Kara Sears
Egypt has a large workforce with a strong grasp of multiple languages, including English, French, and German. This makes it an attractive location for companies to outsource multilingual support services. Additionally, Egypt has a growing outsourcing sector, with the government implementing policies such as the new investment law to attract more foreign investments. Egyptian employment law recognises the act of outsourcing as a crime against both the employer and the client, with penalties including imprisonment and fines. The Labour Law defines an employee as any person who performs work in consideration of remuneration for the employer and under the employer's direct supervision. In the context of outsourcing, if a secondee can prove an employment relationship with the client, they will be considered an employee of the client and entitled to claim employment rights.
| Characteristics | Values |
|---|---|
| Outsourcing law | Outsourcing is a crime, penalized with imprisonment and fines |
| Labour Law definition of employee | Any person who performs work for remuneration under the employer's supervision |
| Labour Law on discrimination | Prohibits discrimination based on gender, race, language, religion or beliefs |
| Labour Law on foreign workers | Foreign workers cannot exceed 10% of the workforce without approval |
| Labour Law on overtime pay | Employees may contractually waive the right to overtime pay |
| Labour Law on annual vacation | Employees are entitled to 21 days of annual leave, increasing to 30 days after 10 years |
| Labour Law on sick leave | Manual labour workers and those in industrial institutions are entitled to one month of paid sick leave every 3 years |
| Labour Law on unlawful termination | Employees are entitled to a minimum of 2 months' salary as severance or compensation for lack of notice |
| Employment Law | Subjective towards employees, granting them various rights |
| Employment Law on claims | Employees must raise a claim within 76 days of a dispute with their employer |
| Employment Law on illegal termination | Courts can decide the legality of termination and compensation owed |
| Employment Law on employment contracts | Contracts must be drafted in Arabic |
| Employment Law on probation | Probation period is restricted to 3 months |
| Payroll solutions | Remote, internal, payroll processing firm, or Employer of Record (EOR) services |
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What You'll Learn
Outsourcing legality and employee rights
Outsourcing in Egypt is a compelling choice for many global corporations due to its cost-effectiveness, efficient legal framework, and proficient human capital. The country's central location offers a distinct advantage for enterprises in Europe, Africa, and Asia, enabling seamless real-time collaboration.
Egypt has explicit laws and regulatory mechanisms in place to create an environment conducive to outsourcing, protecting both service providers and their clients. Law No. 72 of 2017, for instance, provides various incentives for foreign investors interested in outsourcing opportunities in the country. Additionally, the Egyptian government has been encouraging the outsourcing sector through progressive policies, ensuring streamlined processes and substantial growth prospects.
The Egyptian Employment Law, also known as Law No. 12 of 2003, stipulates and organises the relationship between employers and employees. This law is subjective towards employees, granting them various rights. For instance, it allows employees to claim compensation for unused annual leaves if the employer did not allow usage due to work needs. It is important to note that, according to Egyptian Employment Law, the act of outsourcing is a crime punishable by imprisonment and fines. This law defines an employee as any person who performs work for remuneration under the employer's direct supervision. Therefore, if a secondee can prove an employment relationship with the client, they are entitled to claim all their employment rights from the client.
To raise a claim for employment rights in Egypt, employees must do so within seventy-six days. This rule is well-established and often used by defendants before employment courts, as the elapse of this duration results in the loss of the right to claim. However, the court may overrule this rule based on certain conditions, such as the employee's ability to prove a dispute with the employer.
Regarding payroll, Egyptian payroll solutions offer various options for firms, including remote payroll through a parent company, internal payroll at a subsidiary, and outsourcing to a local payroll processing business. When adding employees of a subsidiary to an existing payroll, each country's employees will be subject to their own laws. If outsourcing payroll, the employer is still accountable for employee salaries.
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Payroll and compliance
Outsourcing payroll and compliance in Egypt can be a complex and time-consuming process. To establish and run payroll yourself, your organisation will need to follow a complex set of laws and procedures unique to Egypt. This includes registering a legal entity, signing up with the relevant authorities, opening bank accounts, and hiring a workforce.
A popular option to outsource payroll in Egypt is to use an Employer of Record (EOR) service. An EOR enables companies to hire employees without establishing a local business entity. The EOR takes on all legal and HR responsibilities, including payroll, taxes, and compliance with local employment laws. This allows companies to quickly start operations in Egypt while minimising administrative burdens.
There are several EOR providers in Egypt, including Skuad, Horizons, and Roots Management Consultants. These companies can help with payroll setup, management, and compliance with local laws. For example, Roots Management Consultants offer a team of dedicated payroll experts, including ex-employees of the Egyptian Tax Authority and the Public Authority for Social Insurance, to ensure compliance with tax laws and social insurance regulations.
Alternatively, companies can choose to outsource their payroll to a local Egypt payroll processing business. However, it is important to note that the company will still be held accountable for their employees' salaries. Another option is to set up an internal payroll at the subsidiary in Egypt, but this requires a bigger budget to recruit HR personnel.
Overall, outsourcing payroll and compliance in Egypt can be a beneficial option for companies looking to expand into the country, as it can streamline the hiring and payroll process and ensure compliance with local laws and regulations.
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Contractual obligations
In Egypt, the contractual obligations, rights, and regulations relevant to employment are delineated by Labor Law No. 12 of 2003. This law is subjective towards employees in all its rules, as employees are deemed to be the weakest party in the relationship and in need of security.
