Is Being Self Employed in Israel Really Nigh On Impossible?

For those who follow me on social media, I have carved out a reputation as quite a prodigious poster on Facebook Groups where I can frequently be found crowdsourcing all manner of information.

So long as it doesn’t derail my workday, I have no problem with this label.

Facebook has made it easier over the years to not get overwhelmed by notifications (two tips: turn them off on threads if needed and disable commenting if needed). I tend to engage in Facebook threads while working and check back on comments when I take breaks. Perhaps it isn’t the most effective system, but I have come to greatly enjoy asking questions (pertinent, I hope) and being able to help others out through this medium.

Today — in the Living Financially Smarter group — I asked (in more words than these) why one frequently hears the following:

• “It’s impossible to be self employed in Israel.”
• “It’s not worth it to be self employed in Israel”

For the sake of completion and transparency: I’ve been self-employed here for 5 years, although I have only been doing it full time for the past two. Yes, I ran a side gig alongside a salaried job for a while. That was exhausting, but provided a conduit that later allowed me to go out on my own full time.

Israel’s bureaucracy gets a bad rap. And I’ve certainly not shied away from pointing out some of the problems in this country ( see: Ireland/Israel comparison post, among others). However, my overall experience managing my tik (file) as a self employed individual in Israel has been positive.

With the help of an excellent accountant, I have careered my writing business through its formative days and to its current lofty status as a VAT non-exempt trading entity (Hebrew: osek murshe. And that was a joke).

There have been minor bureaucratic hiccups, sure. My capital assets have been audited — as almost all freelancers’ are (sometimes with annoying frequency). I narrowly evaded a fine from the tax authority after forgetting to make one of my bimonthly reports (hint: set Google Calendar notifications!). But other than that my journey so far has gone off more or less without hitches.

Is Freelancing in Israel Really All That ‘Bad’?

The purpose of today’s thread was to try establish whether there is any truth in the commonly aired claim that being a freelancer in Israel is specifically more expensive than being an employed worker (Hebrew: a sachir).

Before starting the thread, I was aware of several aspects in which we atzmaim (self-employed workers) get the short end of the bargain. For one, we pay slightly higher Bituach Leumi (social security) contributions. Employees’ contributions are made both by themselves, as deductions from their salary slips ( tlushim) and on the employer’s end. Needless to say, as an atzmai (independent worker) you don’t get benefits. In my postings about how to set a freelance hourly rate, I have emphasized the importance of building in both benefits you are not receiving and unbillable hours. In other words: I don’t think this is a direct deficiency of the arrangement.

There’s the aforementioned bureaucracy. But again, my experience has been that it is more than manageable with the aid of a competent accountant (and while in general I’m a DIY sort of guy, I strongly recommend hiring one if you’re looking at freelancing here).

With the help of the financial boffins on the Living Financially Smarter group I came up with several additional reasons which had evaded me. I can understand a little bit more clearly why so many are eager to point out that being self employed in Israel has its drawbacks:

• Americans (dual American-Israeli citizens) are liable for American social security contributions. This is due to America’s unique policy of taxing its citizens extraterritorially.
• Israeli employers also contribute to pensions and savings plans. A good example cited is the keren hishtalmut.

There were other examples given which I would put in the category of “universal freelancing drawbacks” versus Israel-specific situations, which is what I was asking about. Nevertheless, these are worth keeping in mind:

• Company cars are relatively commonplace in Israel. Freelancers, needless to say, do not receive benefits in kind.
• Israel’s social security system affords no benefits essentially to laid off unemployed workers. Grants during the pandemic have been means-tested versus last year. But these grants were anomalous and the situation is usually that if you’re self employed and your work suddenly dries up, you’re eligible for nothing.
• Self employed workers in Israel also do not qualify for dmei havra’ah(recuperation pay). This is a relatively small sum and is a fringe benefit with an interesting history!

Some Upsides To Also Consider….

My thoughts about self employment in Israel are that while there are definitely drawbacks it’s all too easy to forget that, equally, there are upsides to working for yourself here.

• English speakers based in Israel have a great opportunity to work with clients internationally that is often not fully appreciated, in my view.
• Consider also Israel’s salaries — which often lag behind the West. English speakers in Israel often run into a relatively low salary ceiling through which it is difficult to break (how many rungs on the ladder can exist between new marketing hire and Israel Marketing Manager?). Of course, mastering professional standard Hebrew is the obvious and best solution to this quandary. But self employment can actually offer a way for English speakers to make a higher income than they could command in a salaried position. At the least, it can be a good stopgap solution worthy of consideration.

The ultimate answer as to whether or not it’s worth it to be self-employed in Israel is not clear cut. It depends heavily upon factors such as one’s individual financial situation, how important income stability is, and whether one’s second citizenship is to the US or to some other country.

At the very least, this was another interesting Facebook thread!

Originally published at https://www.danielrosehill.co.il