Ethiopia Employer of Record (EoR) Services

How Employer of Record (EoR) in Ethiopia Works

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Employment Contracts in Ethiopia

Although it is not required by law to offer a 13th pay or bonus, bonuses are typical in Ethiopia.
Wage is calculated on daily, hourly, weekly and monthly basis
Employers are not allowed to deduct wages except where it is provided by the law, a court order or a written agreement with the worker. The amount of deduction must not exceed one-third of the monthly wages of the worker.
In case the date of payment (where already decided) falls on a weekly rest day or public holiday, the wages are paid on the preceding working day. Wages may be paid in kind, but it may not be more than 30% of the wages paid in cash.
Probationary periods must be announced in writing and are limited to 60 working days.
Working Hours in Ethiopia

Working Hours in Ethiopia

48 hours every week. With mutual consent between the employer and employees, staff may work two extra hours per day, twenty hours per month, or one hundred hours annually during overtime.

Observed National Holidays and Vacation

The public holidays in Ethiopia are as follows:

Ethiopian Christmas (January 07)
Eastern Orthodox Epiphany (January 19
Adwa Victory Day (March 02)
Ethiopian Good Friday (April 30)
Labor Day (May 01)
Orthodox Easter (May 02)
Patriot’s Victory Day (May 05)
Eid al-Fitr 
Derg Downfall Day (May 28)
Eid al-Adha 
Ethiopian New Year (September 11)
Meskel (September 27)
Birthday of the Prophet Mohammed (Maulid).

Expats, Visas & Work Permits

Acquiring a work permit in Ethiopia is a swift process, especially compared to other government services. Obtaining a work permit from the Ministry of Labor and Social Affairs takes up to two days. To apply for a business visa, a foreigner can choose between the convenience of an online application or an in-person submission at the embassy or consulate.

Foreigners must note that obtaining a visa upon arrival is not permissible, necessitating careful preparation with all necessary documents before entering EthiopiaJoin us to acquire invaluable insights into the benefits of outsourcing to Africa, exploring the strategies, efficient management practices, and optimal scaling methodologies.

Elevate your operations and chart a course for sustainable growth in your business. An Ethiopia PEO/EoR offers this service to help businesses expand easily into the country.

Paid Leave

Annual Vacation/Leave : All regular full-time employees are eligible to receive 16 (sixteen) working days of paid annual vacation leave, plus 1 (one) additional working day of leave for each additional year of service.
Maternity Leave: female workers are entitled to fully paid maternity leave of 120 working days (30 days antenatal and 90 days postnatal). If a pregnant woman does not deliver within 30 days of antenatal leave, she is entitled to additional leave until she gives birth, but if she delivers before the 30 days period has elapsed, postnatal leave commences. 
Sick leave:
- One-month sick leave/year – full pay;
- Two months (2nd and 3rd months) – half pay; and
- Three months (4th, 5th, 6th months)- without pay.

Statutory Deductions

Social Security Contribution:

The contributions payable shall be based on the salary of the employee of the private organization in Ethiopia, and the calculation is as follows:

Employer’s contribution – 11% of BS;
Employee’s contribution – 7% of BS

Tax: Corporate tax rate is 30% while VAT is 15% .

Tax Amount (BS)

Up to 600
601 - 1,650
1,651 - 3,200
3,201 - 5,250
5,251 - 7,800
7,801 - 10,900
Above 10,900

Tax Rate (%)

Health Insurance

In Ethiopia, businesses are not required to offer health insurance to their staff members. Nonetheless, two public insurance programs are managed by the Ethiopian Health Insurance Agency (EHIA):

Social Health Insurance (SHI) is available to public, non-profit, and commercial organizations employees.
The Community-based Health Insurance (CBHI) program is primarily intended to support workers in the area who may not have other coverage.

An Ethiopia employer of record can help employers with the provision of health insurance policy for their employees.

Additional Compensation and Benefits

Overtime:
- Employers pay employees 125% of the basic wage for overtime.
- 150% of base wage when it occurs between 10 p.m. and 6 a.m.
- Paying overtime on weekends is double the regular pay.
- 250% of base wage on public holidays.
Transportation allowance: According to income tax proclamation N0 286/2002 and directive regulation No 78/2002, what is exempt from tax payable for employees is only up to 15% of the basic salary and in any circumstance the amount of transportation allowance exempted from tax must not be more than 600 Birr.

Termination/ Severance in Ethiopia

Termination: Where a contract of employment is terminated, wages and other payments connected due to the worker shall be paid within seven working days from the date of termination; provided, however, that the time of payment may be extended where the worker delays, because of his own fault, to return property or any sum of money which is due to the employer.
- One month notice for workers who have completed their probation and have worked for a year
- Two months for those who have served for one to nine years
- Three months for those who has served for more than nine years
- Two months for an employee whose employment is terminated due to workforce reduction.
Notice: 
An employer may terminate a worker’s employment agreement by complying to the following notice period:
Severance: The following rates are applicable for severance pay, which is determined by the length of service:
- Thirty days’ wages for workers of one year in service (including the first year);
- Ten days’ wages for each additional year of service beyond the first year
- Sixty days’ salaries in addition to the payments as mentioned earlier for employees laid off due to staff reduction.
- Note: severance pay for workers with less than one year of service is calculated proportionately to the service period.
- If an employer terminates a contract unlawfully, he/she shall be liable to a fine not exceeding Birr 1200 (Birr one thousand and two hundred).