Ethiopian workers are young, vibrant, and ready to work, and many professionals living in the country are highly educated. In addition to that, wages in the country are very low, making it easy for businesses to expand operations into the area.

If you’ve been thinking about hiring Ethiopians, we encourage you not to shy away from the legal side of the equation. Just because Ethiopia’s labor costs are low doesn’t mean that the country doesn’t protect its workers from a legal perspective. If you’re not compliant with the regulations, you could be dealing with serious issues in the future. Never mind the fact that Ethiopians are understandably particular about employer-provided benefits.

This guide will cover employee benefits in Ethiopia. We’ll start with the labor laws upon which these benefits are built, and then we’ll branch off into mandatory and supplementary benefits to offer prospective workers and new hires.

Labor Laws in Ethiopia

The employee benefits we’ll highlight in this guide will be based on Labor Proclamation No. 1156/2019. It’s the main piece of labor legislation in the country. It houses provisions related to working hours, rest and holidays, maternity and paternity leave, and more. So, if you want to learn about which employee benefits to offer workers, you need to get familiar with Labor Proclamation No. 1156/2019.

Of course, this labor law isn’t the only piece of legislation that international employers like you should know about. There are so many other laws that go into greater detail on certain topics. For instance, the Social Security Proclamation (Proclamation No. 714/2011) outlines the fundamentals of social security, employer and employee obligations, and more.

Though you shouldn’t focus on just one law, The Labor Proclamation is by far the most important one to explore. If you’re new to Ethiopia and how they do things in the country, we recommend requesting legal assistance from an international business lawyer. An HR professional with experience in Ethiopian business law can also provide meaningful assistance.

Mandatory Employee Benefits in Ethiopia

Employee benefits in Ethiopia run the gamut from annual paid leave to sick leave to overtime pay to maternity leave and more. And if you’re going to achieve and maintain Ethiopian labor law compliance, you’ll need to become familiar with them all. Below, we’ll cover the non-negotiable benefits set forth by the law:

Social Security Contributions

In Ethiopia, private employers have to register their employees with the Private Organisation Employees Social Security Agency. It’s the pension fund that ensures workers can get the benefits they qualify for by law, including:

  • Old-age pensions
  • Survivor benefits
  • Work injury benefits
  • And more

As an employer, you’ll contribute 11% of the employee’s base salary to the scheme, and employees will have to contribute 7% of the base salary. Not making these contributions sets you up for forced deductions to satisfy missed contributions.

Annual Paid Leave

According to Labor Proclamation No. 1156/2019, annual leave entitlements are set at 16 working days for the first year an employer works for your company. And for every additional two years of service, another paid leave day is added. The amount of pay during the leave should be equal to their normal wage.

Working Hours

In Ethiopia, working hours shouldn’t exceed 8 hours per day or 48 hours in a week. In certain areas of work or in special situations, working hour limits may be reduced. It’s unlawful to reduce the employee’s wage in response to hour decreases.

Weekly working hours should be spread evenly over the course of a week, though it’s possible in some circumstances to shorten one or more days and redistribute the hours in a way that makes for one or more extended days. All is well as long as daily working hours don’t exceed 10 hours per day. 

See Articles 61-64 in Labor Proclamation No. 1156/2019 for more information.

Overtime Pay

Any time an employee works longer than 8 hours per day or 48 hours in a week, that’s considered to be overtime (unless the situation aligns with Articles 61, 63, or 64 of Labor Proclamation No. 1156/2019). Overtime is only lawful in the following circumstances:

  • Force-majeure
  • Urgent work
  • Substitution of absent workers
  • Accidents (actual or imminent)

The amount of overtime pay a worker is due depends on the situation. See the table below for more information:

Overtime Work Condition Pay Rate
Work done between 6:00 a.m. and 10:00 p.m. 1.5 times the ordinary hourly rate
Work done between 10:00 p.m. and 6:00 a.m. 1.75 times the ordinary hourly rate
Work done on a weekly rest day 2 times the ordinary hourly rate
Work done on a public holiday 2.5 times the ordinary hourly rate

Read more about overtime entitlements and payment in Articles 67 and 68 of Labor Proclamation No. 1156/2019.

