With the deepening of globalization, when enterprises expand their business in multiple countries, cross-border labor compliance has become one of the most complex and severe challenges. To help enterprises systematically address this issue, we have collaborated with top labor lawyers from over 50 major jurisdictions worldwide (all recommended by Chambers, Legal 500, or equivalent institutions) to jointly compile a Chinese-English labor & employment compliance guide exceeding 1 million words, and we will continuously update relevant key points.

This article publishes the key points of labor & employment compliance in Ethiopia. 

01 Overview of the Labor Law System

1.Legal System

Ethiopia follows predominantly a civil law legal system.

2.Resources and Agencies

The employment of private sector workers is primarily regulated by the Labor Proclamation No. 1156/2019 (the “Labor Proclamation”), which applies to non-managerial employees and the 1960 Civil Code (the “Civil Code”) which applies to managerial employees.

The government organ responsible for enforcing labor laws in Ethiopia is the Ministry of Labor and Skills (the “MOLS”). In cases of legal disputes arising from labor relations, the Labor Divisions of the Federal and Regional First Instance Courts also play a role in the enforcement of labor laws.

02 Employment Qualifications and Classification

1.Employment Age

The minimum age of employees in Ethiopia is 15 years old and it is prohibited to hire someone younger than the minimum age requirement. However, the working conditions of young workers (those who have not attained 18 years) is different. The retirement age of employees is 60 years old.

2.Qualifications for Employment

Foreign businesses are allowed to hire locally even if they do not have a permanent establishment in Ethiopia.

3.Classification of Employment

In Ethiopia, employees are classified into different categories based on job description, duration of engagement, and the nature of the service provided. The basic classifications are as follows:

• Ethiopian law distinguishes between managerial and non-managerial employees based on job description.

• Employment contracts may be concluded for either a definite or an indefinite period.

• Not all service providers are classified as employees. Some individuals may work as independent contractors under a service agreement.

• In Ethiopia, the concept of Employer of Record (EOR) is recognized within the framework of Private Employment Agencies.

4.Foreign Workers

In Ethiopia, employers are permitted to hire foreign workers. However, this is subject to strict legal and regulatory requirements. One of the primary conditions is that the employer must demonstrate that the position cannot be filled by an Ethiopian national. There is also a quota for employing foreign workers.

Foreign workers are entitled to the same rights as Ethiopian workers, with the exception of pension benefits.

03 Recruitment and Employment Contracts

1.Background Examination

Ethiopian law is silent in respect of background checks on applicants.

2.Contract Types

Employment contracts may be concluded for either a definite or an indefinite period.

The law does not require for employment contract to be made in writing, it can be made in any form. However, if the agreement is not in writing and involves a non-managerial employee, the employer is required to provide a letter of employment within 15 days of the agreement. 

3.Probationary Period

For non-managerial employee, the maximum period of probation is 60 working days, and the agreement on probation period should be made in writing. During probation, the employer can terminate the employment contract without any notice, severance payment or compensation if the employee is proven to be unfit for the post.

For managerial employees, the Civil Code states that employees may be engaged on a trial basis and considers the employee engaged on trial as having been employed for an indefinite period. During the trial period, either party may terminate the contract without being required to give notice or to pay compensation. 

04 Working Standards

1.Remuneration and Statutory Benefits

In general, wages in Ethiopia are paid in cash unless the employer and employee agree otherwise.

Currently, Ethiopian labor law does not set a statutory minimum wage. Therefore, wage levels are generally determined through individual agreements, and employers can freely introduce salary scales.

2.Social Security and Employment Taxes

Currently, in Ethiopia, the only statutory social security benefit is the retirement pension. This is a contributory scheme in which both employers and employees make regular contributions.

3.Working Hours

For non-managerial employees, normal working hours cannot exceed eight hours per day or 48 hours per week.

Work done in excess of the aforementioned hours is considered as overtime work. Overtime work shall not exceed four hours in a day and twelve hours in a week.

