Payroll in Egypt

Mercans excels as a leading provider of payroll services in Egypt. Our steadfast commitment to delivering exceptional payroll solutions is evident through our tailored services, incorporating cutting-edge technology to meet the unique needs of employers across various industries and sizes. With extensive experience in payroll management, Mercans ensures precise and compliant payroll services in Egypt, establishing us as the preferred choice for businesses overseeing one employee or managing an entire workforce. Trust Mercans for accurately processed payroll transactions and the convenience of multi-currency payments. As your dedicated local payroll partner in Egypt, we take pride in our team of in-country payroll specialists, well-versed in local regulations, providing comprehensive support for a seamless payroll experience tailored to your business requirements.

Scope of Payroll Services in Egypt

In the domain of delivering payroll services in Egypt, Mercans provides an extensive array of personalized solutions crafted to align with the distinct needs of our clients. This specific Standard Operating Procedure (SOP) should be perused alongside the broader Service Definition and Payroll Services SOP for a comprehensive understanding of the services extended.

Covered Areas:

Maintenance of Employee Master Data
Processing of Leave
Calculations for Payroll
Journal Entry for Payroll
Oversight of Bank Transfers
Documentation of Payroll Cycle
Generating Reports for Payroll
Ensuring Data Security
Issuance of Statutory Certificates
Settlements for Employee Finalization
Handling Queries from Employees and Providing Support Desk Services

Additional Services

Establishment of Legal Entities
Provision of Compliance Information
Assistance with Annual Tax Filing
Advisory Services
Administration of Benefit Programs
Integration of Technological Solutions
Conducting Training Sessions and Webinars

Payroll Solutions in Egypt

Discover the potential of streamlined payroll processing in Egypt with Mercans’ Global Payroll Solutions. Our versatile models ensure local compliance, facilitate multi-currency transactions, and seamlessly integrate with global Human Capital Management (HCM) and Enterprise Resource Planning (ERP) systems. Accurate payments have never been more straightforward.

Explore Our Adaptable Models

  • SaaS (Software as a Service): Tailored for enterprise businesses managing multi-country payroll with intricate complexities arising from diverse data points, locations, currencies, and languages. Our SaaS model optimizes operations for peak efficiency.
  • Managed Services: Designed for mid-sized and large enterprise businesses, our Managed Services model caters to those operating multi-country payroll. It provides on-demand HR expertise, ensuring security, reliability, and compliance across the board.
  • HRMS (Human Resource Management System): Ideal for mid to large businesses in expansion mode, our HRMS model offers a comprehensive range of functionalities, including payroll and benefits. Businesses can select the specific features they need, ensuring a tailored and efficient solution.

Experience payroll solutions that transcend boundaries, customized to meet the unique needs of your business in Egypt and beyond.

Establishing an Entity in Egypt

Establishing a Limited Liability Company (LLC) in Egypt has become more accessible, thanks to the flexible procedures and laws under the new investment law. The streamlined process involves the following steps:

Complete the primary contract form, including company details, purpose of incorporation, and specified period.
Fill out the security inquiries form if partners are of foreign nationality, obtained from the Security Information Office at the Investment Authority.
Obtain a certificate of non-repetition of the trade name from the General Investment Authority.
Open a bank account, mandatory for one-person companies with capital deposit requirements.
Withdraw the file follow-up form for use in concluding the company contract.
Review all documents to ensure compliance with conditions.
Print and pay the fees after verifying document conditions.
Register in the land registry, confirming the presence of the original power of attorney and the agent’s identity card.
Follow up on the incorporation decision after 24 hours, delivering the company file to the Chambers of Commerce.
Submit the application and registration form to the Commercial Registry to issue the commercial registration number and make the decision to establish the company.

The costs for establishing an LLC in Egypt vary based on required documents, company activity, and capital amount, ranging from approximately 4000 EGP to 43,000 EGP, depending on the applicable laws.

Minimum Wages in Egypt

As of July 1, 2023, Egypt has updated its minimum wage, raising the national minimum from EGP2,700.00 to EGP3,000.00 per month.

Payroll Cycle Process in Egypt 

Managing payroll in Egypt follows a structured cycle to ensure accuracy, compliance, and timely compensation for employees. Here’s a simplified breakdown of the process:

Continuous Data Flow

Throughout the month, the Client’s Payroll Coordinator provides a continuous flow of data until the cut-off date.
Minimizing delays in data dispatch is crucial for an efficient process.

Cut-off Date

This marks the final day for the Client to input permanent and variable data.
Signifying a crucial point in the cycle, it ensures all necessary information is gathered.

Transaction Handling during the Pay Period

The Client’s Payroll Coordinator accumulates all transactions throughout the pay period.
By the cut-off date, all transactions must be available, signed, and approved.

