National Insurance Reports for Employees — The Complete Employer's Guide

Why Do Employers Need to Understand National Insurance?

If you employ workers — whether one or ten — you are required to deduct employer national insurance contributions on every payslip. This is not a choice — it is the law. Most employers we meet in our first consultation think they only pay the employee's deduction from salary, but there is another part — the one that belongs to you as the employer.

The good news? If you handle this on time, it is simple. You pay, report as required, and move forward. If you forget or ignore it, there can be fines, interest, and other unnecessary troubles. On this page we will go through everything you need to know — from basic definition to practical field examples.

What is Employer National Insurance and Who Does It Affect?

National Insurance is a state system in Israel managed by the National Insurance Institute. It provides benefits such as unemployment allowances, sick pay, old-age pensions, and more. For this system to function, funds are required — and they come from two sources: deductions from employee wages and employer contributions.

Employer National Insurance contributions are a percentage of each employee's gross salary that you pay directly to the National Insurance Institute. This is not part of the employee's salary — it is an additional cost borne by you as the employer. The rate is typically between 3–3.45% of the salary, depending on certain conditions (age, type of occupation, etc.).

Who must report and pay? Anyone who employs salaried workers — whether a exempt self-employed person, licensed self-employed person, private company, non-profit organization, or any other legal entity. Even if you have only one employee, or a part-time employee working two hours a week — you must report and pay employer National Insurance contributions.

How National Insurance Reporting Works — Step by Step

The process is not complicated, but you need to understand it properly:

1. Registration with the National Insurance Institute as an employer — When opening a business or hiring your first employee, you must register with the National Insurance Institute as an employer. This typically occurs through the "Worker Online" system or through an accountant.
2. Calculating National Insurance contributions on each payslip — Each time you pay an employee's salary, you are required to calculate the National Insurance contribution (typically 3–3.45% of gross salary) and deposit the funds in your National Insurance account.
3. Monthly or periodic reporting — Each month (or each designated reporting period), you must submit a report to the National Insurance Institute containing details of each employee, salary, and the amount of contributions paid. This report is called an "Employee Report" or "Payslip Report".
4. Payment of contributions — If you have not yet paid, you must pay the contributions to the National Insurance Institute according to the established payment deadlines (typically by the 15th of the following month).
5. Document retention — Keep copies of all reports, payslips, and payment receipts. If the National Insurance Institute conducts an inspection, you will need to prove that you have reported and fulfilled your obligations.

One point that is not always clear: reporting and collection are two separate things. You must report on every employee and salary, even if you have not yet paid the contributions. If you do not pay, it does not matter that you have reported — you are still liable.

Practical Example: How to Calculate Employer National Insurance Contributions

Let us go through a concrete example. Say you have an employee whose salary is 5,000 NIS per month (gross).

Employer National Insurance contributions at a rate of 3.45% would be:

5,000 × 3.45% = 172.50 NIS

This is the amount you must deposit with the National Insurance Institute this month, in addition to the deduction of the employee's own National Insurance contribution (which is at a different rate). Each month, you will repeat this calculation for each employee, sum all the contributions, and pay a single amount to the National Insurance Institute.

If you have three employees with different salaries, you calculate the contributions for each separately, sum them, and pay a single amount to the National Insurance Institute. This is also what appears in your employee report — a list of each employee, their salary, and the employer's share of the contributions.

What You Need to Know About Tax and Reporting — Key Points

There are several things employers don't always understand at first, and this causes mistakes:

Employer contributions cannot be deducted from the employee's salary. You must pay them out of your own pocket. If you pay an employee a salary of 5,000 NIS, they receive 5,000 NIS (after deducting their taxes and insurance), and you additionally pay another 172.50 NIS for national insurance. This is an additional cost that cannot be charged to the employee.

The contribution rate can change. In some cases, such as employees of a certain age or under certain conditions, the rate may be different. It is usually the responsibility of an accountant or payroll software to calculate this precisely, but it's good to know that it's not always 3.45%.

Reporting must be done with every payslip. You cannot "skip" a month and then report two the following month. Each payslip must be reported separately, with the exact details of that month. If a salary slip is issued on a certain date, the report should be submitted around that same period.

Penalties for late or non-reporting can be substantial. If you report late or fail to report at all, the National Insurance Institute can impose a fine. This is not a small amount — it can be a percentage of the unreported amount, plus interest. Additionally, if you have a debt to the National Insurance Institute, it can affect your status as an employer in the future.

Common Mistakes and How to Avoid Them

• Failure to report a new employee. An employee started working for you, but you did not report it to the National Insurance Institute. In the meantime, you are paying wages, but there is no official report. This is a problem — the National Insurance Institute does not know the employee exists, and this can cause problems later if there is a claim or inspection. Solution: Report immediately when an employee starts, even if it is mid-month.
• Incorrect calculation of employer contributions. Employers sometimes think the rate is 3% when it is actually 3.45%, or they use net salary in the calculation instead of gross salary. This results in underpayment. Solution: Always use gross salary and verify the correct rate with the National Insurance Institute or an accountant.
• Failure to maintain documents. You reported and paid, but you did not keep a copy of the report or payment receipt. If there is a question from the National Insurance Institute a year later, you cannot prove that you met your obligation. Solution: Keep every report and receipt for at least 3–4 years.
• Failure to separate employee contributions from employer contributions. On a payslip, you must clearly show how much is the employee's National Insurance contribution (deduction) and how much is the employer's National Insurance contribution (additional payment). If you mix these up, it causes confusion and may be problematic if there is an inspection. Solution: Good payroll software or an accountant will do this correctly.
• Late payment without notice. You report on time, but you pay the contributions weeks or months later. The National Insurance Institute may charge interest on the debt. Solution: Pay by the due date, or if you are behind, contact the National Insurance Institute to discuss options.
• Failure to update variable salary. The employee's salary changed (raise, reduction, one-time bonus), but you reported the old salary. This results in missing or excess contributions. Solution: Report the actual salary each month, even if it varies.

When Should You Contact an Accountant?

Most employers can handle National Insurance reporting on their own if they have good payroll software. But there are situations where consulting an accountant is the smart choice:

If you have more than 5 employees. Each additional employee means another report, additional calculations, and a higher risk of errors. An accountant will ensure everything is correct and save you time.

If salaries change regularly. Employees with variable pay (hourly, commissions, bonuses), or employees with mixed fixed and variable income — this gets complicated. An accountant knows exactly how to handle this.

If you employ foreign workers or employees with special status. There are different rules for foreign workers, employees working abroad, or employees under certain conditions. It's not always clear, and a mistake can be expensive.

If there is a delay in reporting or payment. If you've already missed deadlines, it's good to consult with someone who knows how to sort it out correctly — to avoid additional penalties.

If it's a new business for you. In the first year, there are many unclear matters. An accountant can guide you through the entire process and ensure you start off on the right foot.

Important Deadlines to Remember

National Insurance deadlines are rigid. If you miss a deadline, it's not just a problem — it can result in a fine:

Monthly reporting: Usually by the 15th of the following month. If you report on the 20th, it's already late.

Payment: Also usually by the 15th of the following month. If you pay on the 25th, it can incur interest charges.

Annual report: At the end of the year, you need to file an annual report with the National Insurance Institution with a summary of the entire year. The deadline is usually at the beginning of the following year.

Recommendation: If you're unsure about the exact deadlines, check directly with the National Insurance Institution or with an accountant. Deadlines can change from year to year, so it's good to verify.