Definitive Guide to Hiring in Ethiopia

Hiring in Ethiopia

Hiring employees compliantly in Ethiopia means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Ethiopia so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Ethiopia; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Labor Laws in Ethiopia

Employment laws in Ethiopia are uniquely suited to the country’s way of life, and crucial to understand if you want to employ local talent in this country. Get the details on Ethiopia employment laws and Ethiopia policies here.

Employee Probation Period

• A probation period cannot exceed 60 days

Annual Leave in Ethiopia

• Workers are entitled to 16 working days of paid annual leave on completion of one year of service plus one working day for every additional year of service.
• For a worker with 5 years of service, the period of paid annual leave is 18 working days (one day extra for every two additional years of service).

Holidays in Ethiopia

Maternity Leave Ethiopia

• In accordance with the Constitution of Ethiopia and Labor Proclamation, female workers are entitled to fully paid maternity leave of 120 working days (30 days antenatal and 90 days postnatal) on the recommendation of a medical doctor.

Paternity Leave Ethiopia

• Fathers are entitled to 3 days of paternity leave

Sick Leave in Ethiopia

• An employee is entitled to a maximum of 6 months of sick leave within 1 year of service.

Work Hours in Ethiopia

• A regular work day is 8 hours and a regular workweek is 48 hours.

Overtime in Ethiopia

• Overtime rate is as follows
  • 150% of normal hourly rate for overtime work between 06 a.m. to 10 p.m.
  • 175% of normal hourly rate for overtime work between 10 p.m. to 06 a.m.
  • 200% of the normal hourly rate for work on a weekly rest day; and
  • 250% of the normal hourly rate for work on a public holiday.

Termination of Employment in Ethiopia

The following are sufficient grounds for the termination of a contract of employment with notice

• The worker’s manifested loss of capacity to perform the work to which he has been assigned or his lack of skill to continue his work,
• If the worker, for reasons of health or disability, permanently, is unable to carry out his obligations under the contract of employment,
• The worker’s unwillingness to move to a locality to which the undertaking moves,
• When the post of the worker is canceled for good cause and the worker cannot be transferred to another post.
• The notice of termination by the employer shall be handed to the worker in person.
• Where it is not possible to find the worker or he refuses to receive the notice, it shall be affixed on the notice board in the work place of the worker for ten consecutive days

Notice Period in Ethiopia

• Notice period ranges from one to three months based on the period of service of the worker.
  • One month in the case of a worker who has completed his probation and has a period of service not exceeding one year,
  • Two months in the case of a worker who has a period of service a above one year to nine years,
  • Three months in the case of a worker who has a period of service of more than nine years,
  • To months in the case of a worker who completed his probation and whose contract of employment is terminated due to reduction of work force.

Severance in Ethiopia

• The severance pay shall be:
  • thirty (30) times the average daily wages of the last week of service for the first year of service; for the service of less than one year, severance pay shall be calculated in proportion to the period of service;
  • in the case of a worker who has served for more than one year, payment shall be increased by one-third (1/3) of the said sum, provided that the total amount shall not exceed 12 month's wage of the worker;
  • where a contract of employment is terminated in accordance with section 24(4) and 29 of the labor code, the worker shall be paid a sum equal to sixty multiplied by his average daily wage of the last week of service.

Ethiopia Salary and Wages

13th / 14th Month Pay in Ethiopia

• No
• There is no statutory requirement to pay the 13th or the 14th month salary.
• Peculiarly Ethiopia does have a 13th month calendar as they follow a different calendar.
• It does not seem that it is customary for employees to receive any bonus payment around the festivities.

• The employer must contribute to the social security scheme on behalf of the employee at a rate of 11% of basic salary.
• The employee’s contribution is 7%.

Immigration Ethiopia

• Some of the main visas available in Ethiopia are as follows:
  • Tourist visa
  • Investment Visa
  • Foreign Business Firm Employment Visa – WV
  • Ethiopian Private Business Firm Work Visa – PE
  • Ethiopian Government Employment Visa – GV
• Tourist Visa: -
  • Tourist visa is an electronic single-entry visa issued by the Ethiopian Government for visitors who wish to travel to the country for tourism or other non-business related purposes only.
  • Copy of the following documents is mandatory.
  • Recent passport-size photo of the applicant.
  • Passport of the visa applicant which is valid for at least 6 months from the intended date of entry to Ethiopia.
  • Single entry tourist visa is valid up to 90 days starting from the intended date of arrival in Ethiopia.
• Investment Visa: -
  • This is a visa issued to foreign Nationals who are engaged in investment activities.
  • It can also be issued to potential investors who wish to come and invest in Ethiopia.
• Foreign Business Firm Employment Visa – WV
  • Foreign Business Firm Employment Visa is issued to foreign nationals who are entering Ethiopia to be employed by business firms owned/operated by foreigners.
• Ethiopian Private Business Firm Work Visa – PE
  • Private Business Firm Visa is issued to foreign nationals coming for employment or other short term assignments with Ethiopian private business firms.
• Ethiopian Government Employment Visa – GV
  • Government employment visa issued to foreign nationals to be employed by different Ethiopian Government institutions/ministries.

Value Added Tax (VAT) in Ethiopia

• VAT is levied on the supply of goods and services in Ethiopia, and on imports.
• Non-business organizations are exempt from charging VAT on services but are not exempt from paying VAT on services or goods purchased unless exempted by a relevant bilateral agreement.
• The standard VAT rate is 15%. Exports of goods and services are zero-rated.

Mandatory Benefits in Ethiopia

• These are mandatory benefits as postulated by law
• These include probationary period, annual leave, public holidays, sick leave, maternity leave, overtime pay, notice period, and severance pay
• Statutory benefits also include social security benefits

Payments And Invoicing

• The tax year runs from 8 July to the following 7 July.
• Each taxpayer must file a return.
• Spouses are not permitted to file joint returns.
• – A Pay-As-You-Earn (PAYE) system is used for employment income, under which the employer withholds tax on the individual’s wages.
• An individual is required to file within the month following the transaction, if he/she derives any other income from employment.

Payroll Accrual in Ethiopia

Country Accruals Additional Information

Description

If an employer contributes towards an employee’s pension, provident or other retirement fund, these contributions will be exempt from employment income tax as long as their total monthly contribution does not exceed 15% of the staff member’s monthly income.

Payroll Accruals Additional Information

Accrued Benefits in Ethiopia

Why use Global Expansion to hire in Ethiopia

Establishing a branch office or subsidiary in Ethiopia can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Ethiopia labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Ethiopia law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Ethiopia. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Ethiopia Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.