituach Leumi (National Insurance) maximum insurable income ceiling changes annually. Contributions above the ceiling are at a reduced rate. Agents may apply the full rate to the entire salary.
• Israeli employees receive "nekudat zikui" (tax credit points) that reduce tax liability. A single resident gets 2.25 points; women get an additional 0.5. Agents may omit credit points entirely or apply incorrect values.

Troubleshooting

Error: "Tax brackets may be outdated"

Cause: Tax brackets update annually (usually January 1). Israeli income tax brackets were frozen by legislation for 2025-2027. Solution: Verify current brackets at the Tax Authority website (mas.gov.il). Bituach Leumi tiers update annually and should be cross-checked against btl.gov.il -- see references/bituach-leumi-rates.md for the values used in this skill.

Error: "Credit points don't match"

Cause: Various life circumstances affect credit points Solution: Review full credit point table. Common additions: female (+0.5), new immigrant (up to +3), children, single parent, disabled.