Ethiopia Country Facts

We provide comprehensive information regarding, Culture, Work life, Taxation, Visa’s & immigration, Labour Law, recruiting in your country of choice and employment contracts.

Global Expansion Made Easy for You

Expanding into Ethiopia generally comes with challenges, however, partnering with us and using Employer of Record (EOR) eliminates the frustrations you could encounter.

What Types of Work Visas and Permits for Ethiopia are there?

All visiting nationalities can apply for their e-Visa online (Tourist Visa VT) and receive it within three days and sooner with their ‘urgent’ and ‘super urgent’ service. Check out the steps on the following link:

These visas allow stays of 30 or 90 days with possible extensions either through the online process or for longer by visiting the immigration department. Kenya and Djibouti nationals do not require a visa, as applies to many diplomatic passport holders; other African countries can receive a ‘Visa on Arrival’ but check first.

All foreigners with or without a visa, who intend to stay for more than 90 days, should register and apply for a Residence Permit within 30 days of arriving. However, there is a special arrangement with Kenya whose citizens can reside for up to a year, without having to apply.

Passports have to be valid for six months from the day of entering Ethiopia.

Main Visas

Visa are divided into two categories. Although there are different periods of visa validity, from one month for single-entry visas to 12 months for multi-entry, each trip is limited to 90 days. The processing time for all visas is around three days under normal circumstances. Fines for overstaying are issued daily (around US$10) and have to be paid before leaving Ethiopia.

Tourist Visa.

  • Tourist E-Visa applied for online. This can be used for family visits, medical treatment, sports or cultural events or any other reason not including ‘business activities’ whether paid or unpaid. Options include the single-entry 30- or 90-day visa, or a multi-entry visa, valid up to six months giving maximum stays of 90 days. Extensions are available either online or from the immigration office in Ethiopia
  • Transit Visa. When travelling to other countries via Addis Ababa Bole airport, a Transit Visa is not required providing travellers stay within the designated area, allowed for a maximum 12 hours. However, leaving the airport while waiting for flights requires applying for a transit visa at the airport or from an Ethiopian embassy before travelling

Business Visas

People going to Ethiopia with a Business Visa and who have children, should apply for the tourist visa for them.

  • Ethiopian Private Firm Work Visa (PE) for foreigners going to Ethiopia for employment or short-term projects with Ethiopian private companies
  • Foreign Business Employment Visa (WV) for foreigners who enter for employment with registered companies, owned or operated by foreign nationals; for instance, transferees or seconded staff from overseas parent company or those going to work for foreign ‘investing’ companies
  • Journalist Visa (JV) applied for at a local embassy, no appointment required. This is a single-entry 30-day visa for media personnel with no extension available
  • Investment Visa (IV) for potential investors and foreigners participating in investment activities. Available either online or through embassies and consulates abroad. Available as a 30-day single-entry visa or multi-entry visa for three, six or 12 months with extensions available online or through immigration offices
  • Ethiopian Government Employment Visa (GV) for foreigners employed by government organisations / ministries / institutions
  • Ethiopian Government Institutions Short Task Visa (GIV) issued to foreigners for short term work for government departments, either as a single or multi-entry up to six months with the option for an extension
  • NGO Work Visa (NV) issued through invitation for short term projects or employment with Non-Governmental Organisations
  • International Organisation Work Visa (RI) issued to foreigners invited by international organisations or embassies
  • Conference Visa (CV) for people with invitations from certain international organisations or governmental, educational, private sector companies for conferences, workshops, or seminars

Note: As of July 2023, here is no Digital Nomad Visa. Generally, the Tourist Visa is applied for, and applicants must stay within its limitations and restrictions. There is also no specific Retirees Visa, instead a Residence Permit is applied for, and it depends on applicant’s financial means whether it is granted.

What Types of Work Visas and Permits for Ethiopia are there?

All visiting nationalities can apply for their e-Visa online (Tourist Visa VT) and receive it within three days and sooner with their ‘urgent’ and ‘super urgent’ service. Check out the steps on the following link:

These visas allow stays of 30 or 90 days with possible extensions either through the online process or for longer by visiting the immigration department. Kenya and Djibouti nationals do not require a visa, as applies to many diplomatic passport holders; other African countries can receive a ‘Visa on Arrival’ but check first.

