Employer of Record in Ethiopia

Ethiopia Employer of Record Solutions offers a comprehensive, technologically advanced HR platform to assist businesses in growing their operations in Ethiopia. The software serves as a centralised user interface for managing and onboarding remote teams in more than 150 different nations. 

Employer of Record Ethiopia solutions will guarantee 100% compliance with regional labour and employment rules, whether it is in the recruiting and recruitment of a skilled local staff or in the setup of the payroll to handle employee compensation and benefits. To learn more about our specialised EOR solutions, get in touch with us.

Overview of Ethiopia

• Population: 114.96 million (in 2020)
• Currency: Ethiopian Birr (ETB)
• Capital city: Addis Ababa
• Languages Spoken: Amharic, Oromo, Somali, Afar, and Tigrinya are Ethiopia’s official languages. The foreign language that is most often spoken and studied in schools is English. 
• GDP: USD 91.913 Billion (2019)

Employment Landscape in Ethiopia

Key Considerations Before Hiring in Ethiopia

Ethiopia is a landlocked nation that borders Eritrea, Sudan, South Sudan, Kenya, Somalia, and Djibouti. After Nigeria, it has the second-highest population density in Africa. Global corporations are drawn to Ethiopia’s excellent commercial possibilities and are trying to grow their operations there. 

The Labor Proclamation governs Ethiopia’s labour and employment legislation. Foreign nationals may remain and work in Ethiopia under the country’s immigration regulations with valid work and residency permits.

It can be challenging and intimidating to secure the permissions while adhering to local rules and regulations. Employing a localised Employer of Record might be quite advantageous for businesses expanding to Ethiopia in such a situation.

Learn more about how the services provided by Employer of Record Ethiopia reduce the risk of non-compliance and guarantee efficient hiring and onboarding of personnel. Here are a few crucial elements of Ethiopian employment.

Entitlements	Explanation
Standard Working Hours	48 hours per week
Overtime Eligibility	Employees may work overtime under certain conditions with mutual consent between the employer and the employee as follows: In a day 2 hours In a month 20 hours Annually 100 hours The following is how employers pay their workers for overtime: Unless it falls between 10 pm and 6 am, when it is paid at 150% of the base pay, overtime is paid at a rate of 125%. Weekend overtime is compensated at two times the usual rate and at 250% on public holidays. holiday.
Paid Public Holidays	The public holidays in Ethiopia are as followed: Ethiopian Christmas (January 07) Eastern Orthodox Epiphany (January 19 Adwa Victory Day (March 02) Ethiopian Good Friday (April 30) May Day/ Labor Day (May 01) Orthodox Easter (May 02) Patriot’s Victory Day (May 05) Eid al-Fitr (May 13) Derg Downfall Day (May 28) Eid al-Adha (July 20) Ethiopian New Year (September 11) Meskel (September 27) Moulid (October 19)
Holiday Pay	Employees are eligible for all paid public holidays, including memorial days and holidays observed by Muslims and Christians.
Medical Leave	The following employees are eligible for up to six months of sick time: 100% of their salary for the first month 50% of the salary for the following two months Unpaid sick leave is granted after three months.
Maternity Leave	In Ethiopia, female employees are entitled to 120 days of paid maternity leave, of which up to 30 days may be taken before the due date and the remaining days may be used after delivery. In Ethiopia, male employees are allowed up to three days of paternity leave.
Annual Leave Accrual Entitlement	16 days of paid annual leave are available to employees who have worked for the company for more than a year. After finishing, employees are given one extra day each year. two years of service
Leave Expiry	Employees are permitted to postpone a portion of their yearly leave with the employer’s approval. The leaves, however, cannot be postponed for more than two years straight.
Leave Cash Out	Only once the employment contract has expired may employees pay out their yearly leave. Any other agreement that offers payment in exchange for yearly leave is invalid.
Accrued Leave At Termination	Employees are entitled to comparable pay if their work contract terminates before they may use their yearly leave.
Employee Protection and Anti-discrimination Rights	According to the Ethiopian Constitution, everyone is treated equally under the law. Therefore, in accordance with the Labor Proclamation:  Every employee has a right to receive equal compensation for equal effort, and no employee may be subjected to wage discrimination. No employee should be subject to discrimination on the basis of race, color, sex, national origin, social origin, religion, political opinion, language, pregnancy, ancestry, marital status, or any other factor. Every person in Ethiopia is free to select their vocation.
Confidentiality of Personal Information	The Ministry of Innovation and Technology released a draft data protection proclamation, which has not yet been authorised. However, every Ethiopian has a right to privacy under the country’s constitution.

