Employer of Record (EOR) Egypt
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An Employer of Record (EOR) Egypt, often referred to as a Global Professional Employer Organization (Global PEO) Egypt, is the official employer for workers in Egypt. The EOR Egypt takes on a range of critical employment responsibilities, ensuring both legal compliance and operational efficiency.
The roles and responsibilities of our Employer of Record Egypt include:
- The EOR Egypt ensures that all employment practices align with the local labor laws and regulations in Egypt.
- Efficiently handling the local payroll process, the EOR Egypt guarantees accurate and timely compensation for employees.
- Our EOR Egypt manages the meticulous filing of employment-related taxes and essential paperwork, thereby reducing administrative burdens on businesses.
- Employees are provided with detailed payslips by the EOR Egypt, outlining earnings, deductions, and other pertinent financial information, promoting transparency and compliance.
- The EOR Egypt ensures that employees receive their salary payments in a timely manner, contributing to enhanced trust and satisfaction within the workforce.
Mercans Employer of Record Egypt provide a seamless and hassle-free solution for businesses looking to expand their global presence without the need for local entity setup. With a strong emphasis on legal compliance and intellectual property protection in Egypt, our EOR services enable your business to concentrate on its core operations. Furthermore, our services facilitate the seamless management of global workforce mobility, work visas, and the development of an efficient and diverse global team in Egypt.
EOR Solutions in Egypt
Employees vs Independent Contractor Compliance
The following are the main differences between employees and independent contractors, also sometimes called freelancers or part-timers in Egypt:
| Aspect | Independent Contractors | Employees |
|---|---|---|
| Legal Status | Considered separate entities | Formally employed by the company |
| Flexibility | Typically have more flexible working arrangements | Generally subject to set working hours and location |
| Taxation | Responsible for their own taxes | Employer is responsible for withholding and paying employee taxes |
| Benefits | Typically do not receive company benefits | Eligible for company benefits like health insurance, leave, and more |
| Labor Rights | Not entitled to labor rights like overtime pay, paid leave, and other protections | Protected by labor laws, entitled to various rights and benefits |
| Termination Process | Can be terminated more easily based on contract terms | Termination often requires adherence to labor laws and may involve severance |
| Legal Risks | Less legal risk for the employer in terms of labor disputes | Employers may face legal challenges if labor laws are not followed |
| Administrative Responsibilities | Contractors handle their own administrative tasks | Employers manage HR tasks, payroll, and compliance |
| Cost Control | Provides cost control and may be more cost-effective | Costs may be higher due to benefits and compliance requirements |
| Compliance | Lower compliance and reporting requirements | Higher compliance responsibilities for the employer |
| Relationship Nature | Typically more transactional and project-based | Ongoing, long-term relationship with the company |
Employment Contracts in Egypt
You need to consider a number of key factors when dealing with employment contracts in Egypt. Listed below are a few to help you prepare:
- Name and address of the employer and workplace.
- Employee’s name, qualifications, profession, social insurance number, and home address.
- Description of the work and its nature.
- Agreed-upon salary, payment method, and frequency, along with any other benefits.
- A probationary period, which cannot exceed three months.
- These have an agreed-upon duration, and renewal often requires mutual agreement.
- For contracts exceeding 5 years, the worker can terminate without indemnity by providing 3 months’ notice before termination.
- Lack a specific expiration date and can’t be terminated without adequate cause.
- Termination requires written notice by either party.
- Employers may terminate only for ‘reasonable reasons’ or employee inefficiency.
- Contracts can be for a definite or indefinite period, or for the fulfillment of specific work, each with its own set of rules.
- In a definite contract, termination upon the specified term’s expiration doesn’t require formalities or compensation (unless terminated early). It can be renewed if both parties continue duties.
- An indefinite contract can only be terminated with written notice by either party and requires justifications for termination.
- Employers must provide 2-3 months’ notice, depending on the employee’s service period, before termination.
- The contract remains valid during the notice period.
- Employees can look for other work during this period while receiving full wages.