All foreigners with or without a visa, who intend to stay for more than 90 days, should register and apply for a Residence Permit within 30 days of arriving. However, there is a special arrangement with Kenya whose citizens can reside for up to a year, without having to apply.

Passports have to be valid for six months from the day of entering Ethiopia.

Main Visas

Visa are divided into two categories. Although there are different periods of visa validity, from one month for single-entry visas to 12 months for multi-entry, each trip is limited to 90 days. The processing time for all visas is around three days under normal circumstances. Fines for overstaying are issued daily (around US$10) and have to be paid before leaving Ethiopia.

Tourist Visa.

  • Tourist E-Visa applied for online. This can be used for family visits, medical treatment, sports or cultural events or any other reason not including ‘business activities’ whether paid or unpaid. Options include the single-entry 30- or 90-day visa, or a multi-entry visa, valid up to six months giving maximum stays of 90 days. Extensions are available either online or from the immigration office in Ethiopia
  • Transit Visa. When travelling to other countries via Addis Ababa Bole airport, a Transit Visa is not required providing travellers stay within the designated area, allowed for a maximum 12 hours. However, leaving the airport while waiting for flights requires applying for a transit visa at the airport or from an Ethiopian embassy before travelling

Business Visas

People going to Ethiopia with a Business Visa and who have children, should apply for the tourist visa for them.

  • Ethiopian Private Firm Work Visa (PE) for foreigners going to Ethiopia for employment or short-term projects with Ethiopian private companies
  • Foreign Business Employment Visa (WV) for foreigners who enter for employment with registered companies, owned or operated by foreign nationals; for instance, transferees or seconded staff from overseas parent company or those going to work for foreign ‘investing’ companies
  • Journalist Visa (JV) applied for at a local embassy, no appointment required. This is a single-entry 30-day visa for media personnel with no extension available
  • Investment Visa (IV) for potential investors and foreigners participating in investment activities. Available either online or through embassies and consulates abroad. Available as a 30-day single-entry visa or multi-entry visa for three, six or 12 months with extensions available online or through immigration offices
  • Ethiopian Government Employment Visa (GV) for foreigners employed by government organisations / ministries / institutions
  • Ethiopian Government Institutions Short Task Visa (GIV) issued to foreigners for short term work for government departments, either as a single or multi-entry up to six months with the option for an extension
  • NGO Work Visa (NV) issued through invitation for short term projects or employment with Non-Governmental Organisations
  • International Organisation Work Visa (RI) issued to foreigners invited by international organisations or embassies
  • Conference Visa (CV) for people with invitations from certain international organisations or governmental, educational, private sector companies for conferences, workshops, or seminars

Note: As of July 2023, here is no Digital Nomad Visa. Generally, the Tourist Visa is applied for, and applicants must stay within its limitations and restrictions. There is also no specific Retirees Visa, instead a Residence Permit is applied for, and it depends on applicant’s financial means whether it is granted.

Taxation in Ethiopia is based on the Federal Income Tax Proclamation, with additional Proclamations applying regulations to other areas of taxation.

Key Tax and Labour Authorities in Ethiopia

The Ethiopian Customs and Revenue Authority (ECRA):  The ECRA is responsible for collecting revenue from customs duties and domestic taxes. It also implements measures to combat smuggling, tax evasion and avoidance.

The Ministry of Labour and Social Affairs (MOLSA):  The Ministry includes the Employment and Peaceful Industrial Relations Directorate and the Overseas Employment and Workers Safety Directorate.

The Confederation of Ethiopian Trade Unions:  The CETU is affiliated with the World Federation of Trade Unions. The CETU has around three quarters of a million members, but is considered to be largely controlled by the government. The Labour Relations Decree of 1952 authorised trade unions.

Overview of Taxes in Ethiopia

Figures are given in Ethiopian birr (ETB) with equivalents in euros and US dollars.

