Israeli Regulations Update Housing Deduction Limits for Foreign Employees
Summary
- A legislative amendment updates the maximum amounts employers may deduct from foreign employees’ wages for adequate housing accommodations as of September 1, 2026. The caps vary depending on the type of housing structure and the area in which it is located.
- Maximum deductions: The amendment prescribes that employers’ deductions from foreign employees’ wages, including for adequate housing and medical insurance, must not exceed 25% of their monthly wages. The maximum deduction for housing also includes expenses for furniture, electrical appliances, water, and municipal taxes.
- New amounts to apply for September 2026 wages: The updated amounts may be deducted from wages for September 2026, which are payable in October, but not for previous work periods. These amounts are expected to be updated annually under the mechanism prescribed in the Foreign Workers Regulations.
- Employers must update their payroll systems: Employers of foreign employees that deduct housing expenses from their wages must review the applicable deduction amounts, the classification and location of the housing accommodations, and compliance with the 25% cap, and update their payroll systems and pay slips as necessary. Employers that fail to comply with the requirements may face employee claims and enforcement proceedings by the Ministry of Labor.
An amendment to the Foreign Workers Regulations (Rate of Wage Deductions for Adequate Housing), 2000, took effect on September 1, 2026. The amendment updates the maximum amounts employers may deduct from foreign employees’ wages as reimbursement of employers’ expenses for adequate housing accommodations.
Applicability
The amendment applies to all sectors employing foreign employees and establishes maximum deductions based on the type of housing structure and the area in which it is located.
Updated Maximum Deductions
The maximum monthly deduction for housing accommodations in a permanent (non-mobile) building is ILS 1,095 in the Jerusalem region, ILS 1,257 in the Tel Aviv region, ILS 1,030 in the central region, and ILS 999 in the Haifa, southern, and northern regions.
The maximum monthly deduction for accommodations in “temporary mobile structures” intended as housing units, as defined by law, is ILS 999. If employers provide on-site housing at construction sites, the maximum deduction is 50% of the relevant amount prescribed for the applicable type and location of the housing accommodations.
Caps on Deductions from Employees’ Wages
The amendment establishes that employers’ total deductions from foreign employees’ wages for adequate housing accommodations, medical insurance, and other deductions permitted by law shall not exceed 25% of employees’ monthly wages.
The maximum deduction for adequate housing accommodations also includes expenses for furniture, electrical appliances, water use, and municipal taxes. Therefore, employers must not deduct additional sums exceeding the maximum amount established in the amendment.
Effective Date
Employers may deduct the updated amounts from September 2026 wages, which are payable in October 2026. The updated amounts must not be deducted for work periods before September 2026.
These amounts are expected to be updated annually at the beginning of January, in accordance with the weighted index prescribed in the Foreign Workers Regulations.
Employer Obligations Following the Amendment
Employers that employ foreign employees and deduct amounts from their wages for adequate housing accommodations should review the applicable deduction amounts, the classification and location of the housing structure, and compliance with the overall deduction cap, and update their payroll systems and pay slips as necessary.
Employers that fail to comply with the amendment’s provisions concerning maximum deductions or the provision of adequate housing accommodations risk employee lawsuits and law enforcement proceedings by the Ministry of Labor.
Exemption from Providing Housing Accommodations to Expert Foreign Employees
Under certain circumstances prescribed by law, employers are exempt from allocating housing accommodations to certain expert foreign employees. Employers are nevertheless required by law to obtain a permit to employ expert foreign employees before they arrive in Israel.
***
Barnea Jaffa Lande’s Employment Department is available to provide professional advice on this matter and any other labor law issue. The department advises employers on all aspects of employing foreign workers and foreign experts in Israel, including obtaining employment permits, reviewing employment terms and associated rights, and aligning payroll systems and wage deductions with legal requirements.
Adv. Lior Girshevitz is a partner in the firm’s Employment Department.
Adv. Amit Hadad is an associate in the firm’s Employment Department.