Effortless Hiring in Ethiopia

Employment Contracts

• Employment contracts in Ethiopia must be in writing and should clearly outline essential terms such as:
• Job responsibilities.
• Compensation.
• Working hours.
• Leave entitlements.
• While oral contracts are permissible, written contracts are highly recommended to prevent disputes. The Labour Proclamation No. 1156/2019 governs employment relationships and provides a comprehensive framework for employer and employee rights and obligations.

Probationary Period

• Employers may implement a probationary period not exceeding 60 working days. During this period, either party can terminate the employment with a minimum notice period of five working days.

Payroll Frequency

• Employees are typically paid on a monthly basis, with the specific pay date agreed upon in the employment contract. Employers must provide itemized pay statements detailing wages and any deductions.

Minimum Wage

• Ethiopia does not have a national minimum wage for the private sector. However, for the public sector, there is a recommended minimum wage of 420 Ethiopian Birr (ETB) per month. Certain sectors, like industrial parks, have set their own wage levels; for instance, workers in industrial parks earn a minimum wage of approximately 750 ETB per month.

Overtime

• Standard working hours are typically 8 hours per day and 48 hours per week. Overtime is compensated at the following rates:
• 125% of the normal hourly rate for work between 6 AM and 10 PM.
• 150% for work between 10 PM and 6 AM.
• 200% for work on a weekly rest day.
• 250% for work on a public holiday.

Employee Contributions

1. Pension Scheme: Employees contribute approximately 7% of their gross salary to the National Social Security Authority (NSSA) pension scheme.

Employer Contributions

1. Pension Scheme: Employers also contribute approximately 11% of the employee's gross salary to the NSSA pension scheme.
2. Social Security Contributions: Employers contribute to various social security funds supporting employee benefits.

Income Tax

• Ethiopia employs a progressive income tax system with rates ranging from 0% to 35% depending on income levels. Employers are responsible for withholding the appropriate amount from employees' salaries and remitting it to the Ethiopian Revenue and Customs Authority (ERCA).

Types of Leave in Ethiopia

1. Annual Leave

• Employees are entitled to 16 working days of paid annual leave after completing one year of service, with an additional day granted for each additional year of service.

2. Public Holidays

• Ethiopia observes 13 public holidays each year. If an employee is required to work on a public holiday, they are entitled to compensation at 250% of the normal hourly rate.

3. Sick Leave

• Employees are entitled to a maximum of six months of paid sick leave within one year of service. The first month is paid at full salary, followed by two months at half pay, and the remaining three months without pay.

4. Maternity Leave

• Female employees are entitled to 120 working days of fully paid maternity leave, comprising 30 days antenatal and 90 days postnatal, as recommended by a medical doctor.

5. Paternity Leave

• Fathers are entitled to three consecutive days of paid paternity leave following the birth of their child.

Social Security Benefits

• Contributions to the NSSA pension scheme provide employees with retirement benefits, disability benefits, and survivor's pensions.

Health Insurance

• While not mandated by law, some employers offer health insurance as part of their employment package.

Notice Period

• The required notice period for termination depends on the length of service:
• Less than one year: one month
• One to five years: two months
• More than five years: three months

Severance Pay

• Employees with at least one year of service are entitled to severance pay upon termination calculated as follows:
• 30 days' wages for the first year of service
• For each additional year, an additional one-third of the monthly wage.

Dismissal Procedures

• Employers must have valid grounds for termination, such as misconduct or incapacity. The termination process must comply with the Labour Proclamation, including providing written notice and settling all dues.