Ethiopia Employer of Record (EOR) & Payroll

Ethiopia Employer of Record & Payroll

Africa Deployments Ethiopia offers our clients Africa Employer of Record (EOR) & Payroll services covering all of the regions within. We offer full-time employment or fixed terms contracts based on your requirements in Ethiopia for locals only. Unfortunately, Human Resources are not permitted to employ Expatriates in Ethiopia. ADS will also advise our client’s on the best Human Resource (HR) practices when setting up employees locally in Ethiopia.

ADS as the Ethiopia Employer of Record takes care of the local tax & PAYE remittances to the Revenue Services on a monthly basis ensuring that they are fully compliant with the law. We will also ensure that their salaries are paid on time monthly and issue them with their pay slips. Work with a trusted Africa Employer of Record who understands the challenges in Africa.

In addition to our services, we can offer the employee in Ethiopia, Medical, Disability, Life, and Workmen’s Compensation insurance.

Ethiopia, in the Horn of Africa, is a rugged, landlocked country split by the Great Rift Valley. With archaeological finds dating back more than 3 million years, it’s a place of ancient culture. Among its important sites is Lalibela with its rock-cut Christian churches from the 12th–13th centuries.

Population

120.3 million (2021)

Currency

Ethiopian Birr

Capital

Addis Ababa

Language

Amharic/Oromo/
Somali/Tigrigna

GDP

111.3 billion USD (2021)

Industries

Agriculture and Textile

What is the main language spoken in Ethiopia:

The official language of Ethiopia and a widely used lingua franca is Amharic.

Being multilingual, Ethiopia’s population of ±123 million can be broken down linguistically as follows:

Oromo speakers – ±33%
Amharic speakers – ±29%
Somali speakers ±6%
Tigrinya speakers ±5%
Sidama speakers ±3.5%
Other – 23.5%

What type of employment contracts can you offer in Ethiopia:

Through our employer of record (EOR) solutions in Ethiopia, we can offer the following types of employment contracts:

Fixed Term
Indefinite term

Contracts and Offer Letters must:

Be in writing
Be in the official local language and the local currency
Include salary/compensation, benefits and termination requirements

Full-time Employees:

Have specific working terms and conditions
Can be eligible for organizational perks and/or other benefits
Tend to be more focused [as only one employer] and familiar with the specific business – due to e.g. ongoing company training etc.
Probationary period is 2 months [maximum] – used to be 45 consecutive days maximum

WHAT INCOME IS TAXABLE IN Ethiopia:

Any individual who works and lives in Ethiopia for more the 183 days a year will be subject to local taxes in Ethiopia. The Corporate Person maintains a principal office, the effective management of the company or the company is registered by the Ministry of Trade and Industry in Ethiopia.

What income is exempt from taxes in Ethiopia:

A Transport Allowance is allowable and tax-free up to a monthly amount of 2,200.00 Birr or 25% of the employee’s salary if the work requires the individual to travel
Employment income up to 600.00 Birr
Pension
Amounts covered by the employer for hardship, medical treatment etc…
Transport expenses, per diem payments while traveling for work assignments

Standard working hours: Number Overtime to be paid?

Standard workweek in Ethiopia: 8 hours per day, 48 hours maximum per week
Overtime regulations:
- Overtime is paid for work exceeding standard working hours
- Regulated by collective labor convention/agreement
- Maximum overtime allowed:
  - 2 hours in any one day
  - 20 hours in any one month
  - 100 hours in any one year
Overtime compensation:
- Overtime paid at 125% of basic salary rate, except between 10 p.m. and 6 a.m. (150% rate)
- Weekend overtime paid at 200% of basic salary rate
- Overtime on public holidays paid at a rate of 250%

Mandatory contributions?

Employee

Contribution Type	Contribution Rate	Threshold
Social Security Fund (CNaPS)	8%	None
National Health Insurance Fund (CNAM)	1.5%	None
National Pension Fund (CNAPS)	2%	Monthly Salary

Employer

Contribution Type	Contribution Rate	Threshold
Social Security Fund (CNaPS)	11%	None
National Health Insurance Fund (CNAM)	3%	None
National Pension Fund (CNAPS)	0.7%	Monthly Salary

Social

Contribution Type	Contribution Rate	Threshold
Social Security Fund (CNaPS)	4.5%	3.5 I %
National Health Insurance Fund (CNAM)	1.5%	None
National Pension Fund (CNAPS)	None	2%

What is the Maternity and Paternity policy within Ethiopia:

Maternity leave

30 consecutive days of leave with pay preceding the presumed date of delivery and 60 consecutive days of leave after her confinement.

Paternal leave:

3 consecutive days paternity leave
Subject to the birth of the child happening on the assigned days

What type of leave is allowed in Ethiopia:

Annual leave

14 working days for the first one year of service. 14 days plus 1 working day for every year of service.

Sick leave

Cannot be more than six months counted consecutively or separately over a 12 month period starting from the first day of sickness. First month 100% payment of wages. Next two months with 50% of wages. Next three months without pay.

Do I need to pay a mandatory bonus annually OR is it discretionary in Ethiopia:

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

What Gratuity / Severance payments do you need to provide for Ethiopia:

Before employing your employees in Ethiopia, it is always advisable to understand your risk from an employment perspective. Unfortunately, nothing is guaranteed and in the event that you need to terminate for a valid reason, we always suggest that you know what you are in for in the unlikely event you need to terminate. Below are the types are terminations in Ethiopia: Notice period:

Calculated based on length of service and employment type
Can be from ±1 month to 3 months
Generally:
- 1 month for an employment period from probation up to 1 year
- 2 months for an employment period from 1 year up to 9 years
- 3 months for an employment period of 9 years or more
Prior written notice required

Severance [economic reasons]:

Employees generally entitled to:
- 30 days at the regular salary rate for 1^styear of service (pro-rated)
- 10 days at the regular salary rate for every additional year of service after the 1^st year
- Total severance pay must not exceed 12 months’ salary

CAN YOU GIVE FRINGE BENEFITS IN Ethiopia:

Yes, you can but keep in mind that Fringe Benefits will be subject to employee PAYE tax. Only benefits that cannot be converted to cash will not be subject to tax.

Mandatory Probation period of Ethiopia?

3 months for an employee who has a period of service of more than 9 years. 2 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.

Is 13th month pay (Bonus) mandatory?

Not mandatory, applicable as per contract.

What are the Corporate and VAT / Sales tax rates in Ethiopia:

Corporate Tax Rates: 30% [in general]

VAT / Sales Tax Rates: 15% [on most goods and services]

Public Holidays in Ethiopia:

January 7 - Ethiopian Christmas
January 19 - Orthodox Epiphany
March 02 - Victory of Adwa
April 14 - Ethiopian Good Friday
April 16 - Ethiopian Easter
April 22 - Eid al-Fitre
May 01 - Labour Day
May 05 - Patriots' Victory Day
May 28 - Downfall of the Derg
June 29 - Eid Al Adaha
September 11 - Ethiopian New Year
September 27 - Meskel
September 27 - Moulid

What Industries we support in Ethiopia:

Non-Governmental Organization’s (NGO) / Non- profit
Engineering & Construction
Government / Development Agencies
Oil & Gas
FMCG & Manufacturing
Private Equality, Finance, Insurance & Banking
Mining
Agriculture

The information provided above is for an “informative decision” and may change at any given time without prior notice. We always suggest speaking to one of our Sales Consultants before engaging in country.