Israeli High-Tech Layoffs Surge in 2024 Amid AI Shift, Experts Advise on Stock Options

In 2024, Israel's high-tech sector has seen over 10,000 layoffs, driven largely by advancements in artificial intelligence, a trend dubbed "AI layoffs." Major companies affected include Wix (1,000 layoffs, mostly in Israel), Monday.com (630 layoffs, over half in Israel), Playtika (500 layoffs), Amdocs (3,000 layoffs globally, 300-400 in Israel), ZoomInfo (300 layoffs in Israel), and SentinelOne (250 layoffs). This wave reflects a global pattern impacting both Israeli and international tech firms.

A significant concern for laid-off employees is how to handle their stock options, which can be worth more than their salaries. According to Mudi Shapira, chief financial markets strategist at Bank Hapoalim, the value of "in-the-money" stock options held by Israeli tech workers was estimated at around 150 billion shekels at the end of last year, excluding private companies. Many firms are offering early vesting or extended exercise periods (from the usual 90 days to up to two years) to ease the impact on employees.

Legal and tax experts warn that employees should exercise their options promptly rather than leaving them vested but unexercised, as failure to do so can result in losing millions if the company goes public or is acquired. They also advise waiting two years from the option grant date before selling shares to benefit from lower capital gains tax rates (25%) instead of higher income tax rates (up to 50%) plus social security contributions.

Employers’ offers to extend exercise windows or accelerate vesting without prior tax authority approval may inadvertently increase employees’ tax burdens. However, employees can seek tax refunds or use external financing to exercise options if needed. Experts recommend laid-off workers contact their stock option trustees (such as Psagot Equity, EBI Capital, or Altshar) to understand their specific plans and financial requirements.

Additionally, employment lawyers encourage negotiating severance terms, including extended notice periods, continued benefits, and waivers of non-compete clauses. They stress the importance of participating in dismissal hearings to uncover any legal protections related to personal circumstances like pregnancy or military service. These steps can help soften the blow of layoffs amid the sector’s ongoing transformation.