Engage In Ethiopia

Table of Contents

About Ethiopia

Capital City

Addis Ababa

Population

As of March 2024, the estimated population of Ethiopia is 126.5 million.

Currency

The currency in Ethiopia is the Ethiopian Birr (ETB). The currency symbol is Br.

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Overview

Ethiopia, a captivating country located in Eastern Africa, is a land of rich history, diverse cultures, and stunning landscapes. Stepping foot in Ethiopia feels like embarking on an adventurous journey, with its intriguing blend of ancient traditions and natural wonders. This enchanting nation, often compared to an Indiana Jones movie, holds a mystique that captures the imagination of travelers from around the world. From the majestic obelisks and plant-fronded palaces to the tales of ancient dynasties and claims of being the birthplace of humanity, Ethiopia is unlike any other destination. The capital city, Addis Ababa, is a juxtaposition of sophistication and disarray, where bustling blue taxis fill the streets, and grand squares invite exploration. Delving deeper, visitors can wander through the sprawling mercato, a labyrinthine market, or pay a visit to the National Museum, home to the famous ‘Lucy’, a hominid skeleton that once held the title of the earliest of its kind. With its traditional economic system and subsistence agriculture, Ethiopia showcases a unique way of life.

Employment Relationship

Permanent Employment

Employees who are hired for an indefinite term are considered permanent employees. All contracts are deemed to be for indefinite term unless they specify an end date or specific task. Permanent employees are hired to perform tasks that are regular and permanent in nature and are entitled to benefits under the labor code, including annual leave, sick leave, severance pay, and social security benefits.

Fixed-Term or Specific-Purpose Contracts

According to the Civil Code of Ethiopia, fixed-term employment contracts are contracts that expire at the end of the agreed duration or work. No notice is required to terminate such contacts unless otherwise agreed. Ethiopian Labor Proclamation No. 1156/2019 provides a list of circumstances under which a fixed-term contract may be formed. The duration of such an employment agreement is limited to five years, after which it is considered to be an indefinite term contract.

Temporary Employment Contratcs

According to the labor code of Ethiopia, a contract of temporary employment shall not exceed 45 consecutive days and can be agreed to only once in the following circumstances: The temporary replacement of a worker who has suddenly and permanently vacated from a post and who had a contract of an indefinite period The temporary placement of a worker to fill a vacant position in the period between the study of the organizational structure and its implementation Employers can use private licensed employment agencies for hiring temporary workers. Employment agencies are responsible for concluding a contract to ensure minimum working conditions are fulfilled and are not less favorable than those for the regular employees. Such agencies and employers are jointly responsible for the violation of the employment contract concluded with the workers.

Probationary Period

According to the Labor Proclamation of Ethiopia, an employee can be hired for a probationary period to test his or her suitability for the job. This period is limited to 60 days, and an agreement for a probationary period must be made in writing. An employee may not be subject to a probationary period in the same job twice.  If, during the probationary period, an employee is found to be unsuitable for the job, the employer can terminate the employment contract without notice and without obligation to pay any severance pay or any additional compensation. An employee, in turn, may also terminate the employment agreement without notice. If an employee continues to work after the probationary period, it will be included in his or her employment period.

Working Hours

Ethiopian labor law defines "normal hours of work" as the time during which employees perform work or prepare themselves for work in accordance with the law, collective agreement, or work rules. The standard workweek shall not exceed 48 hours a week or eight hours a day. Employees under the age of 18 must not be employed for more than 7 hours a day. Employees who work over 48 hours a week or eight hours a day are eligible for overtime compensation. Overtime may not exceed four hours in a day and 12 hours a week.

Holidays / PTO

Statutory Holidays

Public holidays are celebrated according to the Ethiopian (Julian) Calendar. It consists of 12 months of 30 days each and a thirteenth month of 5 days (6 days in leap year). Persons who work on public holidays are entitled to receive 2.5 times the amount of their regular wages. 

The following holidays are observed in Ethiopia:

  • Ethiopian Christmas - January 7
  • Epiphany - January 19 (January 20 on a leap year)
  • Victory at Adwa Day - March 2
  • Ethiopian Good Friday - date subject to change every year
  • Ethiopian Easter - date subject to change every year
  • Labor Day - May 1
  • Patriot's Victory Day - May 5
  • Eid al-Fitr - date subject to change every year
  • Derg Downfall Day - May 28
  • Eid al-Adha - date subject to change every year
  • Ethiopian New Year - September 11 (September 12 on a leap year)
  • Discovery of the True Cross - September 27 (September 28 on a leap year)
  • Mawlid - date subject to change every year

Paid Annual Leave

In Ethiopia, annual leave can be used for vacation or sick leave. An agreement by an employee to waive annual leave is null and void. Employees are entitled to annual leave as follows: 16 working days for each year of service, plus One day of additional leave for every two years of service If the length of service is less than one year, employees receive an amount of leave proportional to the time that they have worked. Employees are granted their first annual leave after completing the first year of service and are entitled to salary during the period of annual leave. An employee whose contract is terminated is entitled to payment for unused leave. Annual leave can be divided into 2 parts and postponed for 2 years if both the employer and employee agree. If an employee falls sick during the annual leave, it will be suspended, and sick leave shall commence. 

