Laws and Policies in Ethiopia

Employment Contracts in Ethiopia

Employment relationships are governed by the Ethiopian Labour Proclamation No. 1156/2019.

Mandatory Contract Requirements

Contracts must be in writing and include:

• Job title and duties
• Compensation and benefits
• Working hours
• Probation period
• Annual leave entitlement
• Termination terms
• Workplace location
• Overtime rules

Contract Types

• Indefinite-term (default and most common)
• Fixed-term contracts (allowed for project-based work or temporary roles)

Probation Period

• Maximum 60 days of probation.
• Must be specified in the contract.

An EOR ensures that all contracts follow the Labour Proclamation and are filed correctly with relevant authorities.

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Working Hours in Ethiopia

• Standard workweek: 48 hours
• Typical schedule: 8 hours/day, 6 days/week

Overtime

• Overtime is limited and must be paid at:
  • 125% of hourly wage for regular overtime
  • 150% for nighttime overtime
  • 200% on weekly rest days or public holidays

Rest Periods

• Employees must receive 24 hours of uninterrupted rest per week (usually Sunday).

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Employee Leave in Ethiopia

Annual Leave

• Employees receive 16 working days of paid leave after completing 1 year of service.
• Leave increases by 1 day for every additional 2 years of service.

Sick Leave

• Employee must provide a medical certificate.
• Up to 6 months of sick leave per year:
  • First month: 100% pay
  • Next 2 months: 50% pay
  • Last 3 months: unpaid

Maternity Leave

• 120 days total (30 days prenatal + 90 days postnatal)
• Paid at 100% of wages by the employer.

Paternity Leave

• 5 days of paid paternity leave.

Public Holidays

Ethiopia observes 13+ national holidays, including both Christian and Islamic festivals.

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Employee Benefits in Ethiopia

Mandatory Benefits

Ethiopian law requires mandatory contributions to social security via the Public Servants’ Social Security Agency or for private sector workers, the Private Organizations Employees’ Pension Fund.

Social Security Contributions

• Employer: 11%
• Employee: 7%
• Total: 18% of gross salary

Statutory Benefits Include:

• Pension coverage
• Disability benefits
• Survivor benefits
• Retirement benefits
• Work injury insurance

Common Additional Benefits

Companies often provide additional incentives:

• Transportation allowance
• Meal vouchers
• Medical insurance (private healthcare)
• Housing allowance
• Performance bonuses

Your EOR ensures all statutory and optional benefits are structured correctly.

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Payroll & Tax in Ethiopia

Payroll Currency

• Salaries are paid in Ethiopian Birr (ETB).

Payroll Cycle

• Typically monthly.
• Payslips must be provided with detailed breakdowns.

Employee Income Tax

Personal income tax is progressive, with brackets ranging roughly from 0% to 35%.

Employer Obligations

Employers must:

• Withhold income tax
• Submit social security contributions
• File monthly returns with the Ethiopian Revenues and Customs Authority (ERCA)

An EOR manages all registrations, filings, and payroll requirements.

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Employment Laws and Compliance in Ethiopia

Key Regulations

• Labour Proclamation No. 1156/2019
• Social Security Laws
• Occupational Safety & Health Directives
• Immigration and foreign worker rules

Termination Rules

Termination must comply with strict guidelines.

Notice Period:

• 1 month for employees with 1–9 years of service
• 2 months for more than 9 years
• No notice required during probation

Severance Pay:

• Paid for terminations without cause:
  • 30 days’ salary for the first year
  • +10 days per additional year of service
  • Capped by law

Unlawful dismissal can lead to reinstatement or compensation.

Non-Discrimination

The labor code prohibits discrimination based on:

• Gender
• Religion
• Political belief
• Ethnicity
• Disability

Workplace safety and employee rights are strictly regulated.