Israel’s technology sector has been generating layoff headlines for months, but the workforce has barely moved. What is happening underneath is a reallocation of jobs from one half of the industry to the other.
A survey by the Israel Innovation Authority and consultancy Zviran, conducted in the second half of June among 210 tech companies employing roughly 130,000 workers — more than 80% of the sector’s employees — found the total number of tech employees virtually unchanged, with companies still recruiting in significant numbers.
During the first half of the year, the surveyed companies hired an average of 8% of their workforce while laying off 2.8% and seeing another 4.3% leave voluntarily. Hiring above 8% against departures near 7% produces churn, not contraction — a lot of people changing seats without the room emptying.
The wider labor market points the same way: about 18,000 vacancies were recorded in the tech sector against roughly 15,000 job seekers, and the number of people employed in high-tech rose about 7% in the first quarter, according to the Central Bureau of Statistics. Employment in technology positions passed 600,000 in that quarter, a jump that broke three consecutive years of slowing job growth, and Israeli tech companies raised $4 billion over the same three months.
The split beneath the aggregate is the actual story. Software companies are streamlining rapidly in response to the AI shift, while hardware companies keep expanding and recruiting — the most striking gap in the survey. Software firms are the ones finding that AI tools compress the headcount needed per unit of output. Hardware firms, including the defense-adjacent manufacturers now running at capacity, need physical labor that no model replaces.
The currency is doing its own damage. The strong shekel squeezes Israeli companies earning revenue in foreign currencies while paying salaries locally: 17.6% of companies that carried out broad layoffs and 28% of those that reduced hiring cited exchange rates as a direct factor. Israeli growth companies with international operations recorded higher layoff rates than the local development centers of multinationals — a distinction that separates firms carrying their own cost base from those funded out of a global parent’s budget.
The forward-looking numbers are notably weaker than the trailing ones. Almost 37% of tech companies expect hiring volume in the second half of 2026 to fall below the first half, up from 23% in the previous survey. Planned hiring dropped from 7.2% to 5.9%, while among companies planning company-wide layoffs the planned layoff rate climbed from 4.1% to 6.4%. The outlook for the rest of the year is considerably more subdued.
Innovation Authority CEO Dror Bin said the survey shows Israeli tech is not in decline but in the middle of a deep structural change, with overall employment holding despite the uncertainty the layoff wave has created.
Earlier readings support that framing. A December survey covering roughly 80% of the sector’s employees found only 5% of companies cited AI implementation as a reason for layoffs, and in most of those cases it was a contributing factor rather than the sole one. Efficiency measures were the main driver, cited by 26% of companies. The pattern the Authority described was a sector entering a more measured phase: fewer new jobs posted, lower voluntary turnover, and workforce adjustments increasingly made through layoffs rather than natural attrition.
Pay tells the same story about who is scarce. The average high-tech salary hit a record NIS 38,467 in March, up 4.3% year over year, with programming salaries reaching NIS 40,117 — even as headcount stayed flat. Companies hiring fewer people are still bidding hard for a narrower set of engineers.
Israel recorded $85 billion in tech exports, $84 billion in exits and nearly $15 billion raised during 2025. For anyone tracking the sector from abroad, the takeaway from Tuesday’s survey is that the headline layoff count has been a poor proxy for what the industry is doing. The jobs are moving, not disappearing — and the second half will test whether that stays true.
JBizNews Desk | Tel Aviv
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