  • Personal Income Tax (PIT): Monthly income up to ETB 600 (€10, US$11) is exempt. There are six further bands from ETB 601 up to 35% on the excess over ETB 10,900 (€178, US$198). For those on PAYE payroll a deductible amount applies to each band as tax relief
  • Corporate Income Tax (CIT): The headline rate is 30%, applying to both resident and non-resident entities and persons. A rate of 25% applies to companies licensed to operate in mining or petroleum sectors
  • Withholding Tax (WHT): Applies at 10% on dividends paid to resident companies and on technical services fees paid to non-resident entities. Royalties paid to residents and non-residents are taxed at 5%, with 4% applying to interest on deposits paid to resident companies
  • Capital Gains Tax (CGT): A rate of 15% applies to immovable assets such as building and warehouses, with 30% applying to shares and bonds
  • Value Added Tax (VAT): The standard rate is 15%
  • Customs and Excise Duties: Rates vary between 10% and 35% depending on the Harmonised Commodity and Description Coding System. Excise rates range between 5% up to 500%, on such as vintage motor vehicles
  • Stamp Duty: Applies to Memorandum and Articles of Association, bonds and property deeds for example, at rates of 0.5%, 1% and 2%
  • Sur-tax: Most goods imported to Ethiopia attract Sur-tax at 10% on the aggregate of value of the commodity, customs duty, VAT and excise tax

Note: There are no taxes on net wealth, inheritance, estates, gifts or property.

Personal Income Tax in Ethiopia

Figures are in Ethiopian birr (ETB), with equivalents in euros and US dollars.

Personal monthly income tax rates for individuals
Income | % Tax on Excess | Monthly Deductible Fee*
Up to ETB 600 (€10, US$11) | 0%
Excess up to ETB 1,650 (€27, US$30) | 10% | ETB 60 (€1, US$1.10)
Excess up to ETB 3,200 (€52, US$58) | 15% | ETB 142.50 (€2.30, US$2.60)
Excess up to ETB 5,250 (€86, US$95) | 20% | ETB 302.50 (€5, US$5.50)
Excess up to ETB 7,800 (€127, US$142) | 25% | ETB 565 (€9, US$10)
Excess up to ETB 10,900 (€178, US$198) | 30% | ETB 955 (€15.50, US$17.30)
Over ETB 10,900 | 35% | ETB 1,500 (€24.50, US$27)

* Note: For those on PAYE payroll a monthly deductible ‘fee’ applies to each band as tax relief.

Individual Tax Rules in Ethiopia

  • The tax year runs from July 8 until July 7
  • Individuals whose entire income is on payroll are not required to file tax returns, as these are submitted by their employers on a PAYE basis
  • Taxable income includes salary, wages, bonuses, commission and any other remuneration; fringe benefits up to a maximum 10% of the salary income; profits from business and investments
  • Taxable income also includes any severance payment received on termination of employment, for whatever reason
  • Individuals are tax residents if they have a home within Ethiopia; stay in Ethiopia for a total of 183 days, continuously or occasionally, in a 12-month period; are an Ethiopian citizen who is a consular, diplomatic or similar official posted abroad
  • Residents in Ethiopia are taxed on worldwide income, non-residents on income sourced in Ethiopia at the same percentage rates on income

Employers’ and Employees’ Social Security and Statutory Contributions in Ethiopia

Contributions are deducted from payroll by the employer for remittance to the Public Social Security Services Agency (PSSSA).

International companies expanding their global operations need to establish a subsidiary in Ethiopia in order to efficiently and legally hire staff and run the payroll for their new entity in one of East Africa’s leading economies. The African Development Bank (ADB) is confident Ethiopia’s economy will grow by 6% into 2024, which would put it back in its pre-COVID place among the world’s 10 fastest-growing economies.

Ethiopia was Africa’s seventh largest economy in 2022 with nominal Gross Domestic Product of 126 billion US dollars, and the second largest in East Africa. Ethiopia’s government aims to attract higher levels of Foreign Direct Investment with a programme of privatisation and by liberalising the finance sector.

The ADB’s 2023-27 Ethiopia Strategy Plan targets increased industrialisation in the agriculture sector. Other areas to attract international companies are industrial parks, green energy, the rapidly-growing IT and digital sector, mining and real estate.

Companies attracted by this potential, typically take the option of opening a limited liability company as a subsidiary in Ethiopia.

But … there is a better choice. The most practical and financially secure route into the Ethiopian economy avoids the reels of red tape involved in opening a subsidiary … and Bradford Jacobs has the expertise to avoid the bureaucracy. Our Professional Employer Organisation (PEO) teams and Employer of Record (EOR) consultants will guide you through every step – from recruiting staff to managing every legal aspect of compliance. Instead of waiting up to six weeks, you and your staff can be up-and-running in days … and you can be confident your employees always remain under your daily operational control.