Full-time Employees Vs. Contractors

In Ethiopia, employment agreements can either be contractually based or full-time. Fixed-term employment contracts must outline the location of the workplace, the agreed-upon salary and benefits, the precise length of the agreement, and any additional particulars of the job, if applicable. Ethiopian employment rules and collective bargaining agreements must be complied with, and employment contracts cannot include any adverse clauses. 

Contractors, freelancers, or part-time employers are a less preferable option as they are not subject to the benefits provided to full-time employees nor do they bring financial security. This is true even though Ethiopia’s economy is rapidly improving. Full-time employees are treated as fully grown working adults and are given more respect. 

Employers must abide by Ethiopia’s HR compliance requirements if they want to hire workers there. Get in contact with us to discover how easy it is to hire the greatest personnel, whether on a full-time or contract basis.

Recruitment in Ethiopia

When employed in Ethiopia, it is crucial to adhere to the labour laws of the country. To begin the recruitment process, you can advertise job openings through local job portals like geezjobs, ethiojobs, and employethiopia

Once you have received applications, the next step is to shortlist suitable candidates and conduct personal interviews to assess their abilities. After finalising your selection, it is essential to provide comprehensive onboarding and orientation programs, introducing new hires to your company’s work culture and their future colleagues.

Complying with local labour laws also entails securing valid visas and work permits for international employees relocating to Ethiopia, ensuring their legal authorization to live and work in the country.

If you prefer to streamline the hiring process, consider utilising Employer of Record Ethiopia solutions. These services can handle HR management and compliance tasks on your behalf, allowing you to focus on other aspects of your international expansion.

Probation & Termination

The current Labor Proclamation, which was approved by the House of People’s Representatives in 2019, states that Ethiopia’s typical probationary term is 60 working days. Employers might evaluate a candidate’s suitability at this time. The probationary term must be specifically spelled out in writing in employment contracts and must be agreed upon by the employer and the employee.

Probation cannot be presumed if the employment contract does not contain a particular probation clause. In Ethiopia, either party may end the employment agreement at any time during the probationary period without having to give notice. The employment agreement is automatically deemed ratified when the predetermined probationary period has passed.

Only under the conditions indicated in the Labor Proclamation is the employment contract subject to termination. Both parties may terminate an agreement for the reasons listed below:

• expiration of the term of the agreement.
• death of the employee.
• The employee’s retirement.
• the inability to carry out the terms of the contract owing to a major event.
• Both parties have reached a consensus.

Serving a notice of termination is required in all circumstances, with the exception of those involving employee misbehaviour or persistently failing to perform work tasks after receiving earlier warnings. Employment contracts may be cancelled in certain circumstances with no prior notice.

The notice period varies as follows:

Notice for termination of Employment Ethiopia

The employment agreement may be terminated by either party by giving the other party 30 days’ notice. An employer has the right to end a worker’s employment by giving the following notice: Notice Period Period of Service Two months 1-9 months Three months Less than 9 years of service Two months Terminated due to reduction of the workforce

Any termination of an employment contract that does not follow the aforementioned clauses will be deemed illegal and may result in:

either the employee is reinstated in his or her previous position or the employee has the right to severance pay.

EOR Solution

Expansion of a business is a drawn-out process that needs careful preparation, particularly when doing it internationally. Although it is difficult and may take many months to complete, you may hasten the growth process by going the EOR way when employing staff in Ethiopia. Employer of Record Ethiopia (EOR) solutions may greatly simplify and speed up business development into Ethiopia. By managing employment duties for your employees in Ethiopia, such as monthly payroll, work permits, employment contracts, and taxation, our worldwide reach and a tech-enriched HR platform assure compliance with local labour rules

Types of Visas in Ethiopia

Except for citizens of Djibouti (up to three months) and Kenya (up to a year), all travellers must acquire an Ethiopian visa.

