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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.

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

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.

Under the Labor Proclamation of Ethiopia, fathers are entitled to 3 days of fully paid paternity leave. Paternity leave is 10 days for employees in public sector.

Minimum Wage

There is no national minimum wage for private sector employers in Ethiopia. Minimum wages in the public sector are set at the national level, depending on the nature of the service and skill level of the employee. Public sector employees' monthly minimum wage is approximately ETB 420 (Ethiopian birr).

Ethiopia's 2019 Labor Proclamation provides for the formation of a Wage Board consisting of representatives from the government, employees, and trade unions, that will periodically determine and revise minimum wages.

Wages must be paid at such intervals as provided for by law, collective agreement, work rule, or contract of employment. Wages must be paid on working days and at the place of work.

Overtime, Holiday & Vacation Pay

Under the Labor Proclamation, overtime work may not exceed 4 hours in a day or 12 hours in a week. Employees who work overtime hours are entitled to an overtime premium as follows:

• 1.5 times the regular hourly rate for overtime work between 6:00 AM and 10:00 PM
• 1.75 times the regular hourly rate for overtime work between 10:00 PM and 6:00 AM
• 2 times the regular hourly rate for work on a weekly rest day
• 2.5 times the regular hourly rate for work on a public holiday

Persons who work on public holidays are entitled to receive twice the amount of their regular wages. Employees are entitled to their regular salary during periods of annual leave. If an employee is recalled from annual leave, the employer must pay the remainder of the leave. The employer is also responsible for the transport expenses incurred by the employee as direct consequences of the recall, as well as a per-diem.

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:

• 1 month in the case of an employee who has completed probation and has a period of service not exceeding 1 year
• 2 months in the case of an employee who has a period of service of 1-9 years
• 3 months in the case of an employee whose period of service is more than 9 years
• 2 months in the case of an employee whose probationary period is completed and the employment agreement is terminated due to reduction of 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 an employee 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 employees employed for less than 1 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 employees who are dismissed as a part of economic redundancy

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 Benefits

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 Benefits

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.

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.

If the tax payable on profits derived from all sources of business income in a tax year is less than 2.5% of the total income derived in that tax year, individual taxpayers must pay an alternative minimum tax of 2.5% of their annual gross income.

Visas

• Diplomatic visa - issued to ambassadors, diplomatic agents, consular representatives, and their families who are assigned to work in foreign embassies or missions in Ethiopia
• Service visa - issued to permanent employees of foreign embassies, permanent missions, international civil servants, or persons holding service passports, and their family members
• Business visa - issued to persons who come to Ethiopia for business activities up to 122 days
• Immigrant visa - issued to foreign nationals who are adopted by or have valid marriages with Ethiopian citizens or family members of foreign nationals who have become permanent residents in Ethiopia
• Tourist visa - issued for single or multiple entries to foreign nationals who come to visit Ethiopia for leisure purposes
• Transit visa - issued to a foreign national who is traveling to another country via Ethiopia
• Student visa - issued to foreign nationals who come to Ethiopia for admission to an educational or training institution
• Religion Visa - issued to foreign nationals who come to take part in religious activities
• Medical Treatment Visa - issued to foreign nationals who enter to be treated for a medical condition in the country, valid for up to 1 year
• Sports Competition and Training Visa - issued to foreign nationals entering Ethiopia as athletes coming to the country to participate in sports events and/or training
• Entertainment Industry visa - issued to foreign nationals who are entering Ethiopia to work in the entertainment industry on film, television, or live productions as a performer, production, or support staff

Work Permits

Foreign nationals who wish to work in Ethiopia are required to obtain a work permit. It is issued for 3 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.

According to the labor law of Ethiopia, the minimum age for employment is 15 years. Employees under the age of 18 years cannot be hired for jobs that endanger their lives or health.

Regular working hours for young persons may not exceed 7 hours per day. Employers are prohibited from assigning young employees to night work between 10:00 PM and 6:00 AM, overtime work, work on weekly rest days, and public holidays.