How to set up an Ethiopia Subsidiary

Business entities in Ethiopia operate under the Companies Code, as revised in 2021. Procedures and requirements generally include the following:

  • Provide authentication of the parent company and register the unique company name of the subsidiary with the Ministry of Trade and Industry. The name must have the suffix ‘LTD’
  • Provide notarised copies of the foreign parent company’s Articles and Memorandum of Association and its registration document
  • The business and investment licence for the subsidiary is obtained from the Ethiopian Investment Commission (EIC)
  • Obtain the company’s Tax Identification Number (TIN) from the Ethiopian Customs and Revenue Authority (ECRA)
  • Provide Memorandum and Articles of Association to the MTI
  • The Documents Authentication and Registration Office (DARO), part of the Ministry of Justice, verifies the subsidiary’s documentation and the head office lease agreement
  • Obtain the registration certificate from the MTI after creating the Company Seal
  • Register with the ECRA for Value Added Tax
  • Register the company and employees with the Private Organisation Employees’ Pension Fund (POEPF)
  • Register with the Public Social Security Services Agency (PSSSA)
  • Open business bank account

What are the Benefits of setting up a Subsidiary in Ethiopia?

The subsidiary operates in Ethiopia as a legal entity entirely separate from the parent company, which is free from responsibility for the subsidiary’s legal or financial liabilities. The subsidiary has an independent governance structure and its own shareholders, directors, managers and officers.  Generally, the shareholders bear no responsibility for the subsidiary’s debts or liabilities. The subsidiary can undertake new business initiatives unrelated to the parent company’s activities, and operates under Ethiopia’s Companies Law.

Establishing a subsidiary in Ethiopia opens opportunities for the parent company to explore new markets outside its regular economic activities. The subsidiary opens the potential to enter into agreements with other registered companies in Ethiopia, as well as throughout the promising East African region. Also, the permanency of a subsidiary has greater credibility with clients and suppliers compared with branches. Unlike with a subsidiary, parent companies are responsible for the branch’s operations and its liabilities, as branches are legally an extension of the parent company. Also, in order to open a branch or representative office, the parent company must first obtain permission from the Ethiopian Investment Commission (EIC).

But … setting up a subsidiary in Ethiopia is still a long journey compared with taking the most efficient and financially sensible route into the economy.

Let Bradford Jacobs locate top-rated talent for your company in Ethiopia, through our in-country Professional Employer Organisation (PEO) specialists. Employees can be working at their desks and screens in days … not weeks or months. We remove all concerns regarding employment laws and compliance. Our Employer of Record (EOR) teams handle the hassle … while you have day-to-day operational control over your workforce.

Subsidiary Regulations in Ethiopia

The subsidiary operates under Ethiopia’s Companies Code, which was revised in 2021.

Registration and Documentation:

  • Reserve a unique company name for the subsidiary with the Ministry of Trade and Industry and authenticate the name of the foreign parent company
  • Provide notarised copies of the foreign parent company’s Articles and Memorandum of Association and the registration document
  • Draw up Articles and Memorandum of Association of the subsidiary
  • Have the company documents and the head office lease agreement verified at the Documents Authentication and Registration Office (DARO), which is part of the Ministry of Justice
  • Create the Company Seal and obtain the registration certificate from the MTI
  • Register the subsidiary and employees with the Private Organisation Employees’ Pension Fund (POEPF)
  • Register with the Public Social Security Services Agency (PSSSA)

Accounts and Taxation:

  • Apply to the Ethiopian Customs and Revenue Authority (ECRA) for a company Tax Identification Number (TIN)
  • Register with the ECRA for Value Added Tax
  • Open a corporate bank account
  • The subsidiary requires US$200,000 minimum capital to complete the incorporation process
  • The company must file annual tax returns and financial statements
  • If more than 20 shareholders, company must appoint a minimum of three auditors

Management:

  • Minimum two shareholders and a maximum of 50, of any nationality
  • Minimum of one director of any nationality
  • Shareholders and directors can be persons or entities and need not reside in Ethiopia
  • The subsidiary must appoint a general manager during the incorporation process
  • The revised Companies Code allows one shareholder with at least 5% of the shares to propose the agenda for the annual meeting

International companies entering the Democratic Republic of Ethiopia will be entering an economy at the heart of East Africa, both economically and geographically. Economically, Ethiopia is transitioning towards privatisation, is the second largest economy in the region and the seventh largest on the African continent. Geographically, it is landlocked between Eritrea, Somalia, Kenya, Sudan and South Sudan, with access to the Arabian Gulf and beyond through neighbouring Djibouti. Ethiopia has been landlocked since secession of its former province of Eritrea on the Red Sea in 1993.

