Ethiopia PEO & Employer of Record

Pursuing global expansion requires optimized resources and tools to help you engage with the local economy and set up your business. As you seek to grow abroad, you need to have trusted services to optimize your processes as you navigate local labor laws, hiring, and payroll.

G-P provides Ethiopia Employer of Record (EOR) services for customers that want to hire employees and run payroll without first establishing a branch office or subsidiary abroad. Your candidate is hired via G-P’ EOR in accordance with local labor laws and can be onboarded in days instead of the months it typically takes. The individual is assigned to work on your team, working on your company’s behalf exactly as if he or she were your employee to fulfill your in-country requirements.

Hiring in Ethiopia

As one of the oldest countries in the world, Ethiopia has a rich history of trade and regional and international influence. The country has a strategic location in the Horn of Africa and is the largest by size and population in the region, offering diverse business opportunities.

Expanding your business to Ethiopia is easier with G-P. Our solution enables customers to run payroll while HR services, tax, and compliance management matters are lifted from their shoulders onto ours. As a Global EOR expert, we manage employment contract best practices, statutory and market norm benefits, and employee expenses, as well as severance and termination if required. We also keep you apprised of changes to local employment laws.

Your new employee is productive sooner, has a better hiring experience, and is 100% dedicated to your team. You’ll have peace of mind knowing you have a team of dedicated employment experts assisting with every hire. G-P allows you to harness the talent of the brightest people in more than 185 countries around the world, quickly and painlessly.

Employment Contracts in Ethiopia

When you hire new employees, drawing up a contract is critical to establish clear guidelines on both parties’ responsibilities. You are responsible for providing a contract that outlines the terms of employment for your employees. In the agreement, you and a worker may agree to a probationary period of up to 45 days. During this time, the employee is entitled to all rights of being in your employment. However, you may terminate the contract at any time without notice, severance pay, or additional compensation.

Ethiopia’s labor laws stipulate that you should include the following information in your contract at a minimum:

  • Employer name and address
  • Employee age, address, name, and work card number, if any
  • Agreement between the contracting parties in adherence to regulations
  • Signatures of all contracting parties

If you are not providing a written contract, you must supply a signed statement addressing this information within 15 days of the contract’s conclusion. You are obligated to provide work for your employees in accordance with their agreements and supply any materials and payment agreed upon in the contract.

Working Hours in Ethiopia

The standard workweek is 40 hours, and the law stipulates that work hours should be eight hours in a day or 48 hours in a week. If required in a week, daily hours may be increased, provided that they not exceed 10 hours per day. Young workers may not work more than seven hours per day.

Each week, employees are also entitled to a consecutive 24 hours of rest. The standard rest day is Sunday, but workers may choose a substitute if the nature of the job requires work on Sunday.

Employees who do overtime and night work are entitled to receive additional compensation at rates based on their hours and shift times. They may not work more than 20 hours of overtime in a month or over 100 hours in a year.

The Ministry of Work and Social Affairs may make provisions for decreased work hours or other special arrangements for specific industry conditions.

Holidays in Ethiopia

Employees are entitled to 14 paid holidays each year:

  • Ethiopian Christmas Day
  • The Prophet’s Birthday
  • Ethiopian Epiphany
  • Adwa Victory Day
  • Ethiopian Good Friday
  • Ethiopian Easter Sunday
  • International Labor Day
  • Freedom Day
  • Derg Downfall Day
  • Eid-al-Fitr
  • Eid al-Adha
  • Ethiopian New Year’s Day
  • Meskel
  • Mawlid

Vacation Days in Ethiopia

For one year of service, employees are entitled to 16 days of annual paid leave. They may receive another day of leave for each additional year of employment. Workers who have been employed with you for five years or more receive at least 18 days of leave with one extra day for every two years of service.

Ethiopia Sick Leave

Once they’ve completed their probationary period, employees may receive up to six months of sick leave. Their pay rates depend on the duration of leave:

  • Full wages: First month of leave
  • Half wages: Second and third month of leave
  • No wages: Last three months of leave

Maternity/Paternity Leave in Ethiopia

Pregnant employees are entitled to 30 days of leave before birth and an additional 90 days after delivery. As the employer, you are responsible for providing full pay during the duration of maternity leave.

Ethiopia Supplementary Benefits

Your business must be a member of the social health system, and you are responsible for providing health insurance for your employees. Your social insurance contribution on your employees’ behalf is 11 percent of the payroll for each worker.

Termination/Severance in Ethiopia

If a worker terminates employment with your business before using annual leave, the employee has the right to compensation for leave corresponding to the length of service. You may terminate a contract without notice if you have justified cause meeting one of these criteria:

  • Repeated and unjustified tardiness after multiple warning
  • Unjustified absence for five consecutive workdays, 10 workdays in a month, or 30 workdays in a year
  • Fraudulent or deceitful conduct in completing duties
  • Misappropriation of employer funds or property for personal or third-party enrichment
  • Producing output consistently below the required standards
  • Responsibility for altercations at the workplace
  • Conviction for an offense that inhibits an employee from working
  • Causing damage to employer property intentionally or through gross negligence
  • Unlawful activities

If you terminate employment for other reasons, you will need to provide written notice to the worker and pay all wages owed within seven days before termination. You are also responsible for delivering severance pay based on the conditions of termination and years of employee service.

Paying Taxes in Ethiopia

As an employer, you are responsible for withholding income from each month’s paycheck. You must pay the withheld tax to the Ethiopian Revenues and Customs Authority (ERCA) within 30 days of the end of the month being paid.

Why G-P

If you’re ready to move forward with establishing your business overseas, choose us as your trusted partner. With in-country expertise and years of experience in the field, we offer all the resources and services you need to start working internationally. If you would like to discuss how G-P can provide a seamless employee leasing or EOR solution for hiring an employee, please contact us.


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Written by Ethiotime1

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