Ethiopia Labor Law Guide for Hiring Employees and Contractors
Ethiopia’s economy grew by approximately 6.1% in 2023, maintaining its position as one of the fastest-growing economies in Africa.
The country’s economy is largely driven by agriculture, which accounts for around 34% of GDP, employing over 70% of the workforce. Other key sectors include manufacturing, services, and construction, which are seeing increasing growth due to industrialization and infrastructure projects.
Ethiopia’s currency is the Ethiopian birr (ETB).
Minimum Wage
ETB 420 for public sector/ No statutory minimum wage for private sector
Overtime Wage
1.5 times regular wage for overtime
Meal Breaks
1-hour meal break
Rest Breaks
At least 30 minutes
Working hours
8 hours/day, 48 hours/week
Salary Payment Cycle
Monthly
Payroll Taxes
Social Security, Income Tax, Pension Contribution
Paid Vacation
14 days (with increments for additional years of service)
Overtime Hours
Over 48 hours per week
Night Shift Hours
1.25 times the regular wage
Holidays
13 public holidays
No Work Days
Sunday for most sectors
In Ethiopia, businesses looking to hire workers must register with the Ministry of Trade and Industry and acquire the necessary business licenses.
The cost of setting up a business entity varies depending on the type of entity and sector, and incorporation usually takes 1-2 months. Employment agreements must be in writing and should include key clauses such as the terms of employment, salary, duties, working hours, and grounds for termination.
The laws in Ethiopia distinguish between employees and contractors, with contractors typically subject to more flexible contractual terms.
As of 2024, Ethiopia does not have a federally mandated minimum wage for the private sector. The minimum wage for public sector workers is ETB 420. Certain sectors, like the industrial parks, have set their own wage levels. For instance, workers in industrial parks earn a minimum wage of approximately ETB 750 per month. There are no state-level minimum wage laws, and holiday pay is required for public holidays.
The standard working hours in Ethiopia are 8 hours per day and 48 hours per week.
Overtime work is compensated at 1.5 times the normal wage, and any night shifts are paid at 1.25 times the normal wage.
The minimum legal working age is 14, and there are strict prohibitions against employing children in hazardous work.
Employers in Ethiopia are required to make the following payroll deductions:
Social Security Contributions: 7% deducted from the employee’s salary, with an additional 11% paid by the employer.
Pension Contribution: Compulsory for employees in the public sector and formal private sectors.
Income Tax: Based on a progressive tax system.
Income Tax Rates (2024)
Income Level (ETB) | Tax Rate |
Up to 600 | 0% |
601 to 1,650 | 10% |
1,651 to 3,200 | 15% |
3,201 to 5,250 | 20% |
5,251 to 7,800 | 25% |
7,801 to 10,900 | 30% |
Above 10,901 | 35% |
Ethiopian labor law mandates various types of leave:
Paid Vacation: Employees are entitled to 14 days of paid vacation, with an additional day added for every year of service.
Maternity Leave: 90 days of paid leave for female employees, including 30 days before and 60 days after childbirth.
Sick Leave: Paid sick leave is available, with certification required from a healthcare provider.
Public Holidays: 13 official public holidays.
Public Holidays (2024)
Holiday | Date |
Genna (Ethiopian Christmas) | January 7 |
Timkat (Epiphany) | January 19 |
Adwa Victory Day | March 2 |
Fasika (Ethiopian Easter) | April 28 |
Labour Day | May 1 |
Patriots’ Victory Day | May 5 |
Derg Downfall Day | May 28 |
New Year | September 11 |
Meskel | September 27 |
Id al-Fitr | Varies |
Id al-Adha | Varies |
Mawlid | Varies |
Ethiopia mandates several employee benefits, including:
Social Security: Employers contribute to the employee’s pension and social security.
Health Benefits: While there is no universal healthcare, many employers provide some form of medical coverage.
Gratuity: Paid to employees with long service upon retirement or termination.
Annual Bonuses: Some employers, particularly in the private sector, offer performance-based bonuses.
Ethiopia does not operate under “At Will” employment laws. Termination of employment must follow proper legal processes, including providing sufficient notice or paying in lieu of notice.
The standard notice period is one month for employees, and termination without cause is considered illegal. Employers may terminate employees for justifiable reasons such as misconduct, redundancy, or inability to perform.
Employees or labor unions may challenge wrongful termination through labor courts, and severance pay is required for employees with more than a year of service.