- If an employer terminates without notice or before the notice period ends, they must pay the worker an amount equivalent to the worker’s wage for that time.
- An employee can withdraw their resignation in writing within a week from the acceptance date.
- Employers can terminate indefinite contracts with ‘reasonable reasons,’ such as falsifying identity, causing serious damages, repeated safety negligence, unexplained absence, and more.
- Employees can terminate the contract if the employer defaults on obligations, commits hostile acts, or violates contract terms.
- These contracts end upon the work’s completion. If the work exceeds five years and both parties continue, it’s considered renewed for an indefinite period.
- Renewable work projects result in implicit contract renewals.
This overview highlights key aspects of employment contracts in Egypt, but it’s essential to consult with legal experts at Mercans for specific guidance and to ensure compliance with local labor laws and regulations.
Social Security in Egypt
Egypt’s Social Protection
Egypt’s social protection system has undergone significant improvements over the past decade. Law 148, implemented in 2019, unified and streamlined the regulatory framework, merging multiple social insurance laws into one comprehensive statute. This legal shift also facilitated the amalgamation of the Government Social Insurance Fund (GSIF) and the Public and Private Social Insurance Fund (PSIF). Law 148 covers a range of benefits, including pensions for old age, disability, and survivors, along with support for work-related injuries, unemployment, and sickness. The International Labour Organization (ILO) played a vital role in shaping this legislation and continues to support its implementation.
In 2018, Egypt introduced the Universal Health Insurance Law, striving for universal healthcare coverage by 2032 through a mix of contributory and non-contributory elements, partly funded by new tax mechanisms. The country also launched social assistance programs, including Takaful for impoverished households and Karama, offering support to the elderly, disabled individuals, and orphans, with backing from World Bank loans.
Social Security
Who is Subject to Social Security Contributions?
Social security contributions in Egypt apply exclusively to Egyptian nationals engaged in full-time employment.
Exemptions
Social security contributions are subject to minimum and maximum amounts, which are adjusted monthly as per the new limits.
Contribution Rates
- For employees aged over 60: 1% employee and 6% employer contribution.
- Company Managers’ salaries are subject to a 15% employer contribution (capped at 2,500 EGP). No employee contribution is required for Company Managers.
Various income elements are subject to social security deductions, as reported to the National Organization for Social Security (NOSI) annually. This includes:
Partial Periods (Starters, Leavers, Unpaid Leave, and Salary Changes)
- Joiners are subject to social insurance deductions when they join at the beginning of a month. If they join on any other day of the month, deductions begin from the following month.
- Leavers continue to face monthly social security deductions on their departure date.
- During unpaid leave, full social security deductions apply. The employee bears both the employer’s and the employee’s share of the contribution.
Declaration and Remittance
Social Security deductions and contributions should be remitted to NOSI before the 15th of the following month. Payments can be made with cheques from foreign bank accounts if the bank has a branch in Egypt.
Law and Authorities
The National Organization for Social Insurance (NOSI) is the governing body responsible for social security regulations in Egypt.
Initial Employer Registration with the Social Security Authority
To initiate registration with the Social Security Authority, companies must provide the following documents to NOSI:
- Commercial Register
- Tax Card
- Power of Attorney designating the authorized representative
- Copies of the incorporators’ IDs/Passports
- Articles of Association
- Signature Form
Registration of New Hires and Leavers with the Social Security Authority
New hires and leavers must be registered with NOSI within 15 days from the hiring date. Required documents include the employment contract, educational certificates, birth certificates, and National ID copies. For engineers or technicians, a union membership card and the last subscription invoice or technician skills certificate are necessary.
Registration of Salary Changes
Salary changes should be reported to NOSI using Form No. 2 within 30 days from their effective date.
Social Insurance in Egypt
The New Law provides a clear definition of the “comprehensive insurance salary,” encompassing all forms of employee remuneration, such as fixed salary, incentives, tips, overtime payments, and commissions. It’s important to note that comprehensive insurance coverage is subject to specific minimum and maximum thresholds, as detailed below:
- The minimum insurance salary is set at EGP 1,000 per month or EGP 12,000 annually.