Ethiopia’s capital Addis Ababa is in the centre of the country. The landscape is among the most rugged in Africa, with the Rift Valley running north to south through the country from Eritrea to Kenya. The most impressive topographical feature is the North Central Massifs, which reach close to 15,000 feet, dropping to the Blue Nile and Tekeze river channels and Lake Tana, which is the main reservoir for the Blue Nile.

Present day Ethiopians are drawn on a huge ethnic tapestry of around 100 languages and dialects. Under the Constitution, all languages have national status although Amharic is the working language of the federal government. Ethnic-linguistic divisions are reflected in the organisation of Ethiopia’s administrative divisions. Christianity was introduced in the fourth century and the Ethiopian Orthodox Church is among the world’s oldest organised Christian bodies.

A population that has been divided by political, ethnic and cultural divisions, found a national identity through sport. In the 1960 Rome Olympics Abebe Bikila’s epic barefooted victory in the marathon put their long-distance runners in the world sporting spotlight. Four years later he became the first to win successive marathon titles – this time wearing running shoes.

Starting your business in Ethiopia

Foreign companies intending to expand into Ethiopia typically choose a limited liability company as their business vehicle for establishing a subsidiary, which operates under the Companies Code, as revised in 2021. The first step is to obtain permission from the Ministry of Trade and Industry (MTI) to establish the entity.

Procedures and requirements for a foreign company incorporating a subsidiary in Ethiopia generally include the following:

  • Reserve a unique company name for the subsidiary with the MTI and authenticate the name of the foreign parent company
  • Apply to the Ethiopian Customs and Revenue Authority (ECRA) for a company Tax Identification Number (TIN)
  • Draw up Articles and Memorandum of Association
  • Have the company documents and the head office lease agreement verified at the Documents Authentication and Registration Office (DARO), part of the Ministry of Justice
  • Create the Company Seal and obtain the registration certificate from the MTI
  • Register with the ECRA for Value Added Tax
  • Provide notarised copies of the foreign parent company’s Articles and Memorandum of Association and the registration document
  • Publish details of the company’s incorporation in a national newspaper
  • The limited liability company requires at least one director and two shareholders, who do not need to reside in Ethiopia; shareholders can be either natural persons or entities
  • If the company has more than 20 shareholders, at least three auditors must be appointed
  • Open a corporate bank account
  • The subsidiary requires US$200,000 minimum capital to complete the incorporation process, which can take up to six weeks
  • Register the company and employees with the Private Organisation Employees’ Pension Fund (POEPF)
  • Register with the Public Social Security Services Agency (PSSSA)

Note: All private organisations must register with the POEPF. All Ethiopians citizens must contribute to social security, but this is optional for foreign citizens of Ethiopian origin. Foreign citizens with no Ethiopian heritage are barred from making contributions.

This incorporation process emphasises that the best possible advice is essential when exploring the alternatives to opening a subsidiary. By making the right choice now, you can steer a course around these obstacles by working alongside Bradford Jacobs. Our Professional Employer Organisation (PEO) specialists and Employer of Record (EOR) experts will source your staff and undertake every step of compliance to have them up-and-running in the shortest possible time. Instead of waiting weeks or months to complete the process for opening a subsidiary in Ethiopia, you can be operational in days.

Expanding your business into Ethiopia

Expanding business into Ethiopia opens up possibilities in a transitional economy that is moving towards privatisation, increased industrialisation and a more liberal finance sector. Ethiopia already has a strong foundation to build on. It was Africa’s seventh largest economy in 2022 with Gross Domestic Product of US$126 billion and the second largest in East Africa.

The economic strength and potential of the region is underlined by Tanzania and Kenya also being in Africa’s top 10 economies; the African Development Bank (ADB) assesses that Africa as a whole will be the world’s fastest-developing economic bloc.

Despite huge disparity in incomes, Ethiopia has a growing consumer market and services sector, with emphasis on developing the digital economy. The ADB’s 2023-27 Ethiopia Strategy Plan, targets agro-industrialisation, economic and financial governance, monetary policies and debt management

Foreign Direct Investment (FDI) increased to US$4.2 billion in 2021, mainly into oil refining, green energy, mining, manufacturing and real estate, with China contributing around 60%. The planned privatisation of the state-owned railway, maritime, air transport networks is expected to attract more FDI.

