Freelancers in Israel experience 100% freedom but have 0% financial security - opinion

A quiet but dramatic transformation is reshaping Israel’s labor market. More Israelis are leaving traditional jobs and turning to freelancing or self-employment.

Companies increasingly prefer freelancers over full-time employees, not only for flexibility but also because it’s cheaper. No need to pay for National Insurance, paid leave, or pensions. This has created an absurd situation: people performing essential, daily work are legally “independent” but lack protection.

Workers have become “personal brands,” managing income, insurance, and pensions alone and often facing long stretches without work. Israel’s economy may be advancing technologically, but for many, it feels like a step backward in social security.

Israel’s welfare system still assumes a worker is salaried, with pay slips, continuous employment, unemployment benefits, and paid leave. Yet as the share of freelancers grows, this assumption no longer fits. Self-employed workers pay nearly the same National Insurance rates as employees but receive far less in return, no unemployment pay, no sick days, no severance.

In 2024 alone, some 65,000 businesses shut down, compared with an average of 40,000 in previous years. A growing class of independent workers now lives on the edge, without stable income or financial continuity.

Former finance minister Avigdor Liberman tried to tackle this gap in 2022, proposing a national safety net for the self-employed. His plan included two key measures: mandatory pension savings for freelancers, adjusted to variable income levels, and a social security fund offering unemployment payments during business closures, economic crises, or national emergencies.

The proposal won broad support from self-employed organizations and advanced within the Finance Ministry, but was shelved after the government’s fall at the end of 2022. Since then, the issue has disappeared from public debate, while tens of thousands of freelancers continue to work without any security.

To meet the realities of the digital labor market, Israel must redefine what it means to be “self-employed” and create a new set of basic rights: unemployment insurance, an emergency fund, and paid sick leave. Models for such systems already exist in countries such as the Netherlands, Denmark, and the UK, where freelancers enjoy partial protections without losing flexibility.

The government should also encourage fairer hiring practices by offering tax breaks or grants to companies that sign long-term contracts with freelancers or voluntarily provide them with benefits. This would create a more balanced market, where maintaining relationships with independent workers becomes an incentive, not a burden.

The crises of recent years highlight the need for a national emergency fund for freelancers – not a loan mechanism, but direct, temporary aid that prevents collapse during war or economic disruption. Such a fund could be financed jointly by the government, labor unions, and self-employed associations.

Beyond financial tools, Israel must also invest in financial and insurance literacy from an early age. As traditional employment declines, schools and universities should teach basic financial management, pension planning, and small-business skills. The next generation of workers must learn not only how to work, but how to sustain themselves.

Artificial intelligence is transforming the labor market and blurring the boundaries between employer and employee. Yet one thing remains constant: the human need for economic security and belonging. If the state fails to adapt, Israel risks becoming a nation that is technologically advanced but socially unequal.

A thoughtful reform, introducing a safety net, employment insurance, mandatory pensions, and emergency funds for the self-employed can turn this challenge into an opportunity: building an economy that is both flexible and secure, innovative and fair for all.