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Payroll and Benefits Guide Ethiopia

Last updated: May 03, 2023

Currency
Ethiopian birr (ETB)
Employer Taxes
Unknown
Payroll Frequency
Monthly
Employee Costs
7%
Capital
Addis Ababa
Date Format
dd/mm/yyyy
Fiscal Year
8 July - 7 July
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Contribution

Employer
Employer Payroll Contributions
11.00% 
Public/Private Sector Pension Fund
(contributions are only required for local workers)
11.00% 
Total Employment Cost
Employee
Employee Payroll Contributions
7.00%
Public/Private Sector Pension Fund or Military and Police Service Pension Fund
7.00%
Total Employee Cost
Employee Income Tax
0.00%
Up to 600 ETB
10.00%
601 ETB – 1,650 ETB
15.00%
1,651 ETB – 3,200 ETB
20.00%
3,201 ETB – 5,250 ETB
25.00%
5,251 ETB – 7,800 ETB
30.00%
7,801 ETB – 10,900 ETB
35.00%
10,901 ETB and above

Employer taxes

Highest
Lowest

Employee taxes

Highest
Lowest

Minimum Wage

General

There is no national minimum wage in Ethiopia, however for the public sector there is a recommended 420 ETB per month.

MINIMUM WAGE (PER MONTH)

Highest
Lowest

Payroll

Payroll Cycle

The typical payroll cycle in Ethiopia is a monthly basis.

13th Salary

There is no statutory requirement to provide a 13th salary, however bonuses are common in Ethiopia.

Authority Payments

Authority Payment

Due Date

Method

Ethiopian Revenues and Customs Authoirity

25th of the following month

Bank transfer

Ethiopian Revenues and Customs Authoirity Taxes

25th of the following month

Bank transfer

Working Hours

General

The standard workweek in Ethiopia consists of 8 hours per day and 48 hours maximum per week.
The Ethiopian government introduced Public Servants’ Pension (Amendment) Proclamation 907/2015. This was in contrast to Proclamation 714/2011, which defines a public servant as a ‘monthly salaried person employed permanently or for a definite period or piece of work in a public office, public enterprise, or project or program carried out by government’ (Proclamation 907/2015: 8287). The main purpose of the Amendment was to recognize temporary government employees (those employed for at least 45 days) as public servants.

Overtime

All work exceeding the standard working hours a week is to be paid as overtime and is regulated by a collective labor convention/agreement. Overtime is only permissible for a maximum of:

  • 2 hours in any one day
  • 20 hours in any one month
  • 100 hours in any one year

Employers compensate the employees for overtime as follows:

  • Overtime is paid at 125% of the basic salary rate unless the overtime takes place between 10 p.m. and 6 a.m. when it is 150%
  • Weekend overtime is paid at 200% of the basic salary rate
  • Overtime worked on a public holiday is paid at a rate of 250%

Leave

Annual Leave (vacation)

Employees are entitled to a minimum of 16 working days of paid annual leave following the completion of one year of service. The number of days increases by 1 additional day per year for every two years’ service thereafter.

Upon request, unused leave can be carried over for a period of up to 2 years.

Public Holidays

Certain religious holidays are determined by the lunar cycle and will show as tentative until the exact date is confirmed nearer the holiday.

 

Date Day Holiday Notes
7 Jan 2024 Sunday Ethiopian Christmas Day
20 Jan 2024 Saturday Epiphany / Timkat
2 Mar 2024 Saturday Adwa Victory Day
10 Apr 2024 Wednesday Eid al-Fitr Tentative
1 May 2024 Wednesday International Labor Day
3 May 2024 Friday Ethiopian Good Friday
5 May 2024 Sunday Fasika
5 May 2024 Sunday Patriots’ Day
28 May 2024 Tuesday Derg Downfall Day
17 Jun 2024 Monday Eid al-Adha Tentative
11 Sep 2024 Wednesday Ethiopian New Year
16 Sep 2024 Monday The Prophet’s Birthday Tentative
27 Sep 2024 Friday Meskel

Sick Days

An employee is entitled to up to six months of sickness absence per year, with the first month paid at 100% of the regular pay, the second and third months at 50% of the regular salary rate, and the remaining three months unpaid.

A medical certificate should be provided for sick leave above 1 to 3 days.

Maternity Leave

Female employees are entitled to 120 working days of paid maternity leave in Ethiopia, with no less than 30 consecutive days of leave prior to the due date and 60 days following the birth.

Maternity confirmation certificates must be provided before any maternity leave can commence.

Paternity Leave

A father is entitled to paid paternity leave of up to three working days.

Parental Leave

There are no provisions in the law regarding parental leave.

Other Leave

Marriage Leave – Employees are entitled to 3 days of paid leave in the event of their marriage
Special Leave – Employees are entitled to 5 days unpaid leave for exceptional circumstances e.g. bereavement

Vacation Days
Public Holidays
Highest
Lowest

PAID MATERNITY LEAVE (DAYS)

Highest
Lowest

Termination

Termination Process

The contract of employment may not be terminated in the absence of a justified reason. Justified grounds for termination include the expiration of the agreed period of employment, completion of the specified task, insolvency of the employer, if the worker becomes partially or permanently unable to perform his or her contractual obligations, or by mutual agreement.