Verification of Transactions

Mercans meticulously verifies various transactions impacting payroll processing.
This includes changes to employee details, new hires, terminations, fixed payroll components, variable transactions, final settlements, and loan calculations.
Compliance with tax and social security regulations is a key focus.

Closing the Payroll

On the closing date, Mercans ensures the delivery of expected output reports and employee payments.
Finalizing the payroll for the relevant month, this step signifies the end of the cycle.

How Mercans Supports

  • Mercans specializes in navigating the complexities of Egyptian payroll processing.
  • Our team ensures a systematic and accurate approach to handling transactions.
  • Compliance with tax and social security regulations is a priority.
  • Timely delivery of Payroll Outputs is guaranteed within 3 working days post the processing date.

In summary, the payroll processing cycle in Egypt involves a coordinated effort from continuous data input to finalizing payments. Mercans plays a crucial role in ensuring a smooth and compliant process for our clients.

Mercans verifies transactions impacting payroll processing, including:

  • Changes to existing employee details.
  • New hires and terminations.
  • Other fixed payroll components (pay increases, bank details, etc.).
  • One-off variable transactions (sickness days, overtime, reimbursements, deductions, etc.).
  • Final settlement due to employment termination.
  • Calculation of wage-tax reduction schemes.
  • Loans provided.

On the closing date, Mercans confirms the delivery of all expected output reports and payment to employees, finalizing the payroll for the relevant month. If the Client contact is unavailable, an alternative date should be agreed upon in a timely manner.

Registration of Employees to Statutory Bodies

Employee registrations with statutory authorities (Tax and Social Security) involve notifying them of new starters or leavers. Mercans, where legally permitted, includes this registration as part of its standard service.

Social Security Registration:

The NOSI (National Organization for Social Insurance) benefits the following employees:

  • All Egyptian employees aged over 18.
  • Non-Egyptian employees from countries with reciprocal treatment/agreement with Egypt.

Registration of New Hires and Leavers with the Social Security Authority:

All new hires and leavers must be registered with NOSI within 30 days from the hire date. For new hires, the following documents are required:

  • Social Insurance Application No. 1
  • Employment contract for the employee
  • Copy of the educational certificate of each employee
  • Copy of the birth certificate of each employee
  • National ID Copy

When appointing Mercans as an authorized representative with NOSI, a standardized power of attorney format (established by NOSI) must be used. For leavers, Social Insurance Allocation No. 6 must be filed with NOSI for the registration process.

Declaration to Statutory Bodies

Note: Mercans does not make third-party payments as part of the standard service.

Mercans handles the preparation and submission of the following declarations as part of its standard service, while clients are responsible for payments to NOSI (National Organization for Social Insurance).

Social Security/Insurance (NOSI) Forms include:

Enrollment Request Form (Form 1)
Declaration of Salaries (Form 2)
End Of Service Notification (Form 6)
Social Insurance Coverage Form (Form 10)
Work Injury Notification (Form 67)
Previous Enrollment Periods Form (Form 7)

Social Security Payment Details:

Due Date to Pay Contribution: 15th of the month following the due month.
Payment Options: Cash or Cheque.
Power of Attorney needed if payment is done on behalf of the employer.

Declaration Types and Filing Frequencies:

Monthly Payment

  • No declarations, but payment of monthly dues.
  • Filing Frequency: N/A (Monthly)
  • Payment Frequency: Monthly
  • Due Date:Within 15 days from the month-end.
  • Process:Preparation and submission of the payment cheque to the authority (based on Payroll reports).

Registration of Salary Changes

  • Monthly SS deductions are calculated based on the actual monthly salary.
  • New salaries are used for the calculation of monthly deductions starting with the month they become effective (no prorate).
  • No Payment is due against this declaration.
  • Filing Frequency: Event-dependent
  • Due Date: Within 30 days from the salary change date.
  • Process: Filling out application No. 2 and submission to the authority.

Payroll Processing in Egypt

Payroll processing in Egypt is a crucial four-step cycle, involving meticulous tasks from data collection to post-processing. From adhering to a detailed Payroll Processing Timeline, handling transaction verifications, and ensuring timely payments, each stage demands accuracy and compliance. Mercans, with its specialized expertise and a 98% satisfaction rate, stands ready to navigate the complexities of Egyptian payroll. Contact our team for comprehensive payroll solutions tailored to your business needs.

For more information on optimizing your payroll in Egypt, contact Mercans today. 

Pre-Processing: Data Preparation and Control

  • Objective: Ensure accurate and timely data for payroll processing.
  • Key Tasks:
    • Prepare and send yearly declarations to the client for review and signature within 10 working days.
    • Review, sign, and deliver the yearly declaration form to Mercans within 5 working days.
    • Submit the yearly declaration form to the tax authority within 5 working days.
    • File authority receipt of the yearly declaration, report, or make it available for the client within 3 working days.
    • Archive all relevant documentation.