Employment contracts in Egypt must be drafted in Arabic for both international and Egyptian employees. Multiple renewals of temporary work contracts are permitted under the labor law. The probation period is restricted to three months, and standard working hours are 8 hours per day or 48 hours per week. During the month of Ramadan, the working day is typically reduced by two hours. However, working hours can vary depending on the industry, with additional provisions for overtime.
In the case of illegal termination, employment courts can only evaluate and decide the termination's legality and the amount of compensation. If an employer terminates a fixed-term employment contract without cause, they are obliged to cover the full wage that the employee would have received for the whole period of the contract. If the employer terminates an indefinite-term employment contract without cause, the employee is entitled to compensation, including no less than two months' full income for each year of service, as well as entitlements such as earned leaves, bonuses, and other benefits. If the employee has served the company for more than 10 years, they are entitled to three months' notice (90 days).
To raise a claim for any employment rights, an employee must do so within seventy-six (76) days. The most important condition for applying this rule is the employee's ability to prove the existence of a dispute with the employer.
The act of outsourcing is considered a crime against both the employer and the client, penalized by imprisonment and fines. Outsourcing results in an employee performing their job duties solely for a company without having a clear employment relationship with it, while the actual employer does nothing except second the employee to other companies.
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Discrimination and harassment
Despite these developments, women's and human rights groups have expressed concerns about the new law, arguing that it defines key concepts too narrowly. For example, the law defines harassment as an offence that occurs when a man follows or stalks a woman and communicates sexual or pornographic content. This definition has been criticised because it makes the crime conditional on following or stalking, which are not necessary for harassment to occur.
In addition to the new anti-sexual harassment law, Egypt's Employment Law also plays a role in addressing discrimination and harassment in the workplace. The Employment Law is subjective towards employees and grants them various rights. For example, the law allows employees to claim compensation for unused annual leave if the employer did not allow them to use it due to work needs. To raise a claim for any employment rights, employees must do so within 76 days, and they must be able to prove the existence of a dispute with the employer.
While Egypt has made strides in addressing discrimination and harassment through legislation, there are still concerns about the effectiveness of these laws in practice. Some researchers have pointed out that the rationale behind legislation and court rulings on sexual violence is flawed because it focuses on public morality and maintaining family unity rather than acknowledging individuals' rights to bodily integrity and freedom from harassment.
Furthermore, the enforcement of these laws remains a challenge. The United Nations has encouraged Egyptian authorities to ensure the enforcement of the newly adopted anti-sexual harassment law and hold perpetrators accountable. The organisation has also called on civil society and stakeholders to join forces and take a firm stand against all forms of gender-based violence in Egypt.
In conclusion, while Egypt has made efforts to address discrimination and harassment through legislation, there are ongoing concerns about the effectiveness of these laws in practice and their enforcement. It remains to be seen whether these laws will successfully protect individuals, particularly women and girls, from discrimination and harassment in the workplace and public spaces.
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Termination and severance
The termination of an employment contract in Egypt is governed by various laws and regulations, including the Egyptian Labor Law No. 12 of 2003. The law provides a non-exhaustive list of grounds for termination, including subjective grounds such as employee misconduct, poor performance, or repeated violations of work rules, and objective grounds such as redundancy due to economic or technological reasons.
An employer may not terminate a limited duration contract before its term without being viewed as wrongful termination and held liable for compensation. In the case of unlimited duration contracts, an employee cannot be dismissed unless they are proven incompetent or have committed a fundamental breach of contract. The Labour Court has exclusive authority to decide on the dismissal of an employee.
Some specific grounds for termination without notice or severance pay include gross misconduct, such as theft, fraud, violence, or harassment, and breach of confidentiality. Other grounds for termination include attacking the employer or general manager during working hours, breaching provisions related to strikes, conviction of a felony, and excessive absence.
In the case of mass terminations or collective dismissals, employers are allowed to terminate the activity of the establishment totally or partially or to reduce its size for economic reasons. In such cases, employers are obliged to pay terminated employees a sum equal to one month's salary for each of the first five years of service and one-and-a-half month's salary for each year of service after the first five years.
Severance pay is established by the Social Insurance Law (Law No. 79/1975), which grants employees the right to severance pay upon reaching the age of 60. Severance pay is calculated at a rate of half a month's wage for each of the first five years of service and one month's pay for each subsequent year, based on the employee's last salary.
Employers must provide reasonable notice periods or payment in lieu of notice upon termination. An investigation must be conducted with the employee, and the question of dismissal should be referred to the Labour Bureau or the Labour Court before termination.
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Frequently asked questions
The Employment Law or the Law 12 of 2003, as amended, enforced on 8 July 2003, stipulates the relationship between an employer and employees.
Outsourcing an employee in Egypt involves seconding them to another company, where they perform their job duties without a clear employment relationship. The aim is to avoid legal obligations associated with the employment relationship.
Egypt has a large workforce that is multilingual, with many speaking English, French, German, Italian, Russian, Korean, and Mandarin Chinese, in addition to Arabic. The country also has a tech-savvy youth population and top-of-the-line digital infrastructure, making it an attractive outsourcing destination.
Outsourcing employees to Egypt requires compliance with local employment laws, including labour laws and employee rights. Employment contracts must be drafted in Arabic, and employers must contribute to social security and taxes. Outsourcing is considered a crime against both the employer and the client, penalized by imprisonment and fines.
