7 things to consider before expanding to Egypt

Known throughout the world for its rich history, Egypt is also full of potential business opportunities. With a USD 303 billion-GDP that keeps growing, it also boasts a labour market of more than 24 million potential employees. And the best is yet to come: Egyptian universities reached record enrolment rates for years 2019 and 2020, thanks to affordable tuition fees that attract students from various countries such as Malaysia, Indonesia and Nigeria.

This bright financial future coupled with an educated, emerging workforce, is a recipe for success if you plan on expanding to Egypt. You might, therefore, wonder: how do I tap into this strong potential? The key is to master the local labour landscape, its laws and regulations. Here are the most important things you need to know before expanding to Egypt:

1. Employment contracts are strictly regulated

In order to protect employees, probation periods, by law, are allowed for any time frame under 3 months. Past this duration, a probation period cannot be extended.

The same applies to fixed-term contracts, which are allowed for a maximum period of 5 years.

Should the employee still hold the same position after that period, the renewal of the agreement (then becoming an indefinite-term contract) would be automatic.

It is also important to note that, in Egypt, an employment contract’s validity is subject to a number of criteria, namely (among others):

• It needs to be in writing
• It should spell out all terms of employment, from salary to termination
• Salaries and other forms of remuneration should preferably be stipulated in Egyptian pounds.

   

2. Termination must be justified, and employees must be given notice

In Egypt, the act of dismissing an employee cannot be taken lightly. Indeed, any dismissal must be justified by valid reasons, and prior notice must always be given to the employee. Those having under 10 years of service are entitled to 2 months’ notice, whereas those having over 10 years of service are entitled to 3 months’ notice. Even in case of a grave fault, the employee must be given a fair investigation, a right to make representations, and a notice of termination.

Wrongful terminations can cost employers a compensation of two months’ wages per year of service as a penalty.

3. Work days normally last 8 hours

The statutory maximum working time is 48 hours per week for a 6-day week. Any additional hours should be compensated by overtime pay.

4. Employees are allowed time off during Ramadan

Approximately 90% of the Egyptian population is of Muslim faith. Key elements of this religion are therefore adopted, both as a matter of law and as a matter of practice, into the work culture.  The law requires employers to give any employee with over 5 consecutive years’ service additional paid leave for a period of one month for a pilgrimage. The practice also accommodates religious requirements by allowing employees time to attend prayer on Fridays. Ramadan is also a very important time, during which many offices choose to have shorter hours to free employees for prayer.

As fasting is particularly demanding, allowing employees to work shorter hours also shows that the company cares for them, and in practical terms, renders the workday, albeit shorter, more productive.

5.   There are 3 types of leave in Egypt

Apart from 12 public holidays per year, workers are, by law, entitled to 3 types of paid leave:

• Vacation leave is given for a period of 21 days; except for employees who have completed over 10 consecutive years’ service and employees over the age of 50, who are entitled to 30 days.
• Sick leave is given for up to 6 months, provided a medical certificate is presented to the employer. As far as compensation goes, 75% of wages are paid for the first 3 months, and 85% of wages are paid for the rest of the period.
• Maternity leave is granted for a period of 3 months. However, as a matter of practice, women are only eligible for maternity leave twice over a period of 5 years.

6. Taxes are paid by the employer

In Egypt, employees’ income tax is deducted at source. This implies the need for employers to levy those taxes from the monthly salary and pay them directly to the relevant authorities. Failure to pay those taxes on time will accrue penalties at a minimum rate of 2%. This is why many foreign companies who choose to expand in Egypt often elect to delegate the strategic task of payroll to a specialist.

7. The State has the legal duty to insure Egyptian citizens

A citizen’s right to be insured is protected by the Egyptian Constitution. Social security, therefore, provides all employees with insurance coverage for old age, disability, death, sickness, occupational accidents, and pension.

How can Africa HR help?

When planning for expansion, the list goes on. You have the option to decide on how to proceed: whether to set up your own legal entity or choose an Employer of Record that will facilitate your implementation and adaptation.

How about insuring non-citizens? Or complying with regulations when working with independent contractors?

Africa HR has helped many companies in their expansion journey across Africa. With experts in domestic law and efficient compliance mechanisms, our teams are here to handle the hassle of onboarding, offboarding, HR, and compliance to let you focus on growing your business.