Pay Processing Cycle and Pay Calculation:

  • Objective: Accurately process payroll based on client-specific rules and legal requirements.
  • Key Tasks:
    • Respect cutoff dates for sending changes using the corresponding input template, ensuring timely data import into the payroll system.
    • Process payroll, check and validate results, and generate/send pay slips and reports to the client as per the agreed method.
    • Receive, print, and distribute pay slips to employees or perform email distribution (as an add-on).
    • Generate output reports (payroll, GL, Tax, etc.) and make reports available to the client.
    • Archive process results.

Off-Cycle Pay Calculation:

  • Objective: Handle special cases for leavers/starters or specific requests for off-cycle pay calculations.
  • Key Tasks:
    • Respect cutoff dates for sending changes using corresponding input templates.
    • Process off-cycle payroll, check and validate results, and generate/send pay slips and reports to the client as per the agreed method.
    • Receive, print, and distribute pay slips to employees or perform email distribution (as an add-on).
    • Generate output reports (payroll, GL, etc.) and make reports available to the client.
    • Archive process results.

Processing of Statutory Year End:

  • Objective: Ensure compliance with statutory requirements at the end of the tax year.
  • Key Tasks:
    • Prepare yearly income tax declarations and deliver to the client for review and signature within 10 working days.
    • Review, sign, and deliver the income tax declaration form to Mercans within 5 working days.
    • Submit the income tax declaration form to the tax authority within 5 working days.
    • File authority receipt of the income tax declaration, reconcile quarterly tax declaration amounts, and make reports available to the client.
    • Archive all relevant documentation.

Payroll Processing in Egypt – General Steps of Pay Processing Cycle:

  • Additional Insights:
    • Mercans ensures remuneration calculations align with legal requirements, client-specific rules, and the Payroll Processing Timetable.
    • Execution of client instructions for payroll administration and calculation using the chosen data input method.
    • Verification of payroll accuracy by Mercans based on client-provided data.
    • Generation of payroll outputs, including statutory declarations, upon client sign-off.

Post Processing Services in Egypt

Post-processing services in Egypt refer to the critical tasks undertaken after the primary payroll cycle to manage changes and updates efficiently. These services encompass responsibilities related to the General Ledger (GL), ensuring accurate financial recording and compliance with accounting standards. The process involves customization of GL files, cost center allocations, and other adjustments to meet the specific needs of the client’s accounting framework.

Key Aspects of Post Processing Services

  • General Ledger Customization:

    • Output formats: csv, txt, pdf, or excel files.
    • Mapping flexibility: Linking wage types/pay elements to accounting codes.
    • Cost center allocation: Customizable to meet client requirements.
  • Customization Complexity Levels:

    • Minor Complexity (Level 1):

      • Adjustments to existing GL files (header/footer, label changes).
    • Medium Complexity (Level 2):

      • Text/csv file generation for cost centers, GL accounts.
      • Splitting cost center allocations, adding GL class for final posting.
    • High Complexity (Level 3):

      • Individual GL posting by employee.
      • Structured file generation for specific ERP input.

Mercans’ Contribution

In managing these post-processing tasks, Mercans collaborates with clients to assess changes, configure systems accordingly, and generate trial files for verification. The process includes internal controls in finance and accounting, ensuring accuracy and compliance. Mercans archives the entire process, providing transparency and efficient handling of changes to the General Ledger. Any additional charges are communicated and approved by the client, guaranteeing a smooth transition.

Payroll Administration in Egypt

Delving into the nuances of payroll administration in Egypt demands a thorough grasp of local laws and regulations. The following information will assist you in navigating this complex landscape:

Employee Fixed & Variable Changes

Maintenance of Client Master File: Data Input Methods

Mercans administers the client personnel master file, processing fixed employee data changes and variable transactions using:

Standard input templates provided by Mercans.
Standard input template/documents approved by Mercans.

Standard inputs include necessary fields to meet Mercans service definitions, generate payroll reports, and comply with local statutory requirements.

Additional client-required information incurs extra fees.

Client fills data input templates following predefined formats; incorrect or incomplete templates are rejected.

No statutory obligation to provide supporting documents unless specifically requested; client is responsible for HR and payroll file maintenance per local regulations.

Changes in Fixed Employee Details

Fixed employee data, initially provided by the client, undergoes changes communicated through standard data input templates.
Templates differentiate between new records (I – Insert) and updates to existing records (U – Update).
Client responsibilities include internal approval, preparing templates, registering changes with non-tax authorities when applicable, validation, processing changes, and internal controls before archiving.

