Payroll and Benefits Guide Ethiopia

Employer

Employer Payroll Contributions

Employee

Employee Payroll Contributions

Employee

Employee Income Tax

General

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

Payroll Cycle

The typical payroll cycle in Ethiopia is monthly.

13th Salary

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

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%

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%

Working Week

Monday-Friday

Paid Time Off

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

There are 12 days of 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.

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

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

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.

General

The standard rate of VAT in Ethiopia is 15%.