- In contrast, the maximum insurance salary stands at EGP 7,000 per month or EGP 84,000 annually.
Additionally, it’s worth highlighting that these minimum and maximum amounts are slated to undergo an annual increase of 15% for the next seven years, commencing on January 1, 2021.
Payroll in Egypt
Minimum Wages in Egypt
Egypt has established minimum wage regulations, with the minimum wage currently set from EGP2,700.00 to EGP3,000.00 (Egyptian Pounds) per month.
Egypt Employee Hiring Cost
To calculate the total cost of hiring an employee in Egypt, you need to consider various employer costs in addition to the employee’s gross annual salary. Here’s the breakdown for a gross annual salary of EGP 3,000.00:
- Gross Annual Salary: EGP 3,000.00
- Total Annual Employer Costs: EGP 592.56
- Total Annual Cost: EGP 3,592.56
The “Total Annual Employer Costs” represent the additional expenses that the employer incurs on top of the employee’s salary, such as social security contributions, benefits, and other statutory obligations. The “Total Annual Cost” is the overall expenditure for the employer when hiring the employee, encompassing both the gross salary and the associated employer costs.
Termination in Egypt
In Egypt, termination laws are impacted by several factors. Listed below are a few important points to keep in mind:
- End Of Employment Contracts’ Duration: Employment contracts exceeding 5 years can be terminated by the employee, provided they give a 3-month notice prior to termination.
- Employment Contracts for Specific Task: Contracts created for a specific task end upon the completion of that task. Renewal of such contracts can occur through mutual agreement or by continuing work after task completion.
- Indefinite Employment Contracts: Employees can terminate indefinite employment contracts for legitimate reasons related to their health, social circumstances, or economic conditions. Employers can only terminate these contracts if an employee is inefficient or has committed a significant mistake.
- Dismissal Of Employees: Employers can dismiss employees for gross mistakes, such as identity fraud, actions leading to material losses, repeated safety rule violations, or specific other reasons defined by law. Specific procedures must be followed for dismissal.
- Employee’s Incapacity: Total incapacity of an employee results in the termination of the employment contract. In cases of partial incapacity, the contract remains valid unless the employer can prove that the employee cannot perform any job duties. If alternative work is available, the employer should offer it.
- Employee’s Sickness: Employees cannot be terminated due to illness, unless they have exhausted their sick leave entitlement as defined by law, in addition to their annual leave. Employers must notify employees about termination 15 days before their leave entitlement ends, and termination cannot occur if the employee recovers before receiving the notice.
- Retirement: An employer has the right to terminate the employment of an employee who reaches the age of 60, unless the contract specifies a different retirement age. If the employee continues to work beyond the retirement age, they are entitled to certain indemnities based on years of service.
- Female Employee’s Right To Terminate: Female employees can terminate their employment contracts for reasons related to marriage, pregnancy, or childbirth, without affecting their rights under labor and social insurance laws.
- Termination For Disciplinary Reasons: Employers are entitled to terminate employees for specific crimes or convictions.
- Termination For Economic Reasons: Employers can terminate employment contracts due to economic necessities, subject to certain procedures. Compensation for terminated employees depends on their years of service.
- Resignation: Resignation must be submitted in writing and can be withdrawn within a week if accepted by the employer.
- Unlawful Termination: Some reasons for termination are considered illegitimate, and the party responsible for an unlawful termination is required to compensate the other party for any damages incurred.
- Death Of Employee: The employment contract ends upon the death of the employee. The employer must provide compensation to the employee’s family.
- Notice of Termination: Notice periods and procedures for termination are specified for both employees and employers. In the case of employer-initiated termination, employees are provided time to find another job.
- Mandated Annual Raises Employers are obligated to provide annual raises of at least 7%.
- Equal Opportunity Discrimination in hiring based on sex, origin, language, religion, or creed is strictly prohibited.