Variable Transactions

Employee variable data changes are communicated through standard input templates; Mercans provides a single template for amount-based changes and separate forms for unit-based transactions.
Pre-defined pay elements (e.g., overtime, bonus) must be established during setup.
Client responsibilities include identifying transactions, internal approval, completing templates, dispatching to Mercans, validation, internal controls, and archiving.

Emergency Cases / Exceptional Input

Limited to leavers, change of bank details, change of pay method, and last-minute absence.
Rules govern emergency cases, restricting inclusion of overtime or variable data.
Any other payroll data not detailed should be carried forward to the next pay period.

Starters / New Employees

Recruitment and onboarding processes include assigning a client ID, benefits inclusion, gathering mandatory documents, completing registration forms for tax authorities, submitting input templates, and registering with non-tax authorities if applicable.
Client ensures validation and processing of data collection templates within the payroll processing timetable.

Leavers

No statutory End of Service Gratuity payment in Egypt; any gratuity processed is considered a variable change.
Termination process involves defining termination conditions, generating termination letters, submitting corresponding input templates to Mercans, and processing termination transactions.
Submission of ‘Termination of Service Form’ to social security authorities is mandatory within 3 days of termination.

Absence Recording for Pay Purposes

Time and Attendance administration is not included in standard service.
Client declares unpaid absences with reasons up to the cutoff date for applicable deductions.

Paid Absences (Holidays, Compensatory Leaves, Non-Working Days)

No statutory requirement to split monthly salary for paid absence/leave.
Client updates annual leave balances; statutory leave includes holiday, compensatory leave, and non-working days.

Paid Hajj/Pilgrimage Leave, Sickness Leave, Maternity Leave

Specifics for paid leave types include eligibility, entitlement, and payment details.

Tax and Social Security in Egypt

The Egyptian tax year spans from January 1st to December 31st, with employers responsible for quarterly tax returns, due within one month after each quarter’s end. An annual salary tax reconciliation, including employee salaries, deductions, exemptions, and net payments, must be filed. Late submissions incur a 1% monthly penalty for both tax and social security contributions.

Income Tax for Residents and Non-Residents

Employers calculate monthly salary tax, remitted to tax offices within the first 15 days of the subsequent month. Temporary residents or those without citizenship status file annual tax returns on January 1st, with quarterly returns mandated for employers. Year-end, an annual salary tax reconciliation is prepared, addressing any disparities.

Penalties for non-compliance include a 2% fee plus the Central Bank’s declared discount rate (currently around 11%).

Example Tax Calculation

Monthly Salary

EGP 102,975.96

Social Insurance

EGP 473.4

Personal Exemption

EGP 600

Taxable Income

EGP 101,902.56

Tax

EGP 14,629.83

Net Income

EGP 87,872.73

Social Security

The Egyptian constitution mandates social security services, covering old age, disability, death, occupational accidents, sickness, unemployment, and social care. Approximately 80% of employees are covered under the public program, with contributions based on base and variable earnings. Monthly contributions should be made within 15 days of the following month.

Reporting also includes an annual salary reconciliation submitted by the end of January, detailing employee names, gross income, and yearly tax calculations.

Key Legislative Authorities

Investment Authority

Salah Sales, Cairo

Tax Authority

5 Hussien Hegazy Street, Cairo

Social Insurance Authority

5 Lazoghly Sq Monera, Cairo

New Employees

Employers handle payroll and registrations for new employees. Registration with local authorities must occur within 15 days of employment commencement. Required documents include employment contracts, personal IDs, education certificates, Social Insurance Form (1), birth certificates, valid passports, and work permits.

Leavers

Upon an employee’s departure, the final payment is included in the last payslip, remunerated by the month-end. Employers must notify Social Security of the employment contract termination.

Payroll Outsourcing in Egypt

Engaging in payroll outsourcing in Egypt presents several advantages, such as cost-effectiveness, precision, and adherence to regulations. With a 98% satisfaction rate, Mercans excels in payroll outsourcing, expertly managing the intricacies of Egyptian payroll procedures. Mercans guarantees punctual disbursements and offers proficient counsel on labor and tax compliance.

Payroll in Cairo

Mercans, with its established presence in Cairo, is your trusted partner for comprehensive payroll services in Egypt. Our expert team is well-versed in the intricacies of payroll laws across various Egyptian locations, including Cairo and other major cities. Let us seamlessly handle your payroll needs, ensuring compliance and efficiency.

Conclusion

In conclusion, Mercans stands as your dedicated ally in navigating the complexities of payroll services, providing tailored solutions, and ensuring compliance with regulations in Egypt and beyond. With our proven expertise, advanced technology, and commitment to client satisfaction, we empower your business to thrive in the ever-evolving landscape of workforce management. Choose Mercans for a seamless, efficient, and reliable payroll experience.

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.