Employer of Record & Payroll Services in Ethiopia

Expand seamlessly, hire talent compliantly, and streamline your payroll with Flexi Personnel Employer of record and payroll outsourcing solutions.

  • Ethiopia, located in the Horn of Africa, has a population of 120.3 million as of 2021. 
  • Gross Domestic Product (GDP) stands at $315 billion, with a growth rate of 5.8% as of 2023.
  • Foreign Direct Investment (FDI) contributes 2.2% to Ethiopia’s GDP.
  • The unemployment rate is relatively low at 3.7%, indicating a labor force engaged across various sectors.
  • Capital city: Addis Ababa.
  • Currency: Ethiopian birr.
  • Official language: Amharic. The country also has linguistic diversity, including Oromo, Afar, Somali, and Tigrigna, reflecting its rich cultural heritage.

Flexi Personnel EOR and Payroll Solutions in Ethiopia

In-Country Compliance

We ensure your business meets all Ethiopian labor laws, taxation, and employment standards, handling every aspect of employment and regulatory compliance.

Accurate and Compliant Payroll Management

Our employer-of-record payroll services guarantee accurate, timely salary payments and tax filings, adhering to Ethiopian laws for all statutory deductions and benefits.

Streamlined Recruitment

We manage the recruitment process end-to-end, from sourcing to hiring, ensuring you get the best local talent tailored to your business needs

Contract Issuing and Onboarding

Our service includes drafting compliant employment contracts and efficient onboarding, making new hires feel welcome while ensuring compliance with employment laws.

Expatriate Support

We provide visas, work permits, and relocation services when employing foreign nationals to simplify the transition for expatriates and their families.

Employment Contracts in Ethiopia

Employment contracts in Ethiopia are governed by the Ethiopian Labor Proclamation No. 1156/2019 and may include various employment agreements. Here are some common types of employment contracts that can be offered in Ethiopia:

Permanent Employment Contract:

  • This type of contract is offered to employees hired for long-term positions with no specific end date.
  • It outlines the terms and conditions of employment, including salary, benefits, working hours, and job responsibilities.

Fixed-Term Employment Contract:

  • Fixed-term contracts are used when an employer hires an employee for a specific period or project, with a defined start and end date.
  • These contracts may be renewed, but the total duration of consecutive renewals cannot exceed the maximum limit prescribed by the law.

Probationary Employment Contract:

  • New employees are offered probationary contracts to evaluate their suitability for a permanent position.
  • As per labor laws, the maximum probationary period for new employees is typically 60 days.

Temporary Employment Contract:

  • Temporary contracts are used for short-term or seasonal work.
  • They are subject to specific regulations and must comply with the Labor Proclamation’s provisions regarding temporary employment.  

Probation and Termination Terms in Ethiopia

  • The standard probation period is 60 working days, agreed upon in writing in the employment contract.
  • Without a defined probation clause, probation cannot be assumed.
  • During this probation period, either party can terminate the contract without notice.
  • Once the probation period ends, the contract is presumed confirmed.
  • Termination of the employment contract can only occur under specific conditions:
    • Contract expiration
    • Employee’s death
    • Retirement
    • Force majeure preventing contract fulfillment
    • Mutual agreement
  • Notice is mandatory for termination except in cases of employee misconduct or repeated job failures with prior warnings, where contracts can be terminated without notice

Working Hours and Employee Benefits in Ethiopia

Working Hours in Ethiopia 

The standard working hours for employees follow a 48-hour workweek, spread over six days. This means employees work eight hours a day. However, some working-hour variations may exist depending on the industry and the employer’s policies.

Employee Benefits and Leave

1. Medical Leave

  • Employees are entitled to up to six months of sick leave, with varying pay rates:
    • It will be 100% of their regular pay in the first month.
    • It will be 50% of their regular pay in the next two months.
    • Sick leave beyond three months is unpaid.

2. Maternity Leave

  • Female employees in Ethiopia receive 120 days of paid maternity leave.
  • Up to 30 days can be taken before the due date, with the remaining days available post-partum.