Notice Period

The statutory notice period given by the employer must be:

  • One month for an employee who has completed the probation period and has a period of service not exceeding one year.
  • Two months for an employee who has a period of service above one year but fewer than nine years.
  • Three months for an employee who has a period of service of more than nine years.
  • Two months for an employee who has completed the probation period and whose contract of employment is terminated due to a reduction of workforce.
  • No notice is required during the probation period.
  • Workers can generally terminate the contract of employment giving prior notice of 15 days).

Severance Pay

The amount of severance pay depends on the length of service and is payable at the following rates:

  • 30 days at the regular salary rate for one year of service (pro-rated)
  • 10 days at the regular salary rate for every additional year of service after the first year (however, the total severance pay must not exceed 12 months’ wages)

In addition to the above, 60 days at the regular salary rate are paid in cases of termination on grounds of redundancy.

Probation Period

Probationary periods are 60 working days.

VISA

VISA

A foreign national must have a work permit to undertake any type of work in Ethiopia. A work permit for employees of foreign investors is issued for a specific type of work by the Ethiopian Investment Commission (EIC). The work permit is subject to renewal every year. One of the grounds considered by the EIC in determining whether to grant a work permit or to renew the same is the unavailability of the workforce locally having the required skill and experience for the position.

Residence permits are issued by the Ethiopian Immigration, Nationality and Vital Events Agents. A work permit is one of the mandatory requirements for applying to get a temporary residence permit. Residence permits are typically issued within two business days after the application is submitted and can take up to five days in exceptional cases.

VAT

General

The Standard rate of VAT in Ethiopia is 15%.

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Questions & Answers

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George
George
1 year ago

Did the National Bank in Ethiopia pay the foreign employees’ annual leave in US dollars or Birr?

If By Birr, The Contract; THe Salary, and the benefits mentioned in USD, how I get the Birr out of Ethiopia

Enny Shmurin
Admin
Enny Shmurin
14 days ago
Reply to  George

Unfortunately, this is a unique case and we cannot advise on this matter. We recommend directly contacting your employer and the bank.

YESHEWA
YESHEWA
9 months ago

HOW CALCULATE YEARLY BONUS TAX

Enny Shmurin
Admin
Enny Shmurin
9 months ago
Reply to  YESHEWA

A bonus is taxed the same way as salary.

Milli Deneke
Milli Deneke
6 months ago

is overtime tax-payable
?

Enny Shmurin
Admin
Enny Shmurin
6 months ago
Reply to  Milli Deneke

Yes, overtime is subject to taxation as wages.

Habtamu Abebe Nigatu
Habtamu Abebe Nigatu
3 months ago

I have served for about over 25 years. Can you calculate my severance pay?

Enny Shmurin
Admin
Enny Shmurin
2 months ago

Hello, unfortunately, we are unable to provide advice on individual personal statuses.

abeba desta
abeba desta
1 month ago

is there an income tax and pension cut for contract employees? if so is it the same as the full time workers?

Enny Shmurin
Admin
Enny Shmurin
14 days ago
Reply to  abeba desta

Independent contractors are responsible for paying their own income taxes (up to 35%); they are not enrolled in the Social Security/Pension scheme.

lee
lee
23 days ago

can we ask severance pay if we leave with our accordance after working for more than five years

Enny Shmurin
Admin
Enny Shmurin
7 days ago
Reply to  lee

This question lacks specificity, making it difficult to provide a clear answer. In Ethiopia, an employee is entitled to severance pay depends on the terms specified in their employment agreement. Unlikely if its a resignation scenario.

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Payroll and Benefits Guide in Ethiopia

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Download this guide to read later

Payroll and Benefits Guide
in Ethiopia

What’s covered in this guide:

  • Employer/employee contributions
  • Minimum wage
  • Working hours
  • Visa requirements

And more...

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All questions are answered by our in-house compliance department working in conjunction with our local in-country partner for this specific country

Public Holidays Calendar

Ethiopia
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PDF
ICS
Date Day Holiday Notes
7 Jan 2024 Sunday Ethiopian Christmas Day
20 Jan 2024 Saturday Epiphany / Timkat
2 Mar 2024 Saturday Adwa Victory Day
10 Apr 2024 Wednesday Eid al-Fitr Tentative
1 May 2024 Wednesday International Labor Day
3 May 2024 Friday Ethiopian Good Friday
5 May 2024 Sunday Fasika
5 May 2024 Sunday Patriots’ Day
28 May 2024 Tuesday Derg Downfall Day
17 Jun 2024 Monday Eid al-Adha Tentative
11 Sep 2024 Wednesday Ethiopian New Year
16 Sep 2024 Monday The Prophet’s Birthday Tentative
27 Sep 2024 Friday Meskel