4.Rest and Leave

In Ethiopia, employees are entitled to various types of leave, including the following:

•  Weekly Rest Day

•  Public Holiday

•  Annual Leave

•  Special Leaves

•  Sick Leave

•  Maternity Leave

05 Occupational Health and Special Protection

1.Occupational Health and Security

Employers are obligated to implement necessary occupational safety and health measures to protect the safety and well-being of their employees. This includes providing essential equipment and installing the required infrastructure to ensure a safe working environment and to prevent occupational accidents and diseases.

An employee who has sustained an employment injury shall be entitled to the following payments:

•  Periodical Payment

•  Disabled Payments (Pension) or gratuity

•  Dependents’ Benefit

2.Special Protection

The law provides specific protections and affirmative actions for certain groups of employees, including persons with disabilities, women, and young workers.

•  Employees with Disabilities

•  Women Employees

•  Young Workers (Ages 15-17)

06 Personal Information and Privacy

1.General Rules

There are no specific regulations exclusively addressing employee privacy or personnel data. However, the Data Protection Proclamation No. 1321/2024 applies to all organizations, including employers, that process personal data.

2.Transnational Transfer

Cross-border data transfer of personal data requires prior approval from the Ethiopian Communications Authority. 

07 Anti-Discrimination and Anti-Harassment

1.General Rules

Ethiopian labor law prohibits workplace discrimination based on gender, nationality, religion, political opinion, disability, HIV/AIDS status, or any other ground.

Sexual harassment and sexual violence at a workplace are prohibited acts. At first, they are criminal acts, there is a criminal liability that the perpetrators of sexual harassment or violence face under the Ethiopian Criminal Code (2004). Further, the Labor Proclamation prohibits sexual harassment or sexual assault at workplace in the context of employment. 

2.Protective Characters

Discrimination is any distinction, exclusion or preference made on the basis of nation, race, color, sex, religion, political opinion, national extraction, social origin, HIV/AIDS status, disablement and others which has the effect of nullifying or impairing equality of opportunity or treatment in employment or occupation. 

08 Internal Policies

1.Applicability

It is a common practice to manage workers through internal policies and the internal policy applies on the workers employed by the employer.

2.Validity

An employer may adopt internal work rules/internal policies without requiring formal approval from workers, trade unions, authorities, or other third parties, provided that these rules do not establish working conditions less favourable than those guaranteed by law.

09 Transactions

1.Employment Relationship

Employees’ employment contract shall be continuously performed after a merger and acquisition, equity or asset transfer because under Ethiopian law any amalgamation, division or transfer of ownership does not have an effect of terminating or modifying the contract of employment.

2.Compensation

As the employment contracts will not be affected, employees will not be entitled to compensation due to M&A or equity/asset transfer.

10 Termination of Employment

1.Termination Grounds

Under the Ethiopian labor law, an employer can only dismiss an employee for a legally recognized cause. Termination must be based on the worker’s conduct, circumstances related to the ability to perform the job, or organizational or operational requirements of the employer.

2.Termination  Procedure

Under Ethiopian labor law, the obligation to give notice for termination of the contract of employment by the employer depends on the ground for the termination. When the cause of the termination falls within those stipulated under the law requiring prior notice, the obligation to give prior notice arise.

For managerial employees, an employer may terminate a managerial employee with either a definite or indefinite period contract by providing advance notice.

For non-managerial employees, the duration for the notice period depends on the years of service of the worker except in the case of reduction of workforce, where a standard notice period of two months applies regardless of service length.

Under Ethiopian labor law, there are no requirement of obtaining prior approval before terminating the contract of employment. However, there is an obligation to give notice to the Ministry of Labor and Skills before effecting layoff when the termination is considered as a reduction of workforce.

3.Termination Protection

As previously discussed, the Ethiopian labor law protects employees from dismissal by providing stringent grounds based on which the employer can terminate the contract of employment while also leaving room to stipulate additional violations serving as grounds for termination in the collective agreement.

