Egypt is renowned for its architecture in its capital city, Cairo. Did you know that the African country is also fantastic for foreign employers looking to expand their global footprint because of its low cost of hiring and favorable European time zone?
The Benefits of Hiring Remote Workers in Egypt
Lower Hiring Costs
By comparison, Egypt’s cost of living at USD 500 is 1.4 times less expensive than the global average. This means that you can hire and pay top talent while boosting your bottom line. As of January 2023, the national minimum wage in Egypt is EGP 2,700 per month. At about USD 88, this is much lower than anywhere in North America or Europe. An annual increase of no less than 3% of current basic pay is required.
Except for oil companies taxed at 40.55%, an employer’s standard corporate income tax rate is 22.5%, lower than France’s, US’, and Japan’s, to name a few. The cost of hiring an employee in Egypt in terms of payroll costs is about 1.3 times an employee’s base salary. Egypt’s comparably lower salary and low rate of contributions to social security translate it into an attractive destination to outsource qualified talent.
However, not needing permanent establishment status to hire in Egypt, a foreign employer would typically only be subject to taxes on payments such as service or commission fees to an EOR. For this reason, among many others, EOR is one of the most cost-effective ways of global hiring.
Work Culture
There are 14 national holidays in Egypt. The official language is Arabic but English is widely used. When it comes to doing business, the emphasis tends to be placed more on relationships than expertise. Formalites in meetings and the considerations of age along with experience are highly regarded.
To be viewed as a competent business partner, foreign employers may consider hiring more senior employees with experience. Positive word-of-mouth along with substantiated referrals, for example, may help to expand their brand presence and assist them in hiring more employees faster.
Time Zone Overlap
Egypt observes Eastern European Time (Central African Time), sharing the same time zone as eastern European and a few northwestern Asian countries. This enables employees in Egypt to easily coordinate and collaborate with international colleagues. Working with North America is likely to take place in the mornings which are afternoons in European time zones.
Tech Talent
Over 600,000 university graduates become part of the workforce each year, making Egypt the country with the largest and youngest multilingual pool of talent in the Middle East and second largest in EMEA. Already home to Fortune 500 companies, Information and Communications Technology is its highest growing sector with an upward trajectory of 16% from 2021 to 2021. In 2022, Egypt’s growth also placed it within the top four African countries with the most dynamic fintech sectors. Combined with 70% of the 107 million people below age 40, Egypt prides itself as a top provider of advanced technologies and diverse talent for foreign companies to outsource.]
Why Should You Hire Employees Using an Employer of Record?
A company cannot hire international talent in Egypt without having permanent establishment (PE) status there. One option is to get on the ground and set up a local entity. However, you can also opt for a more cost-effective and simpler way by using the services of an employer of record (EOR).
An EOR manages international hiring, payroll, tax withholding, and other matters related to employment such as compensation and benefits. An EOR is also an incredible resource for understanding and navigating the work culture and processes abroad.
Manage Employees Through a Global Employer of Record
Hiring employees in Egypt requires compliance with several areas of employment.
Employment Contracts
Foreign employers should be aware that employment contracts, whether indefinite or definite, are required to be written in Arabic, Egypt’s official language. The maximum length of probation is three months and must be included in an employment contract.
If a working relationship continues after a definite contract has expired, an indefinite contract by default, continues. The renewal of a fixed-term contract is maximally five years with the same employer.
An indefinite contract is somewhat more difficult to terminate, requiring reasonable and legal grounds, which include terminating for gross misconduct, to do so. In these cases, an employer is obligated to provide a termination notice but not severance pay. Pay in lieu is simply the amount of salary owed to the employee for time worked and payout of accrued but unused leaves.
With increasing seniority, employees of both fixed-term and indefinite contracts gain greater benefits and entitlements, such as annual paid time off and severance pay. The implication for foreign employers is to conclude lengths of contracts appropriate to the requirements of work, and be aware that in doing so, employees’ benefits and entitlements are protected. Understanding these distinctions can also aid in estimating headcounts, budget forecasting, and document preparation for global expansion.
