The upward trend of salaries in Israel’s technology industry has been continuing, even since the beginning of the war, despite a slowdown in recent months. But when it comes to granting options to employees, the picture is quite the opposite. A study conducted by Altshare for Globes found that the number of options distributed by technology companies in 2024 fell by 76% since 2021. Altshare, which controls 40% of the options market in Israel, found that in 2024 the company distributed more Of the 31 million options, about half the number distributed in 2023.
An option is a benefit that a company offers to its employees, allowing them to buy its shares at a fixed and known price after a period of time, such as one or two years. Options are seen as encouraging employees to invest their full energy in the company and work there for a long period of time. An option that allows, for example, a $1 stock to be purchased at a price of only $0.10, creating a profit of $0.90 per share for those employees. When a company is sold or goes public, employees immediately receive shares — a bonus on top of their salaries.
As for salaries, on the other hand, there is a noticeable upward trend. Between October 2023, when the war broke out, and October 2024, salaries in the technology sector rose 4.7% to a monthly average of NIS 30,915. There were 398,200 paid jobs in the technology industry in Israel in October 2024, an increase of 0.6% from October 2023, although a slight decrease from September 2024.
Return to a balanced market
The biggest hit, in terms of options received, was suffered by those working in enterprise software — down 86% between 2022 and 2024; Even more surprising, for cybersecurity employees, the number of options received decreased by 90% between 2023 and 2024. The only industry currently seeing a rebound in the volume of options distributed is Media & Entertainment, with a rise of over 400%, mainly due to the recovery of the Israeli gaming and gaming app industry.
“Rising interest rates, especially in the US, and the slowdown in the high-tech industry in the past two years have also led to a significant decline in the number of options distributed,” said Ronen Solomon, founder and CEO of Altshare. “In 2021, companies reached the maximum payroll they can Paid it to employees, made a lot of money selling shares (secondary deals) to investors, and many options were distributed to attract them to work in these companies A healthy and balanced market, where people sit at home for a few days looking for work and do not move from a job To another.”
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According to Solomon, foreign investors’ concern about increasing investments in Israel has also led to a decrease in the number of jobs in this field, resulting in a limited distribution of options. “Global companies are reducing or freezing their operations in Israel, Israeli unicorns are moving more jobs abroad, and in addition, fewer startups were founded in Israel last year. 80% of companies founded by Israelis were registered directly in Delaware State.
The research is based on the volume of options, not their value. Companies that implemented “segmentation,” thus artificially increasing the number of options per employee, were not included in the research.
The largest number of options distributed over the past four years was in the field of enterprise software, where 113.5 million options were distributed. Cybersecurity came in second place with 105 million. In last place came industrial technology and energy, with only 14.5 million options distributed. According to Solomon, the explanation for this is that AI programmers work in the software market and have experience that helps maintain their value.
The cybersecurity industry was one of the strongest industries in Israel last year, with private companies raising 40% of the total capital invested in private technology companies in 2024, according to IVC, LeumiTech and RISE Israel. Therefore, the significant decline in the number of options distributed by cybersecurity companies needs an explanation. “Apparently, not many new programmers have joined the cybersecurity industry, so compared to 2023 or 2022, there was no need to give so many options,” says Solomon. “In any case, it is possible that many of them will be allocated options for four years.” years in those years, so they didn’t need to have options allocated to them in 2024.”
Altshare also examined the frequency with which options are distributed to employees, regardless of their number or value. Here too, there has been a gradual decline in the last four years, although there has been an amazing increase in the fintech sector compared to 2023. Apparently, due to the boom in the cryptocurrency sector and the insurance sector, but perhaps also due to the size of the market: the number of fintech companies In Israel it is large compared to other sectors.
At the same time, additional taxes on the rich rise
The decrease in the distribution of options coincides with an increase in the additional tax from 3% to 5%. “Employees will have to pay 30% at checkout, which is already very high,” says Solomon. “Raising the tax rate does not matter to employers, but the employee is already thinking about whether moving to the US, for example, will help with taxes, because every expense there is tax deductible – including housekeeper expenses and mortgage interest.” “So the net tax is lower.”
However, the requirements for exercising options are more stringent in the United States. There, whether there is a way out or not, employees must pay the tax out of their own pockets. In Israel, an employee who wishes to exercise options when conditions are met will be able to sell shares and pay capital gains tax of only 25% – a low rate compared to the maximum income tax of 47%. In the United States, every employee with options must pay taxes when the exercise period vests, even if they do not sell the stock. In Israel, more than half of technology companies and startups offer optional benefits at NIS 0.01 to their employees. An employee who wishes to exercise the option, upon maturity of the terms, will be able to do so free of charge, without paying taxes.
Published by Globes, Israel Business News – en.globes.co.il – on January 12, 2025.
© Copyright Globes Publisher Itonut (1983) Ltd., 2025.
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