The Ethiopian labor law also affords protection to pregnant employees during her pregnancy.

Additionally, the law protects employees during workforce reductions by outlining a detailed process and specific steps that employers must follow before carrying out any reductions.

4.Severance and Compensation

A non-managerial employee who is not eligible for pension and has completed his/her probation period is entitled to receive severance when the contract of employment is terminated due to:

•  Permanent cessation of operation of the employer;

•  Unlawful termination by the employer;

•  Reduced as per reduction of workforce;

•  Resignation due to sexual harassment/violence by the employer, managerial employee or co-worker but when reported to the employer he/she did not take appropriate measure in due time;

•  Resignation due to the employer’s maltreatment affecting his/her human dignity or moral or constituting a criminal offence or failure of the employer to take measures despite being informed of threat to his safety or health;

•  Partial or total disablement as certified by medical board;

•  Due to sickness or death when he has over five years of service upon his imitative but when he has no contractual obligation to render training service;

•  Resignation due to HIV/AIDS.

5.Wrongful Termination

Wrongful termination occurs when an employer dismisses an employee without valid grounds or fails to follow proper procedures. In such cases, the employer is liable and may face penalties including compensation, reinstatement, and administrative fines.

6.Mass termination and Layoffs

There is a special provision applicable for workforce reduction. The threshold for termination of employment contract to constitute a reduction of workforce is when the termination affects 10 percent of the number of workers employed or when the number of employees is between twenty and fifty, termination of at least five employees over a continuous period of not less than 10 days.

11 Confidentiality, Non-Compete, and Non-Solicitation

1.Confidentiality

It is a common practice but not mandatory to sign a confidentiality with workers.

2.Non-Compete and Non-Solicitation

There are no detailed regulations governing non-compete or non-solicitation clauses. However, such clauses may still be included in an employment contract.

12 Work Representation and Trade Unions

1.Work Representation

The Labor Proclamation permits employees to establish a labor union within an organization where there are ten or more workers. Once a labor union is formed, employees are represented through the union.

The primary role of the union is to protect the rights and interests of its members. This includes representing members in collective bargaining and labor disputes before the competent authorities, ensuring that relevant laws, regulations, directives, and decisions are known to, complied with, and implemented by its members. Additionally, unions are empowered to propose new labor-related legislation, actively participate in the drafting and amendment of such laws, and carry out other responsibilities as outlined in their organizational bylaws.

13 Dispute Resolution

1.Procedures & Enforcement

The Ethiopian labor dispute resolution system incorporates both judicial and non-judicial mechanisms to ensure timely and effective handling of employment-related issues. Judicially, labor disputes are initially handled by the labor divisions of federal or regional first instance courts, with appeals going to appellate courts and, ultimately, to the Federal Supreme Court Cassation Division. 

2.Waiver & Enforcement

An employee cannot legally waive any rights granted under the law, and any such waiver will be considered unenforceable.

* To avoid ambiguity, this article should not be regarded as legal advice.

Authors

Mehrteab Leul Kokeb is the Founder and Managing Partner of Mehrteab & Getu Advocates LLP. Mehrteab is a renowned senior law professional with almost three decades of experience with core competence in Project Finance and Corporate matters.

Dr. Martha is a Legal Director in the Corporate Practice Group with nearly two decades of experience in academia. She specializes in International Trade Law, Investment Law, domestic commercial laws, and African Regional Integration. 

Helina Asamnew is an Associate in MLA’s Employment and Immigration Practice. Helina has advised a number of foreign and local companies, not-for-profit organizations, and members of the diplomatic mission on recruitment, termination, separation and settlement, compensation, employment disputes, pension, collective agreements, investigations, conducting due diligence and producing due diligence reports.

Translator

Zhou Hao, Master of Laws, Associate at Anli Partners. Areas of expertise: Labor Law, Dispute Resolution, ESG Compliance.