Guide to employment, payroll and benefits in

Ethiopia

Rivermate offers complete payroll, benefits and compliance services for

Ethiopia

01. Overview

Last updated: 

August 19, 2021

Currency
Ethiopian Birr
Capital
Addis Ababa
Ease of doing business
48
Language
Amharic
Population
114963588
GDP growth
10.25%

02. Grow your team in

Ethiopia

with Rivermate

Payroll, benefits, taxes, and compliance can be difficult to manage in

Ethiopia

, particularly if you don't have established local relationships. You can hire employees in

Ethiopia

effectively, conveniently, and in full compliance with all relevant labor laws using Rivermate's global employment solution. We handle the responsibilities and legal risks associated with foreign employment so you can concentrate on growing your company.

03. Summary

Ethiopia is a landlocked country in the Horn of Africa, formally known as the Federal Democratic Republic of Ethiopia. It is bordered on the north by Eritrea, on the northeast by Djibouti and Somaliland, on the east by Somalia, on the south by Kenya, on the west by South Sudan, and on the northwest by Sudan. Ethiopia is the 13th most populous country in the world and the second most populous in Africa, with a total area of 1,100,000 square kilometers and a population of over 109 million people. Addis Ababa, Ethiopia's capital and largest city, is located several kilometers west of the East African Rift, which divides the country into the African and Somali tectonic plates. Ethiopian national identity is rooted in the traditional and contemporary positions of Christianity and Islam, as well as Ethiopia's independence from foreign rule, which dates back to ancient Ethiopian kingdoms. Ethiopia provides some of the earliest skeletal evidence for anatomically modern humans. It is generally assumed that it was from this area that modern humans first set out for the Middle East and beyond. Linguists believe that the first Afroasiatic-speaking peoples arrived in the Horn during the Neolithic period. Ethiopia's governing structure, which dates back to the second millennium BC, has been a monarchy for the majority of its existence. Oral history claims that the Kingdom of Aksum was established by the Solomonic dynasty of the Queen of Sheba, and that its first king, Menelik I, retained a unified culture in the region in the first centuries. During the late–19th-century Scramble for Africa, Ethiopia and Liberia were the only two countries to avoid long-term colonisation by a European co-op. Ethiopia developed its current boundaries during this period by conquering territory to the east, west, and south. Ethiopia was the first African country to join the League of Nations and the United Nations as an independent nation. Italy annexed the country in 1936, and it became Italian Ethiopia as part of Italian East Africa until 1941, when it was liberated during World War II. During Italian rule, the government abolished slavery, which had been practiced for centuries, and urbanization grew steadily. The Derg, a communist military government supported by the Soviet Union, overthrew Haile Selassie's long-standing Ethiopian monarchy in 1974. The People's Democratic Republic of Ethiopia was founded by the Derg in 1987, but it was overthrown in 1991 by the Ethiopian People's Revolutionary Democratic Front, which has been the dominant political coalition since then. Ethiopia is a multilingual country with about 80 ethnolinguistic groups, with the Oromo, Amhara, Somali, and Tigrayans being the four main. The majority of the population speaks Cushitic or Semitic Afroasiatic languages.

04. Public holidays

05. Types of leave

Paid time off

After one year of service, employees are entitled to 16 days of paid annual leave. After that, for every two years of service, employees receive one additional day per year.

Public holidays

Ethiopia observes the following public holidays:Eastern OrthodoxTimkatAdwa Victory DayGood Friday (Eastern)Orthodox EasterLabor DayPatriots’ Victory DayEid al-FitrDerg Downfall DayEid al-AdhaEnkutatashMeskelMawlid

Sick days

Sick leave is given to employees for a period of six months. Employees are paid 100% for the first month of their leave and 50% for the next two months. Any remaining sick leave is unpaid after that.

Maternity leave

Female employees are entitled to 120 days of paid maternity leave, with 30 days taken prior to the expected due date and the remainder taken after the birth.

Paternity leave

Employees who are fathers are entitled to three days of paid parental leave.

Parental leave

Other than the already mentioned terms regarding maternity and paternity leaves, there are no other provisions in the Ethiopian law regarding parental leave.

Other leave

06. Employment termination

Termination process

Employers may terminate an employee's employment contract with advance notice.

Notice period

The duration of the notice period is determined by the employee's length of service. Depending on the length of service, the notice period is usually one to two months. If an employee is fired for misconduct, no notice is necessary.

Severance pay

Severance pay begins at one month and increases by a third for each year of service; however, it cannot exceed the total annual wage. Dismissals for redundancy are governed by special rules.

Probation period

In accordance with the Labour Proclamation, a probationary period is the initial period of execution of an employment contract to test the suitability of a worker to the assigned position. Probationary must be declared in writing however it may not exceed 60 working days.

07. Working hours

General

The standard workweek is 40 hours, and the law requires eight hours of work per day or 48 hours per week. Daily hours may be increased if necessary during the week, provided they do not exceed 10 hours per day. Young employees are not permitted to work more than seven hours per day.

Additionally, employees are entitled to a consecutive 24 hours of rest each week. Sunday is the standard rest day, but workers may elect to work on another day if the nature of their job requires them to work on Sunday.

Overtime

Overtime hours are limited to two hours per day, twenty hours per month, or one hundred hours per year. Overtime is compensated at 125 percent of the basic wage, but may be higher depending on the duration of the overtime. Weekend overtime is double the standard rate, and public holidays are paid at a rate of 250 percent.

For specific industry conditions, the Ministry of Work and Social Affairs may make provisions for reduced work hours or other special arrangements.

08. Minimum wage

General

Ethiopia has no national minimum wage. Only the public sector has a minimum wage, which is around 420 birr ($22). Some government agencies also have their own minimum wage.

09. Employee benefits

General

The business must be a member of the social health system, and employers must provide health insurance for their employees. Employers contribute 11% of payroll to social security on behalf of their employees.

10. Why Rivermate as your Employer of Record / PEO?

Establishing an entity in

Ethiopia

to hire a team takes time, money, and effort. The labor law in

Ethiopia

has strong worker employment protection, requiring great attention to details and a thorough awareness of local best practices. Rivermate makes expanding into

Ethiopia

simple and effortless. We can assist you with hiring your preferred talent, managing HR and payroll, and ensuring compliance with local legislation without the hassle of establishing a foreign branch office or subsidiary. Our PEO and Global Employer of Record solutions in

Ethiopia

give you peace of mind so you can focus on running your business.

Please contact us if you'd like to learn more about how Rivermate can help you hire employees in

Ethiopia

via our Employer of Record / PEO solution.

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