For any of your work visa needs, contact us.

Work Permits

The Ministry of Labor and Social Affairs issues Work and Residence Permits to foreign nationals moving to Ethiopia with the intention of working lawfully there and residing there for a prolonged length of time.

Visa Category	Explanation
Ethiopia Tourist Visa	issued to international visitors to Ethiopia who are not there on business.
Ethiopia Work Visa	It is given to foreign citizens travelling to Ethiopia for business. Based on the type of company, it is further divided into several sorts of work visas. International nationals who want to live and work in Ethiopia and who are employed by foreign-operated firms must apply for a Foreign Business Firm Employment Visa.
Ethiopia Work Visa Requirements	The following documents are required of international applicants for a Foreign Business Firm Employment Visa (WV): A recent passport-size picture. Passport that is current (for at least six months) An official letter from the organization inviting them, written to the Ethiopian Agency for Immigration, Nationality, and Vital Events. The inviting company’s TIN (Taxpayer Identification Number) Certificate and current business license. Employment Agreement
Processing Time	Three days (under normal circumstances)
Validity	Beginning on the anticipated date of entrance into Ethiopia, the business visa is valid.
Extension	Extension requests must be submitted before the deadline.

Payroll & taxes in Ethiopia

You must put together a team and take care of payroll management if you want to grow your business in Ethiopia. You have two choices for this:

• internal HR administration
• outsourcing payroll

It might take time and effort to establish an internal team for payroll and HR administration. It is further governed by a number of regional tax laws. Employer of Record Ethiopia services for payroll outsourcing makes tax and payroll compliance simple and hassle-free. 

Taxes in Ethiopia:

Employer Taxation

Tax Type	Rate
Income Tax Rates	Tax Base (in ETB) From Employment Tax % Up to 600 0% 601 – 1650 10% 1651 – 3200 15% 3201 – 5250 20% 5251 – 7800 25% 7801 – 10900 30% Above 10900 35%
Financial Year End Date	The fiscal year in Ethiopia starts on July 08 and ends on July 07 of the following year
Corporate Tax	30%
Withholding Tax	10%
Ethiopia employer payroll taxes/ Ethiopia payroll tax rates	20 percent tax with a deduction of 302.50 Birr
VAT	15%
Employers Social Security and statutory contributions	11% (civilian), 25% (military)
Employees Social Security and statutory contributions	7%
Public Pension	Employees aged over 60 are eligible for a pension with contributions of at least ten years.

Employee Taxation

Taxes	Explanation
Income tax on employment income	Progressive employment income tax rates are in place, with the top rate being 35% for income over 10,900 Birr ($402).

Bonuses

Bonuses are common in Ethiopia, but they are not necessary.

You might choose to open a local subsidiary firm, a branch office, or a liaison office while growing your company in Ethiopia. These organisations will supply the essential framework for your selected company operations, including internal operations like HR management.

You can take into account the following possibilities while establishing a distinct legal entity in Ethiopia:

1.Private Limited Company (PLC): Adhere to the prescribed procedure, which entails obtaining the Investment Permit Application Form, drafting the Memorandum and Articles of Association, submitting the application form to the Licensing and Registration Department with the supporting documentation, and meeting additional requirements like obtaining approval for the company name, opening a foreign currency bank account, and submitting the required photos and certificates. Following completion, you will be given a certificate of business registration in addition to an investment permit certificate.

2.Branch Office: Obtain the Investment Permit Application Form, complete it, and submit it to the Licensing and Registration Department with the parent company’s supporting documents and valid passports or investment/business visas. You’ll also need to open a foreign currency bank account and deposit the necessary share capital. Lastly, get the certificate for the investment permit.

It’s crucial to remember that, especially without local support, the process of forming a distinct legal organisation in Ethiopia can be laborious and take several months. Seizing the correct business opportunities as soon as they arise is essential since timing is a key aspect in international success. A fast and effective procedure for company development is made possible by Employer of Record Ethiopia services, which can handle all regulatory compliances linked to recruiting, recruitment, and employee payroll administration.