3. Paternity Leave:

  • Male employees in Ethiopia are entitled to up to three days of paternity leave.

4. Annual Leave Accrual

  • Employees with more than one year of service qualify for 16 days of paid annual leave.
  • An additional day per year is added after completing two years of service.

5. Accrued Leave at Termination

  • If an employment contract ends before employees can utilize their annual leave, they are entitled to proportionate compensation.

6. Holiday Pay

  • Employees are entitled to fully paid public holidays, including memorial and religious holidays (Christian and Muslim).

Taxes and Payroll in Ethiopia

Overview 

  • Currency: Ethiopian Birr (ETB)
  • Payroll Frequency: Payroll is typically processed every month.
  • Employee Costs: Employees are subject to a tax rate of 7%.
  • Capital: Addis Ababa
  • Fiscal Year: The Ethiopian fiscal year runs from 8 July to 7 July.

Employer Payroll Contributions

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

Employee Payroll Contribution 

Employee income tax 

Income Range (ETB)Tax Rate
Up to 6000.00%
601 – 1,65010.00%
1,651 – 3,20015.00%
3,201 – 5,25020.00%
5,251 – 7,80025.00%
7,801 – 10,90030.00%
10,901 and above35.00%

Minimum Wage in Ethiopia 

Ethiopia has no established national minimum wage. However, a recommended monthly wage of 420 ETB is suggested for the public sector.

Overtime Regulations in Ethiopia

  • Overtime applies when work exceeds standard weekly hours and is governed by collective labor agreements.
  • Maximum overtime limits are as follows:
    • 2 hours per day
    • 20 hours per month
    • 100 hours per year
  • Overtime compensation rates are based on the following criteria:
    • Overtime is paid at 125% of the basic salary rate, except between 10 p.m. and 6 a.m. when it’s 150%.
    • Weekend overtime is compensated at 200% of the basic salary rate.
    • Overtime worked on public holidays is remunerated at a rate of 250%.

Severance Pay in Ethiopia

  • Severance pay is determined by the duration of employment and is provided at the following rates:
    • 30 days’ pay at the regular salary rate for each year of service (pro-rated)
    • An additional 10 days’ pay at the regular salary rate for each subsequent year of service after the first year (with a cap of not exceeding 12 months’ wages)
  • In cases of termination due to redundancy, an extra 60 days’ pay at the regular salary rate is granted.

Visas and Work Permits in Ethiopia

When hiring non-national employees to work in Ethiopia, obtaining the appropriate business visa for your staff is essential. Ethiopia offers several types of business visas:

  • Foreign Business Firm Employment Visa: For short-term assignments, lasting up to one month, at non-national-owned companies.
  • NGO Work Visa: Designed for non-nationals invited by NGOs.
  • Conference Visa: Issued for attending conferences, seminars, and workshops in Ethiopia.
  • International Organizations/Embassies Work Visa: Intended for non-nationals employed by embassies or international organizations.
    Ethiopian Government Employment Visa: Applicable to nonnationals working for the Ethiopian government.
  • Investment Visa: Extended to potential investors upon invitation from a company.
  • Ethiopian Private Firm Visa: Suitable for short-term employment with Ethiopian-owned companies.
  • Government Institutions Short Task Visa: Granted to non-nationals entering the country on behalf of another government.

Why Choose Flexi Personnel EOR and Payroll Services

Dedicated Account Manager

YYou get a dedicated account manager for personalized service, ensuring seamless communication and quick issue resolution tailored to your business needs.

Real-Time Support

Our team offers real-time support to promptly address your inquiries and challenges, keeping your operations smooth and responsive.

Tailored Solutions

Flexi Personnel crafts customized EOR and payroll solutions to fit your unique business requirements, offering strategies that align with your specific goals.

15+ Years of Experience

Leverage our 15+ years of experience in EOR and payroll for informed, proven strategies and insights that cater to the intricacies of the Ethiopian labor market

No entity, no problem

Leverage us as a bridge hiring solution while you set up entities—or partner with us long-term and avoid entity setup altogether. As your employer of record, we take care of payroll, statutory benefits, and compliance so you can focus on growing your business

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