It is therefore crucial for foreign employers hiring employees in Egypt to solidify working expectations using an employment contract. This enables them to stay legally compliant, establish clarity, and build trust from day one. An EOR like Borderless is here to support you in navigating the requirements of employment amidst evolving local regulations, ensuring that you fulfill your employer responsibilities.
Paid Leaves
Employees who have worked for six months are entitled to 21 days of annual paid time off. Those who have been employed for 10 years or are aged 50 receive 30 days. Furthermore, employees who have worked for five years are entitled to a one-time 30-day paid leave for a day of specified worship.
In addition, sick leave of 90 days is paid at 75% of base salary and at 85% for up to a further 90 days. Employees may choose to convert their annual leave days to sick leave. Upon 10 months of employment, an employee is entitled to maternity leave of 180 days of which the first 90, including the period preceding giving birth, are fully paid. An EOR like Borderless will provide you with the clarity you need to provide the different types of mandatory leaves in employment contracts.
Overtime
Egypt’s regular eight-hour per day workweek spans Sunday to Thursday. Furthermore, a six-day workweek from Saturday to Thursday or from Sunday to Friday isn’t uncommon, leaving either Friday or Saturday to be the day of rest.
A full 24 full hours of uninterrupted rest is mandatory after a six-day workweek. When employees have worked over 40 hours within a five-day work week or 48 hours during a six-day work week, overtime pay is required. Overtime hours worked during daytime are paid an additional salary of 35%, during nighttime are paid an additional salary of 70%, and during rest days and public holidays are paid an additional 100% of salary. Minors aged 14 to 18 and women are prohibited from working during the night shift hours between 19:00 to 7:00.
Social Security Benefits
Contributions to social security are collected by the National Authority for Social Insurance of Egypt to fund pensions, disability, sickness, death allowances, and unemployment insurance. An employer’s contribution to social security, with wage base limits, totals to 18.75% while an employee’s adds up to 11% of base salary.
Employer-sponsored health benefits are not mandatory with access to public healthcare, a work in progress tracking to universal healthcare coverage in the future. However, some employers additionally offer it as part of a competitive package. Both employers and employees are mandated to contribute 1.5% of base salary to public healthcare.
An EOR like Borderless will provide the revised contributions to social security that both you, the foreign employer, and your employees, will need to make, in addition to the latest economic and social changes affecting employment.
Other Employer Responsibilities
Within fixed-term contracts, severance pay for termination without just cause cannot be less than two months pay. Under definite contracts, it is the amount of salary for the remainder of the contract period. Foreign employers should also know that severance pay is only required if they have contractually agreed to pay an end of employment gratuity, reinforcing the importance of employment contracts. The only other circumstance in which severance pay is required is for an employee who has continued working for the employer after reaching age 60. In this case, the period spent after working this age is to be compensated.
An EOR like Borderless can ensure that you fulfill your employer responsibilities in the event of separation in employment.
Choosing the Right EOR for Your Business
There are several key considerations for employers to make the most informed decisions in choosing the best EOR for their businesses.
- Geographic coverage: Make sure that your EOR of choice can legally operate in Egypt.
- Employment services: The suite of employment services offered by a competitive EOR should cover hiring, onboarding, payroll, benefits, and HR management.
- Reputation: When selecting an EOR, get a sense of its past work and experience. Make sure that it has a great track record and the local know-how to bring you value add.
- Cost: A high-value EOR’s pricing should be transparent and reasonable.
- Flexibility: An EOR should offer customized employment solutions to meet your specific needs and requirements.
Overall, foreign employers should choose an EOR that can provide cost-effective, reliable, and compliance-first employment solutions. This will enable you to navigate and expand into foreign waters with confidence, ease, and trust.
An EOR Like Borderless Can Help
In over 150 countries, we are ready to help you hire, onboard, manage, and pay remote employees, wherever you are. Our experienced team of legal experts provides guidance on compliance and assists employers all over the world in navigating the cultural and professional environment in the country they choose to do business in. Book a demo today.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
