A Guide for Foreign Companies Operating in Israel

As of March 11, 2026

For foreign companies operating in Israel, an emergency is never only a security event. It quickly becomes a business continuity issue, a workforce management issue, a project delivery issue, and often a financial reporting issue as well. If your group has local employees, foreign experts, subcontractors, or active projects in Israel, local developments may affect not only day-to-day operations, but also legal compliance, client commitments, group reporting, and management communications.

As part of Operation “Roaring Lion”, the Israeli government has announced a range of relief measures. However, when it comes to the furlough framework for employees, accuracy is essential: according to the official update published by the National Insurance Institute, the announced furlough outline has not yet completed the legislative process and therefore cannot currently be implemented in practice. For foreign companies, the practical message is clear: this is not the time to build HR policy, cost assumptions, or employee communications on the basis that a final state-backed furlough mechanism is already in force.

Why this matters more for foreign companies

Foreign companies active in Israel typically need to manage three separate but connected layers at the same time: the employment layer, the project layer, and the reporting layer. The employment layer asks who can work, under what conditions, and what legal protections apply to local employees. The project layer asks whether work can continue, whether milestones can still be achieved, and whether installation, rollout, commissioning, or handover can proceed. The reporting layer asks what should be communicated to headquarters, auditors, investors, customers, and lenders.

In practice, the greatest risk is often not the disruption itself, but the gap between what is happening in Israel and what headquarters believes is happening in Israel. When management outside Israel receives only a partial picture, it may assume the issue is simply a temporary operational disruption, while in reality the company may also be facing local labour-law constraints, health and safety limits, client notice requirements, documentation obligations, and potential disclosure implications.

Employees in Israel – local employment rules still apply during an emergency

If employees are employed in Israel, Israeli labour law remains the starting point. The Ministry of Labor has published official emergency guidance on employees’ rights during the current emergency period and questions and answers on workers’ rights. These publications address issues such as protected absences, remote work, and situations in which employees cannot be required to report to a workplace that does not allow timely access to a standard protected space.

This matters in practical terms. An employee absence in Israel is not automatically a performance failure, nor is it automatically a basis for unilateral employment action. In certain circumstances, an employee who remains at home because of emergency-related restrictions or because of the closure of an educational framework for a child may be protected by law, subject to the statutory conditions. For a foreign company, this means that any decision regarding unpaid leave, reduction of scope, payroll treatment, absence classification, or disciplinary messaging should be reviewed through the lens of local Israeli law – not only through global HR policy.

Unpaid leave – not a solution that can yet be treated as available and approved

For international management teams, this remains one of the most important points. The official position of the National Insurance Institute is that the announced furlough outline has not yet completed legislation and is therefore not currently implementable.

That means foreign companies should avoid presenting the arrangement internally as a finalized government support measure. It also means that management should avoid treating potential labour cost relief as a committed or already available saving in budgets, forecasts, margin analysis, or internal updates.

There is also a second practical issue. Under the general framework, an employee cannot be treated as being on unpaid leave while still continuing to work for the same employer, even partially. For multinational businesses, this is a real risk area because project teams often try to keep people “partially available” for calls, handovers, customer updates, or knowledge transfer. In Israel, that kind of hybrid arrangement may create a mismatch between the intended employment status and the reality on the ground.

Projects in Israel – what happens if delivery is delayed

For many foreign companies, the central issue is not only payroll – it is delivery. If your company is in the middle of an implementation, installation, fit-out, rollout, service project, commissioning process, or customer handover in Israel, the current conditions may affect staffing, site access, subcontractor availability, testing, acceptance procedures, and contractual completion dates.

There are two separate layers here. The first is operational: what can actually be performed under the current conditions, given workforce availability, site access rules, emergency instructions, and safety requirements. The second is contractual: whether the relevant agreement includes force majeure wording, relief-event language, extension-of-time provisions, liquidated damages exposure, notice requirements, or mitigation obligations.

From a management perspective, the most important immediate step is to build a clear and timely record. If delivery is at risk, document which workers or subcontractors became unavailable, which work packages could not proceed, which milestones are affected, what mitigation was attempted, and when the client was notified. In many disputes, the problem is not only the delay itself – it is the absence of timely notice and contemporaneous evidence explaining why the delay occurred and what the company did in response.

Overtime and business continuity measures may help – but only within the legal framework

Israel has also adopted emergency labour measures intended to support continuity. The Ministry of Labor published atemporary emergency overtime permit, under which the weekly overtime cap was expanded to 25 hours, the total weekly working time including overtime may not exceed 67 hours, the monthly cap may not exceed 90 overtime hours, and work of up to 14 hours per day is possible subject to the employee’s consent and the applicable conditions.