These are among the opportunities for international businesses. However, companies aiming to establish their own entity in the country face issues of incorporation, recruitment and contracts, corporate and employment legislation and much more. By working with Bradford Jacobs as your Professional Employer Organisation (PEO) and Employer of Record (EOR), we deal with everything on that list. We can ensure that the only item on your list is … ‘Global expansion’.

Advantages and Challenges when entering the Ethiopian Market

Some Advantages:

  • A young and potentially trainable, low-cost workforce from Africa’s second-largest population
  • Moves towards privatisation of state-owned sectors
  • Liberalisation of the finance sector
  • Strong and varied agriculture sector
  • Member of the Common Market for Eastern and Southern Africa (COMESA), with 21 member nations and a combined population of 600 million
  • Development of green economy and hydro-power potential

Some Challenges:

  • Regional and ethnic divisions pose risk of conflict
  • Risk of drought and other climatic issues
  • Foreign ownership not allowed in banking, finance and insurance sectors
  • Ethiopia currency, the birr, not easily convertible into foreign currency
  • Foreign exchange operations can be delayed up to a year
  • Difficult for foreign companies to repatriate profits
  • Electricity demand outstrips supply
  • Vulnerable to world commodity prices for its exports, particularly coffee
  • Bureaucracy and logistics delay imports and exports
  • High transportation costs and uneven infrastructure

Ethiopia’s Civil Code and Labour Proclamations allow contracts to be either written or oral; in the case of the latter the employee must be given a document detailing the essentials of the agreement within 15 days of starting work. The contract must include: the job’s duties and place of work; salary and payment schedule; type and duration of contract; the full names and addresses of both parties; age and gender of employee. The contract or agreement must be signed by both parties. Under the terms of the Electronic Signature Proclamation No. 816/2013, contracts can be signed electronically as an alternative to written signatures or identification of the employee by fingerprint. The Civil Code decrees that all contracts in the construction industry must be written. Note: Foreign nationals need a written contract in place to obtain a work visa to enter Ethiopia.

Different types of Employment Contracts in Ethiopia

Open-ended, indefinite employment contracts:  All contracts are considered to be for an indefinite period, unless specified otherwise by legislation.

Fixed-term employment contracts:  These are permitted for specified work; replacement of a temporarily absent employee; seasonal work for a specific period of the year; occasional work that is not generally part of the company’s operation. The maximum period for any fixed-term contract is five years, after which it becomes indefinite.

Probation periods:  Trial periods must be in writing and cannot exceed 45 consecutive days, with the same rights and entitlements as a full-time employee. If the individual proves to be unsuitable for the role, the trial period is terminated without severance. If work exceeds the trial period, the employee is deemed to have been on an indefinite contract since the start of the trial period.

Homeworking employment contract:  These are for a definite period or piece of work, where an employee regularly performs work for an employer without in-person guidance or supervision. Employers must keep detailed records of a homeworker’s output.

Collective Bargaining Agreements (CBAs): International Labour Organisation (ILO) conventions that guarantee the rights of workers to freedom of association and collective bargaining have been ratified under Ethiopian legislation. CBAs are permitted in theory and the right to strike is protected by law, but complicated and protracted procedures make such action difficult in practice.

Laws that regulate the labour relationship in Ethiopia

The Labour Proclamations dictate employment legislation for ‘workers’ in Ethiopia, as opposed to those defined as ‘managers’, who can choose to have their contract drawn up under the employment laws of another country.

General requirements for contracts

Contracts be either written or oral. In the case of verbal arrangements, employees must be given a written agreement detailing the essentials of the employment within 15 days of commencing work. The contract or agreement must be signed by both parties. Under the terms of the Electronic Signature Proclamation No. 816/2013, contracts can be signed electronically as an alternative to written signatures or identification of the employee by fingerprint.

The Labour Proclamations are the basis for employment legislation.

What are the Compensation Laws?

