Egypt Payroll & HR Insight from a Global Payroll Outsourcing Leader
This guide is a must read before you either outsource your Egypt payroll or build a local HR and Payroll function. As a Global Payroll Provider, Mercans can guarantee your full compliance with all the applicable regulations.
1.0 Doing Business in Egypt
1.1 Investing in Egypt
Egypt is one of the major Oil and Gas producers and investment needs in power infrastructure remain significant. Vast sectors of trade in Egypt include: Construction, Architectural and Engineering Services, Healthcare, Telecommunications, Water and Waste Water, Chemicals, Pharmaceuticals, Renewable Energy, Education and Training Services, Electric Power Generation, Port and Shipbuilding Equipment, Consumer Goods and Safety and Security Equipment. Consumer goods provide the highest profit margins.
Political violence and uncertainty have taken a heavy toll, but foreign firms, though wary, have not abandoned Egypt.
The Government welcomes foreign investment and has various tax breaks to encourage foreign investment in the country.
1.2 Registrations and Establishing an Entity
The company is required to have a legal entity established in order to process a payroll.
For integrating a company under the Investment Law in Egypt the Investor has to conclude the endeavours of incorporation at GAFI (General Authority for Investment and Free Zones) to establish the Company. The GAFI is a one-stop Business Services Centre. All business-related Egyptian Government agencies are now located under one roof. GAFI is empowered to negotiate and sign contracts, apply for licenses and approvals on behalf of all parties.
Foreigners may establish or acquire Egyptian companies.
Procedures for Establishing Companies in Egypt
The contract for establishing the company is submitted provided this is in compliance with the fields stipulated in Investment Law in Egypt.
The draft contract should enclose the following:
- Data form for the company, including purpose, capital, investment costs, and statement of partners, location, and expected labour.
- Certificate determining unambiguity of company name, issued from the Commercial Register of Investment (at Ministry of Economy & Foreign Trade).
- A Bank Deposit Certificate with not less than 25% of the capital of joint-stock companies and 100% of the capital of companies with limited liabilities.
The contract is assessed and authorised within 24 hours from the date of application. It is mandatory to legalize the signature of the lawyer who prepared the contract from the Bar Association in Cairo. After legalizing, it is submitted to the Authority in order to issue a licensed decree with the establishment of the company within 24 hours from submitting the completed contract.
The applicant receives an official copy of the decree of the Authority with the license to establish the company, enclosing an official copy of the contract and a letter to the competent commercial register office. The investor should provide the Authority with a copy of the commercial register of the company after its registration.
Banking hours are 8.30am to 2:00pm (Sunday to Thursday) in the major towns and cities, with smaller towns and villages operating a more varied timetable. To open a bank account in Egypt, the employee will need supporting official documentation, such as a passport, work visa and Residence Certificate, letter from home bank and some recent bank statements and passport-size photograph to verify identity.
1.4 Working Week
A full working week is generally considered five 8-hour work days in Egypt, from Sunday through Thursday (to a maximum of six full days, which would generally add Saturday as the sixth).
1.5 Basic Facts about Egypt
Full name: Arab Republic of Egypt
Population: 99.38 million (UN, 2018)
Major Language: Arabic
Major Religion: Islam followed by Christianity (8% to 10%)
Monetary Unit: “Livres Egyptiennes” (Egyptian Pound) 1 Egyptian Pound (EGP) = 100 piastres
Main exports: Crude Petroleum, Petroleum Gas, Refined Petroleum, Gold and Nitrogenous
International dialling code: +20
How to say: –
Good morning صباح الخير
Good evening مساء الخير.
Do you speak English? هل تتحدث الإنجليزية؟
Good bye وداعا
Thank you شكرا
See you later اشوفك بعدين
Dates & Numbers
Dates are usually written in the day, month and year sequence. For example, 1st July 2017 or 1/7/17.
2.0 Tax & Social Security
The Tax Year in Egypt is 1st January to 31st December.
It is the employer’s responsibility to file quarterly tax returns. The employer has one month after the end of each quarter to file the returns. Additionally, the employer is required to file annual salary tax reconciliation outlining salaries paid to each employee, deductions, exemptions, tax due, and the net salary paid to each employee.
The penalty of 1.5% per month is added for the late submission and payment of Tax and Social Security Contributions.
2.1 Income Tax
Residents and Non-Residents
All employers are required to calculate the salary and tax on the monthly basis which need to be remitted to the relevant tax offices within the first 15 days of the following month.
An employee on a Temporary Residence Permit or no citizenship status will be required to file a Tax Return on 1st of January each year. Additionally, the employer is required to file a quarterly tax return. The employer has one month after the end of each quarter to file the quarterly tax returns.
At the Year-End the employer is required to prepare an annual reconciliation of the salary tax to determine whether there are any disparities and to remit such tax disparities, if any, to the competent Tax Office till April of the following year.
Penalties are obligatory in the case of not complying with the due dates at 2% plus the discount rate declared by the Central Bank of Egypt.
2.2 Social Security
The Egyptian constitution specifies that the state must insure Social and Health Security Services and Retirement, Unemployment and Old Age Pensions for all citizens.
Employees benefit from the social security system in Egypt which provides insurance for all workers, whether they are subject to the Labour Law, state or public sector employees. The legislator did not make any distinction between workers in the government sector and workers in the non-government sector.
The Social Security System shall include the following:
- Old Age, Disability and Death Insurance
- Occupational Accidents Insurance
- Sickness Insurance
- Unemployment Insurance
- Social Care for Pensioners
The current Public Program in Egypt covers approximately 80% of employees, which is the highest among the developing nations.