- Minimum Wage A minimum wage is defined for all workers, even those on commission.
- Annual Leave Employees are entitled to 21 days of paid annual leave.
- Maximum Work Hours The maximum workday is 8 hours, and the maximum work week is 48 hours.
- Termination Rules Employees or employers can terminate open-ended contracts with proper notice. Employers can dismiss employees only for serious offenses.
- Minimum Wage and Overtime Minimum wage rates are set by sector, and overtime pay is required.
- Leave Allowances Annual leave of at least 21 days is provided, increasing for longer service or age.
- Health Insurance and Social Security Employers must provide health insurance and social security coverage.
- Maternity Leave Female employees receive maternity leave for three paid months per baby.
- Disability Insurance Employees who pay into social insurance are eligible for injury benefits.
- Unemployment Compensation Unemployment benefits are available to eligible employees.
- Termination Rules Specific termination rules are in place, with notice requirements.
Employee Benefits in Egypt
In Egypt, labor laws provide robust protections for employees. After six consecutive months of employment with an employer, employees are entitled to various benefits, including social security, health insurance, paid leave, sick leave, and maternity leave. These protections extend to full-time, part-time, and temporary employees, but do not cover independent contractors.
Key labor protections in Egypt include
Hiring
Employers are allowed to request certain information from job candidates, but discrimination based on age, religion, gender expression, or race is prohibited. The employment contract must be provided in Arabic.
Statutory Benefits in Egypt
Full-time employees in Egypt are entitled to various statutory benefits, including:
Supplemental benefits can include home office supplies, flexible scheduling, bonuses, additional paid time off, and health and wellness programs.
To stay compliant and ensure accurate payments, especially for international employees, consider using a Professional Employment Organization (PEO) like Mercans. A PEO handles payroll, taxes, and benefits, keeping your company in compliance with local labor laws. This is essential when hiring remote employees in Egypt or other countries.
Personal Income Tax in Egypt
Egypt has progressive income tax rates and rules that are subject to change as legislation changes. To get an idea of the updated, most recent rates, please read below:
| Earned Income (EGP*) | Tax Rate on Bracket (%) |
|---|---|
| From 0 to 21,000 | 0 |
| 21,000 to 30,000 | 2.5 |
| 30,000 to 45,000 | 10.0 |
| 45,000 to 60,000 | 15.0 |
| 60,000 to 200,000 | 20.0 |
| 200,000 to 400,000 | 22.5 |
| More than 400,000 | 25.0 |
| More than 1,200,000 | 27.5 |
*EGP stands for Egyptian pounds Individual income tax is applicable to resident individuals for income earned in Egypt and income earned outside Egypt for resident individuals whose center of commercial, industrial, or professional activities is in Egypt. It also applies to the income of non-resident individuals for income earned in Egypt. Both residents and non-residents can benefit from an annual salary tax exemption of EGP 15,000.
Work Permit in Egypt
In numerous countries, a distinct Work Visa category exists. However, in Egypt, foreigners planning to work simply need to apply for a work permit. The process for acquiring an Egyptian work permit involves several stages and may sometimes span a few months.
You can obtain the application form from the nearest Ministry of Manpower and Training Office (in Cairo, this is situated within the Mugamma in Tahrir Square).
Essential documents required for the application include:
Employer of Record Cairo
Mercans proudly owns and operates an established entity in Cairo, Egypt. We offer a wide range of services designed to facilitate and support foreign companies seeking to expand their operations into this dynamic market. From handling complex employment procedures to ensuring compliance with local labor laws, Mercans is here to provide the expertise and support you need.
Global Employment Services in Cairo
Conclusion
Mercans is your comprehensive partner for all things related to employer of record Egypt services. With our deep local expertise, we make it easy for foreign companies to navigate the complexities of Egypt’s employment landscape. From payroll and workforce expansion to HR and compliance, Mercans ensures that your business operates smoothly and in full compliance with Egyptian labor regulations. Trust us to be your reliable partner in Egypt.