  • National Minimum Wage (NMW): Minimum wages apply only to the public sector and can be set independently by authorities for their employees
  • Working Hours and Breaks: The typical working week is 48 hours a week, comprising six eight-hour days
  • Overtime: Overtime is restricted to two hours per day, 20 hours in a month and 100 hours annually. Overtime between 6am and 10pm is paid at 25% above the normal hourly rate, and 50% above the normal for overtime between 10pm and 6am. Overtime on weekends or public holidays is paid at twice the normal hourly rate
  • Sick Leave and Benefits: The need for sick leave must be confirmed by a medical certificate if it exceeds three days. Workers are permitted six months’ leave a year. Benefit is on full salary for the first month, 50% for the second and third months and unpaid for the remainder of the allowance
  • Paid Vacations: After completing one year’s full service, workers are entitled to 16 working days of paid leave. An extra day is allowed for every subsequent two years of service up to 18 days after five years
  • Public Holidays: Public holidays in Ethiopia comprise both national and religious holidays. Most businesses close during public holidays and workers have paid leave. Dates vary for the Muslim holidays of Eid-al-Fitr, Eid al-Adha, the Islamic New Year and the Birth of the Prophet
  • Probation Periods: These are for a maximum of 45 consecutive days and must be in a written contract. No severance is due if terminated due to unsuitability of the candidate. If trial period exceeds the 45 days the contract becomes indefinite
  • Notice Periods: One month’s notice after completing any probation period and employed for up to one year; two months for more than one year’s service up to nine years; three months for more than nine years. Workers who complete a probation period but are terminated due to reduction of workforce receive two months’ notice
  • Termination, Severance and Redundancies: Justification for termination is determined by the Labour Proclamations, and generally allowed for issues regarding workers conduct, ability to fulfil their role or the reorganisation of the company. Termination outside the provisions of the Proclamations is illegal. Severance pay is 30 days of regular pay for one year of service, adjusted pro rata; 10 days’ pay for each additional year of service up to a maximum of 12 months wages. Lay-offs are considered mass redundancies if they involve 10% of the workforce, or five employees in a company employing between 20 and 50 workers. Regulations apply to the order in which individuals can be laid-off and also stipulate negotiations must be held with trade unions
  • Maternity / Paternity Leave and Benefit: Maternity leave is 120 consecutive days, with 30 days taken before the due date. The law states that if the birth is after the due date leave is extended, but if the birth is before the due date the 90 days’ post-natal leave begins then. Maternity leave is on full pay, as is three days of paternity leave for the father
  • 13th Month Bonus: There is no statutory requirement for an extra month’s salary, but bonuses are common
  • Pensions: Employers at 11% and employees at 7% contribute from payroll to the Public Social Security Services Agency (for the public sector) and the Private Organisation Employees’ Social Security Agency for the private sector, which administrate the pension fund. The self-employed contribute 18% of salary. The retirement pension is available at 60 years after 10 years of contributions, although this can be reduced for those working in hazardous conditions. Retirement pension is available at 55 years for those with 25 years of contributions
  • Healthcare:  The primary level comprises ‘health posts’ usually staffed by women who care for their local communities. The secondary level is for general hospitals and clinics. The tertiary level comprises specialised hospitals, mainly restricted to urban areas with most located in the capital, Addis Ababa. Facilities generally lack equipment, funding, medicines and specialists, with most medical graduates trained for general practice. The government is encouraging private investment and participation in the health system

Foreign companies recruiting staff in Ethiopia as part of their global expansion face a number of issues. Employees needing to recruit specific skills can struggle to find candidates with the educational qualifications and practical experience they need. Despite an estimated two million young people entering the employment market each year, many prefer to work independently in the informal sector.

Companies can avoid this pitfall by recruiting from abroad to bring staff into Ethiopia. However, this brings other issues with work permit and immigration regulations. There are also employment categories where foreign candidates must satisfy a Labour Market Test to ensure there are no Ethiopians that could fill the vacancy. Additionally, foreigners who are cleared for these positons may have to be subsequently replaced by Ethiopians who are upskilled to fill the role.

Complicated? Yes! This highlights where the global experience and local know-how of Bradford Jacobs is essential. Our Professional Employer Organisation (PEO) platforms bridge the gap between the skills you need and finding the best-qualified talent for your company. We locate the best available candidates to make you quickly operational in Ethiopia. This effective alternative provides fast and cost-effective solutions that will have your new staff moving your business forward in just a few days, removing the obstacles surrounding recruitment and other aspects of employment.