For foreign companies, this does not mean “push through at any cost”. It means that in some cases there may be lawful room to restructure shifts, compress schedules, or maintain partial continuity – provided that this is done carefully, with attention to employee consent, safety, and the actual emergency restrictions in place.

Foreign experts and overseas managers – the immigration layer still matters

Some foreign companies in Israel rely not only on local employees but also on foreign experts, senior representatives, regional managers, or temporary project teams. In those cases, the immigration framework remains important. According to the official GOV.IL service for expert foreign workers, Israeli employers may apply for a permit to employ an expert foreign worker, and if there is any difference between the page and the law, the law prevails.

For companies already active in Israel, this means checking that the employment structure, permits, and visas remain properly aligned with the actual role being performed. For companies considering entry into Israel, the lesson is broader: market entry planning should cover not only business development and tax structure, but also payroll, employer model, permits, local signatory arrangements, and the ability to operate under emergency conditions.

Relief measures are broader than the furlough discussion

The state response is not limited to employee furlough policy. The official Operation “Roaring Lion” government page includes direct damage claim routes, including both regular and fast-track options. The Israel Tax Authority has also announced relief measures, including the postponement of deadlines for filing and paying VAT, withholding tax, and income tax advances to March 26, 2026 for the relevant reporting periods.

In addition, the Ministry of Finance has published relief for businesses with state-guaranteed loans, including temporary payment deferrals in certain cases. For foreign companies, this means the local response should not be framed only as a labour-cost issue. Property damage, tax timing, cash flow pressure, and financing relief may all be relevant parts of the response plan.

Accounting implications – why both Israeli standards and IFRS may matter

For this audience, it is sensible to address accounting in two layers.

The first is the Israeli local-reporting layer. If the group has an Israeli entity, local statutory reporting obligations, or a local reporting package, Israeli standards remain important. The Institute of Certified Public Accountants in Israel publishes the integrated text of Israeli Accounting Standard 14 on interim financial reporting, and the Israeli framework also includes Standard 15 on impairment of assets, as well asISA (Israel) 570 for going concern-related considerations.

The second is the group-reporting layer. If the parent group reports under IFRS,IAS 34,IAS 36, andIAS 1 may all become relevant, depending on the facts. In practical terms, the accounting question is not only whether payroll expense has temporarily changed. It is also whether project delay affects revenue expectations, whether there are impairment indicators, whether forecasts need revision, whether uncertainty requires enhanced disclosure, and whether the Israeli component should be escalated into the group’s interim reporting process.

Court relief does not automatically change contract deadlines

Israel’s judiciary has also operated under an emergency regime. According to the officia lJudicial Authority update, courts and labour courts operated in emergency format through March 5, 2026, and procedural timelines were affected accordingly.

That is important for foreign companies with pending legal proceedings in Israel. But it should not be confused with contractual relief. A delay or suspension of court timelines does not automatically extend commercial deadlines in a customer contract, EPC agreement, implementation agreement, or services contract. Those issues still need to be assessed under the contract itself, including notice mechanics and extension-of-time language.

What foreign companies should do now

A practical response usually starts with a structured five-part review:

Workforce: identify who is working, who is absent, who may be protected, and what messages have already been sent to employees.
Projects: identify milestones at risk, required client notices, subcontractor constraints, and delivery dependencies.
Compliance: review local labour-law implications, emergency work conditions, documentation, and payroll treatment.
Immigration: confirm the status of foreign experts, managers, permits, and visas.
Reporting: update headquarters with a fact-based picture that connects operations, legal exposure, and financial implications.

Conclusion

For foreign companies with employees and projects in Israel, Operation “Roaring Lion” is not only a business continuity issue. It is a multi-disciplinary management issue that sits at the intersection of employment law, payroll, project delivery, client communication, tax relief, immigration, and financial reporting.

As of March 11, 2026, the cautious and accurate approach is not to describe the furlough outline as a fully implemented solution, but to work from the official position currently in force while actively managing employee rights, project delays, evidence, notices, and both local and group-level reporting impacts.

At AUREN Israel, we advise foreign companies, international groups, and overseas investors operating in Israel – or preparing to enter the Israeli market – through an integrated perspective of accounting, tax, payroll, and legal analysis. If your organization is currently dealing with workforce disruption, project delay, foreign experts, reporting obligations, direct damage, or financial reporting implications in Israel, this is the time to get coordinated local advice.

Ofir Angel
Chairman, AUREN Israel
International Tax | M&A | Due Diligence | Deal Structuring
Contact: [email protected]

Disclaimer: This article is intended as a general overview only and should not be relied on as a substitute for specific legal, tax, accounting, payroll, or other professional advice. Each matter depends on its particular facts and circumstances, and tailored advice should be obtained before making decisions or taking action.