Sick Leave

Ethiopian labor law entitles employees to sick leave for up to 6 months upon completion of any probationary period. An employee is entitled to sick leave if he or she is incapable of working due to a sickness other than that resulting from an occupational injury. Employees must provide a valid medical certificate and notify the employer on the day following their absence. The six months can be used consecutively or separately in the course of any twelve-month period starting from the first day of sickness. Sick leave is paid as follows: 100% of wages during the first month of sick leave 50% of wages during the second and third months of sick leave Unpaid leave from the fourth until the sixth month

Maternity Leave

Under the Labor Proclamation of Ethiopia, female employees are entitled to fully paid maternity leave of 120 days (30 days pre-natal and 90 days postnatal) upon the recommendation of a medical doctor. If a pregnant employee does not deliver within 30 days of her pre-natal leave, she is entitled to additional leave until her delivery. If she gives birth before the 30 day period has elapsed, postnatal leave (90 days) commences after delivery. Female employees are also entitled to paid leave for medical examinations related to pregnancy and paid leave during pregnancy based on the recommendation of a medical doctor.

Paternity Leave

Under the Labor Proclamation of Ethiopia, fathers are entitled to three days of fully paid paternity leave. Paternity leave is 10 days for employees in public sector.

Termination of Employment

Notice Period

In Ethiopia, the notice of termination of an employment agreement must be in writing, specifying the reasons for the termination and the date on which it will take effect. The notice must also be handed to the employee in person. When this is not possible, it must appear on the notice board in the workplace for ten consecutive days. The obligations of the parties arising from the contract of employment shall remain intact during the period of notice. The notice period in Ethiopia depends on the length of service or the grounds for dismissal: One month for an employee who has completed probation and has a period of service not exceeding one year Two months for an employee with the service between one and nine years Three months for an employee whose period of service is more than nine years Two months for an employee whose probationary period is completed and the employment agreement is terminated due to a reduction of the workforce A period agreed upon by the parties for a contract of employment that is for a definite period or piece work

Severance Benefits

In Ethiopia, the Labor Proclamation provides for severance pay for a worker who has completed a probationary period. Severance pay amount depends on the length of service and is payable at the following rates: 30 days' wages for the first year of service (pro rata for workers employed for less than one year) 10 days' wages for every additional year of service after the first year, up to 12 months wages 60 days' wages are paid in addition to the above amounts to workers who are dismissed as a part of economic redundancy.

Social Security

Pension

A new private pension organization law, effective March 2022, requires all employees of private organizations enrolled in a private social security scheme before March 2022 to join the new pension scheme. The new law also: changes the definition of "private organization employee" exempts companies with a sole owner from the pension scheme discontinues inclusion of an employee's work period beyond the retirement age of 60 in their period of service for pension calculation purposes. Ethiopia has two separate laws for public and private organization employees. The retirement age for both categories of employees is 60 years with 10 years of service. All private organization employees are required to register their employees for the Private Organizations Employees Pension Fund within 60 days of the beginning of employment. Employee and employer contributions percentages are generally 7% and 11%, respectively, of monthly salary.  The pension amount is 30% of the insured's average monthly basic salary in the 3 years before retirement, plus 1.25% (civilian) or 1.65% (military and police) of the insured's average monthly basic salary for each year of contributions exceeding 10 years. The basic salary is the gross salary paid for work performed during regular hours. The maximum monthly old-age pension is 70% of the insured's average monthly basic salary in the 3 years before retirement. 

Dependents/Survivors Benefit

A new private pension organization law, effective March 2022, requires all employees of private organizations enrolled in a private social security scheme before March 2022 to join the new pension scheme, The amount of pension for survivors is as follows: A widow or widower will receive 50% of the pension to which the deceased was or would have been entitled.  A surviving child will receive 20% of the pension to which the deceased was or would have been entitled. If both parents are dead, 30% of the pension is paid to the child. A dependent parent will receive 15% of the pension to which the deceased was or would have been entitled. If there are no survivors other than the parents, the pension shall be 20%.

Invalidity Benefit

A new private pension organization law, effective March 2022, requires all employees of private organizations enrolled in a private social security scheme before March 2022 to join the new pension scheme. An employee who is assessed with an incapacity for any gainful employment and has at least 10 years of contributions qualifies for an invalidity pension (if under 10 years of contributions – for an invalidity gratuity). The recipient of an invalidity pension will receive 30% of the insured’s average monthly basic salary in the three years before the disability began plus 1.25% (civilian) or 1.65% (military and police) of the insured’s average monthly basic salary for each year of contributions exceeding 10 years is paid. For workplace injuries, permanent disability benefits are paid by the social insurance fund; employer contributions help fund these benefits. A permanently disabled insured employee will receive as a pension 47% of the last monthly basic salary before the disability began if he or she has an assessed degree of disability of at least 10% and is unable to work.

Taxation of Compensation and Benefits

Personal Income Tax

According to the Tax Proclamation of Ethiopia, residents are required to pay taxes on their income from sources in Ethiopia and abroad. Persons who are present in the country for more than 183 days in a tax year are considered residents. The tax year runs from July 8 through July 7 of the next year (1 Hamle to 30 Sene in the Ethiopian calendar).  The government collects tax from individual employees. It is paid either on a PAYE (pay-as-you-earn) system or PAYG (pay-as-you-go) system. PAYE is a payroll deduction system in which the tax is deducted from a person’s income when paid by the employer. PAYG is a system for businesses and individuals that allows paying installments of expected tax liability on their employment income, business, or investment for the current income year. Tax rates vary from 0% to 35% of the employment income per month.

Immigration

Types of Visas

Work Permit

Foreign nationals who wish to work in Ethiopia are required to obtain a work permit. It is issued for three years by the Ministry of Labor for a specific type of work and is renewed every year. Getting a work permit requires an application from the hiring organization and a recommendation letter from relevant governmental bodies and agencies. Work permits are issued based on the type of work for the permit being requested and upon providing appropriate educational and experiential documents. The requirements vary based on the employing organization.

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