Payroll and Benefits Guide - Ethiopia



Ethiopian Birr (ETB)


Addis Ababa

Employer Taxes


Date Format


Fiscal Year

8 July – 7 July

Fun Facts

Ethiopia is located in the Horn of Africa and is the second-most populous country on the continent, after Nigeria.

Ethiopia is known for its rich history and is one of the oldest countries in the world, with recorded history dating back over 3,000 years.

The Ethiopian flag’s colors represent the fertility of the land, peace, and the sacrifices made by the people in defense of their freedom.

Ethiopia follows its own calendar system called the Ethiopian calendar, which has 13 months.

Ethiopia is known for producing some of the finest coffee beans in the world.

Ethiopia is the only African country with its own alphabet, Ge’ez, which has been in use for over 2,000 years.



Employee Payroll Tax

Public/Private Sector Pension Fund or Military and Police Service Pension Fund7.00%

Employer Payroll Tax

Public/Private Sector Pension Fund11.00%


Payroll Cycle

Ethiopia typically pays its employees once every month.

13th Salary

Although there is no legal duty to pay a 13th paycheck, bonuses are common in Ethiopia.

Work Hours and Week

Ethiopian workers typically put in a maximum of 48 hours a week, or 8 hours per day.


A collective labor convention or agreement governs all work that is performed in excess of the required number of hours per week and must be compensated as overtime. Only up to: is permitted in overtime.

  • 2 hours per day, on average
  • 20 hours a month, on average
  • 100 hours per year, on average



Paid Time Off

After one year of service, employees are entitled to a minimum of 16 working days of paid yearly leave. Every subsequent period of two years of service results in an addition of one day every year to the total number of days.

Unused leave may be carried over for a maximum of two years upon request.

Public Holidays

In Ethiopia, there are 12 public holidays.

The actual date won’t be known until closer to the celebration because some religious holidays are based on the lunar cycle and will appear as tentative.

Sick Days

An employee is allowed up to six months of paid sick leave per year, with the first month being paid at 100% of regular pay, the next two at 50% of usual pay, and the latter three months going unpaid.

For sick leave lasting more than one to three days, a medical certificate must be given.

Maternity Leave

In Ethiopia, female employees are entitled to 120 working days of paid maternity leave; this must include at least 30 days in a row of leave before the due date and 60 days after the baby is born.

Before any maternity leave can start, birth certificates must be presented.

Paternity Leave

A father is entitled to up to three working days of paid paternity leave.

Parental Leave

There are no parental leave provisions in the law.


Termination Process

Without a good reason, the employment agreement cannot be ended. Expiration of the agreed-upon employment time, completion of the assigned task, the employer’s insolvency, the employee’s temporary or permanent inability to perform the terms of the contract, or mutual agreement are all acceptable grounds for termination.

Notice Period

The employer must provide the following statutory notice duration: For an employee who has finished their probationary period and has no more than a year of service, one month.

  • For an employee who has more than nine years of service, three months.
  • Two months for an employee whose contract of employment is terminated owing to a reduction in the number of employees after they have successfully completed the probationary period.
  • During the trial period, there is no need to give notice.
  • Employees may typically end their employment by giving 15 days’ notice.

Severance Pay

The following rates apply to severance compensation, which is paid based on duration of service:

  • 30 days at the usual salary rate (pro-rated) after one year of employment
  • After the first year of service, 10 days at the regular salary rate are added on; nevertheless, the total severance pay cannot be greater than 12 months’ income.

In addition to the foregoing, terminations for redundancy are compensated for with 60 days at the standard salary rate.

Probation Period

Probation Period

The initial probationary period lasts for 60 working days.


To perform any type of work in Ethiopia, a foreign national needs a work permit. The Ethiopian Investment Commission (EIC) issues work permits for particular types of work to employees of international investors. Every year, the work permit is up for renewal. The lack of a local workforce with the necessary training and experience for the position is one of the factors taken into account by the EIC in deciding whether to grant a work permit or to renew the same.


In Ethiopia, the standard rate of VAT is 15%.