Effective from January 1, 2020, the government of Egypt has amended the Social Insurance contributions calculation process. The contributions are no longer calculated based on fixed and variable contribution basis but based on the actual salaries subject to social security at an employee contribution rate of 11% and 18.75% contribution rate for employers. The social security contributions are subject to a contribution base minimum/floor amount of EGP 1,000 and maximum/ceiling of EGP 7,000 per month.
Accordingly, the minimum and maximum employee and employer social security contributions are calculated as follows:
Monthly contributions should be made to the Tax Authority within 15 days of the following month.
Monthly contributions for social security payments should be made within 15 days of the following month.
The employer is required to file a quarterly tax reporting. The employer has one month after the end of each quarter to file the quarterly tax reporting.
Annual salary reconciliation, including the name of all employees, Gross Income, and Tax calculation per year, has to be submitted before end of April of the following year.
Key Legislative Authorities
- Investment Authority, Salah sales, Cairo.
- Tax authority, 5 Hussien Hegazy Street, Cairo.
- Social Insurance Authority, 5 Lazoghly Sq Monera, Cairo.
In Egypt, the payroll and registrations of a new employee are the responsibility of employer. All new employees have to be registered with the local authorities within 15 day of commencing the employment.
Documents required for setting up a New Start include:
- Employment Contract
- National Id
- Education Certificates
- Form (1) for Social Insurance
- Birth Certificate
- Valid Passport
- Work Permit
- Military service Certificate for men
- Clearance form & form (6) “in case of resignation from previous work”
- Labor Office Certificate
- Certificate of criminal record
- Medical check-up
Payment for leavers is made in the employee’s last payslip. An employee’s final payment must be remunerated by the end of the month and Social Security must be notified of the termination of employment contract.
3.0 Employment Law
3.1 Holiday Accrual / Calculations
In accordance with the Labour Law, the amount of holiday allowance should be equivalent to 100% of the employee Gross salary. The same applies to the Christmas allowance. The employer may grant the employee a percentage higher than the one quoted in the law.
3.2 Maternity Leave
A woman who has worked for 10 months for her employer is entitled to a Maternity Leave of 90 days with full salary.
Entitlement is up to 90 days after the birth. The salary is maintained and the employer pays 100% of the salary. A female worker will not be allowed to work during the forty-five days following childbirth.
3.3 Paternity Leave
There is no Paternity Leave in Egypt.
The Labor Law in Egypt proposes that an employee with an identified sickness by an approved medical professional is entitled to up to 6 months of paid sick leave annually, paid at the rate between 25%, 75% and 100% of the total wage.
3.5 National service
In Egypt, Military Service is for males and all the wages are paid by the Egyptian Armed Forces during the Military Services.
4.0 Employee Benefits
In relation to general expenses, car mileage and company cars, expenses will only be included in the payroll if they are considered part of the employee’s income.
Each company must adhere to their individual expenses policy.
For example – car mileage is usually included in the payroll but each company holds their specific reimbursement policy per mile.
5.0 Visas & Work Permits
In many countries, there is a separate Work Visa category. In Egypt, however, foreigners who intend to work just apply for a work permit. The application process for obtaining an Egyptian work permit has to go through a few stages and it may sometimes take a few months.
The application form can be collected from the nearest Ministry of Manpower and Training Office (in Cairo this is located within the Mugamma in Tahrir Square).
Other important documents required for making the application are as follows-
- A Valid Passport (With Valid Egyptian Residence Status)
- 7 Passport-Size Photos
- 2 Copies Of Employer’s Incorporation Contract
- 2 Copies Of Tax ID
- 2 Copies Of Academic
- A Copy Of The Commercial Register From Your Employer
- Any Licenses Required For Practicing Your Profession
- A Memorandum From Your Employer Explaining Why It Is Necessary To Hire A Foreigner Rather Than A Qualified Egyptian Citizen
- Approval From The Authority Related To Employee’s Profession
- A Representative From Employer Who Will “Sponsor” Work Permit
- Proof Of Test Showing Employee Is Free Of HIV/Aids
- Approval From Egypt’s State Security Service Showing That Employee Is Not A Threat To National Security Or Public Safety
The registration fee to complete the process is LE1000 (Subject to changes as per law)
We are your trusted HR function outsourcing partner, simplifying employment tasks worldwide. We deliver bespoke human capital management services and global payroll solutions to empower businesses across all continents. A borderless people engagement enabler, driven by technology and innovation and committed to make your teams happy, we ensure your consistent and sustainable growth.
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SIMPLIFYING EMPLOYMENT TASKS WORLDWIDE
Local Presence. Regional Strategy. Global Success.
We are a borderless people engagement enabler, committed to make your teams happy. Driven by technology and innovation, we pride ourselves in being global people experts with striking local presence. We deliver bespoke human capital management services and innovative global payroll solutions to empower international businesses.
We are your reliable HR function outsourcing partner, delivering innovative HCM solutions, along with cutting-edge human capital management advice, to ensure consistent business growth, regardless of the size and industry of your company. We develop SaaS software and outsource HCM solutions tailored to 5,000+ clients across all continents.
Mercans operate globally, ensuring timely measurable results and bottom-line savings. We employ 500+ payroll and human resources specialists with in-depth local knowledge. Thanks to success-oriented teams striving for excellence and taking care of your organization’s tasks within budget, we have gained the trust of major multinational companies.
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