Public Holiday Leave

In Ethiopia, workers are entitled to public holiday leave. So, when a public holiday rolls around, the employee should have that time off. But in situations where an employer needs a worker to work on a public holiday, they should be prepared to pay them double their usual salary.

Here’s a list of the public holidays:

  • Jan 7 – Ethiopian Christmas
  • Jan 19 – Timket
  • March 2 – Adwa Victory Day
  • March 20 (Date varies) – Eid al-Fitr
  • April 10 (Date varies) – Siklet (Ethiopian Good Friday)
  • April 12 (Date varies) – Fasika (Ethiopian Easter Sunday)
  • May 1 – Labor Day
  • May 5 – Patriots’ Day
  • May 27 (Date varies) – Eid al-Adha
  • August 26 (Date varies) – Prophet Muhammad’s Birthday
  • September 11 – Ethiopian New Year
  • September 27 – Meskel

Look at Articles 73-75 of Labor Proclamation No. 1156/2019 for more information about public holiday leave.

Sick Leave

Whenever a worker has finished their probationary period and is injured or too sick to work, they have a right to take up to six months of sick leave. Employees are required to notify their employers of their sickness or injury on the first day, where practical. They must also turn in a medical certificate from a duly recognized medical facility.

During sick leave, the worker is to receive:

Period Pay Rate
First month 100% of their usual wage
Next two months 50% of their wage
Final three months No pay

This leave entitlement doesn’t apply to work-related sicknesses or accidents. This information is outlined in Labor Proclamation No. 1156/2019.

Maternity Leave

A female employee who is expecting a baby should receive 120 days of maternity leave – 30 days during the prenatal period and 90 days post-natal. This leave should be paid. 

Read Article 88 of Labor Proclamation No. 1156/2019 for additional information.

Paternity Leave

Compared to maternity leave, paternity leave is slim. A male employee whose partner is expecting a baby should receive three days off with full pay.

Severance Pay

Any employee who has completed probation but isn’t eligible for a pension should receive severance pay. There are several different situations necessitating severance pay, and they’re all outlined in Labor Proclamation No. 1156/2019 in Article 39. The amount you’ll need to pay is outlined there as well (Article 40).

Read Labor Proclamation No. 1156/2019 in Article 39 for additional information.

Supplementary Employee Benefits in Ethiopia

The above benefits are non-negotiable for employers of Ethiopian workers – they provide a good basis for the employer/employee relationship, and they should appear in every employer’s benefit plans. But if you want to stand out in a sea of employers, it’s worthwhile to consider offering supplementary employee benefits as well.

These benefits help to encourage more candidates to apply, say “yes” to job offers, and give their best at work every day:

  • Health insurance plan through a private insurer with extensive healthcare benefits and dental and vision coverage (As of the time of this writing, health insurance is not a mandatory benefit for Ethiopian employees.)
  • Education assistance for employees who want to further their careers and rise through the ranks at your company.
  • Work-from-home options on one or more days per week.
  • Transportation allowances to pay for gas and car maintenance.
  • A company vehicle to use during and/or outside of working hours.
  • Childcare assistance for workers who have one or more children.
  • Annual bonuses based on performance and seniority at your company.
  • Employee of the Month awards and perks.

As you might be able to imagine, when it comes to supplementary employee benefits, you’ve got a lot of choices. Take some time to brainstorm additional options, ensuring that they align with your hiring budget and that there aren’t any laws prohibiting the provision of that benefit.

So, there you have it – the basics of employee benefits in Ethiopia. We hope you found all the information you were looking for, and we wish you the best as you work to expand your workforce. Remember to reach out for assistance from legal or HR professionals as needed throughout the process.