Israeli technology companies are struggling to cope with the shekel’s appreciation below the 3-per-dollar level, warning of rising labor costs and a growing shift of jobs overseas.
The pressure is already driving firms to relocate roles in software development, QA testing and other engineering functions to Eastern Europe, India and even Latin America, where work is done remotely without employees relocating to Israel.
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The pressure is already driving firms to relocate roles in software development, QA testing and other engineering functions
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Executives across the sector are calling on the government to intervene, saying the current exchange rate is discouraging new hiring and the opening of new R&D centers in Israel. Some warn that if the trend continues, companies will prefer to expand abroad instead.
While a stronger shekel is generally seen as positive for consumers—potentially lowering import prices and airfare costs—it is widely viewed in the tech industry as a “tax on exports.”
“For startups, it’s a disaster,” said one industry executive. “We raise capital in dollars and generate revenue in dollars, but salaries are paid in shekels. That creates a major imbalance.”
According to calculations cited in the sector, a salary of 30,000 shekels previously cost about $8,500 when the dollar traded at 3.5 shekels. At current levels near 3 shekels, the same salary now costs roughly $10,000 in dollar terms.
Elad Arad, CEO of Arad Finance, said the situation creates a structural distortion. “On one hand, a strong shekel looks like good news for the economy, but in practice it’s a tax on high-tech exports,” he said. “It pushes companies to move work abroad rather than shut down operations.”
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Layoffs. The concern is growing and is currently reflected in a hiring freeze
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He said the trend is especially visible in development and QA roles. “Companies are keeping management in Israel but moving R&D elsewhere. It’s not layoffs—it’s non-hiring.”
Companies are increasingly turning to lower-cost labor markets such as Eastern Europe, India and Latin America for remote engineering teams.
A senior executive at a major cybersecurity company said budgets built around a 3.30 exchange rate are now significantly off target. “We’re 11% below plan and about 20% below last year’s conditions,” he said. “At the same time, office rent is up 21% and property taxes are up 26%. Israeli engineers are now 20% more expensive than American engineers just because of the exchange rate.”
“I’m an Israeli, a reservist, and I want to hire locally,” he added. “But today I’m expanding my team in the U.S., not Israel. I’m a business, I can’t operate on ideology alone.”
Executives are calling for government intervention, including targeted support for exporters, subsidies, tax relief and emergency measures to stabilize the sector.
“The high-tech industry accounts for roughly half of Israel’s exports,” the executive said. “We earn in dollars but spend in shekels. That gap is making us uncompetitive.”
Recruitment firms say hiring has not collapsed but is becoming more selective, with companies prioritizing efficiency and hybrid global teams.
Lital Yaron, CEO of iLeadx, said smaller companies are feeling the pressure most acutely. “We’re seeing optimization rather than layoffs,” she said. “Companies are restructuring teams and shifting roles abroad.”
Rinat Buchholz, CEO of Global Teams, said demand for outsourcing and AI-driven development is rising sharply. “We’re seeing a doubling of open offshore positions compared to last year,” she said. “Companies are building hybrid teams faster and more aggressively.”
Despite the shift, she said Israeli hiring remains the first priority when funding is raised. “But once local teams are built, companies expand abroad to scale efficiently.”
Alon Ben-Tzur, chairman of the High-Tech Association at the Manufacturers Association, warned of broader economic consequences.
“This is hitting the core of Israel’s export industry,” he said. “If the trend continues, it will lead to reduced hiring, relocation of activity abroad and long-term damage to competitiveness unless the government intervenes immediately.”