Payroll

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.

Working Hours

General

The standard workweek in Ethiopia consists of 8 hours per day and 48 hours maximum per week.

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%

Working Week

Monday-Friday

Leave

Paid Time Off

Employees are entitled to a minimum of 16 days of paid annual leave once one year of service has been completed.

The number of days increases by one additional day per year for every two years of service thereafter.

Public Holidays

There are 13 national holidays in 2022.

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 salary rate, the second month at 50% of the regular salary rate, and the remaining three months unpaid.

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

In Ethiopia, a father is entitled to unpaid paternity leave of up to three working days.

Parental Leave

There are no provisions in the law regarding parental leave.

Other Leave

Employees are entitled to 3 days of paid leave in the event of their marriage.

Employees are entitled to 5 days of unpaid leave for exceptional circumstances (e.g., bereavement).

Termination

Termination Process

Employers can terminate a fix term contract by giving the following reasons – business, personal, or employee misconduct. The notice of termination must be in writing, specify the reason for termination and be handed to the employee in person.

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 less 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 reduction of workforce.

Severance Pay

In Ethiopia, the Labor Proclamation provides for severance pay for any employee who has completed the probation period.

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 (as well as during the first year, when it will be pro-rated) of service (severance pay for workers with less than 1 year of service
• 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)

60 days at the regular salary rate in addition to the above payments for employees who are terminated on grounds of redundancy.

Probation Period

In Ethiopia, probationary periods must be no longer than 45 consecutive days

VISA

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

VAT

General

The standard rate of VAT in Ethiopia is 15%.