Recruiting in Ethiopia

Employers recruiting in Ethiopia through an agency must ensure they are licensed by the Ministry of Labour and Social Affairs. Other options feature job boards and sites such as ethiojobs.net, Harmeejobs and Geezjobs.com among the choices for employers.

But there are ways to eliminate the ‘hit and miss’ element of making such a move. You need expert ‘on the ground’ guidance … so call Bradford Jacobs. We have the experience and contacts in place in Ethiopia to provide a direct route for your journey into the economy.

The global reach of our Professional Employer Organisation (PEO) networks will locate the perfect candidates for your business expansion vision. Next, our Employer of Record (EOR) specialists will have your new employees sitting at their desks and screens in the shortest time possible. This guide highlights the essentials of recruitment and onboarding in Ethiopia. Bradford Jacobs guarantees putting the brightest talent in position for your company – today!

Employees’ pre-hire checks in Ethiopia

General:  There is little guidance under Ethiopia’s employment legislation regarding the legality of pre-hire checks, other than the non-discrimination provisions of the Labour Proclamation No. 1156 (2019). This bars discrimination in employment on grounds of race, nationality, colour, gender, religious or political beliefs, social origin, HIV/AIDS status or disablement. Discrimination in employment on any of these grounds is illegal.

Required:  Foreign employees must satisfy all work permit and immigration requirements.

Basic requirements when recruiting in Ethiopia

Drawing up employment contracts with staff is a basic requirement of the recruiting and onboarding process, and in Ethiopia they are governed by the terms of the Labour Proclamations and the Civil Code. Generally, contracts can be written or oral although the written form is advised to provide evidence in the case of disputes. The contract can be signed with the person’s name, by fingerprint or electronically if it complies with the Electronic Signature Proclamation No. 816/2013. The Civil Code states that employment contracts in the construction industry must be written.

In the case of an oral contract, the employee must be given a written notice of the terms within 15 days. The contract must include: the job’s duties and place of work; salary and payment schedule; type and duration of contact; the full names and addresses of both parties; age and gender of employee. The contract or agreement must be signed by both parties. Note: Foreigners need a written contract in order to obtain a work visa.

The terms of the contract must equal or improve any terms covered by legislation, and collective or workplace agreements.

The Basics of Ethiopian Culture

Ethiopian culture is a dazzling mosaic, as influences from Judaism, Christianity and Islam have merged with folklore that also reflects Abyssinia, ancient Yemen and the ‘Kingdom of Solomon the Wise’. Ethiopia’s indigenous ethnic groups have individual cultural traits, displayed in dance, customs and their dress. Out of close to 100 dialects, it was the Emperor Hailie Selassie who assigned Amharic as the official language, which still applies today as the federal language of government. Having never been colonised, Ethiopian culture is deeply rooted in the history of its various regions and its states are based on their ethnic identity. Critics believe this system has politicised ethnicity and fuelled tensions. Nevertheless, Ethiopians are proud of their cultural depth, which they feel defines their nation today.

Ethiopia Work Culture

Negotiations and Meetings:  Initial contact can often be arranged away from the office, at a coffee shop, for parties to get to know each other before arranging a formal meeting. Agendas are unlikely to set an end time for the meeting, which continue until all options have been exhausted, or the most senior member calls a halt. Ethiopians do not like giving flat refusals, so a non-committal answer can be interpreted as being a ‘no’. Beware of hastily offered verbal agreements; take time to consider all the options before agreeing a written contract.

Hierarchy:  Employees show respect and deference to the most senior and experienced members of their team, and visitors should be aware of the structure and behave accordingly.

Punctuality: Be on time … graciously accept your opposite number’s apology for being late.

Introductions/Greetings:  Use formal titles and professional qualifications where they apply. In the Amharic language, Mr. is Ato (‘Aww-toe’); Mrs. is Wayzero (‘way-zuh-row’) and Miss Weizeerit (‘way-zuh-reet’). Always stand to meet a new entrant to the room. Equal sexes exchange handshakes and a handshake is generally acceptable between men and women; although be aware that Muslims may wish to avoid any physical contact.

Language:  English is the business language.

Gift Giving: Gifts are not usually exchanged at the first meeting, although modest and thoughtful gifts can be offered on conclusion of the deal.

Business Cards:  Accept and offer business cards with the right hand or both hands, never the left. Leave them flat and visible on the table.

Dress Code:  Business suits are suitable for men and women, the latter avoiding dresses or skirts that finish above the knee.

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