Employer of Record in Djibouti
Skuad's Djibouti EOR (Employer of Record) solution helps your business expand into Djibouti without the need for an entity setup. Our unified and automated global HR platform enables you to expedite the onboarding of your remote team, manage their payroll, benefits, etc. compliantly. We help you streamline the global expansion process with the able assistance of our international network. Book a demo with Skuad today.
Djibouti at a Glance
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Employment in Djibouti
What Needs to be Understood Before Employing Someone in Djibouti
Djiboutian labor laws govern the employment process in the country. Employment contracts in Djibouti can be both verbal and written. Most contracts are written in the local language. By obligation, contracts should include – name & address (both employee and employer), job description, salary with the payment method (to be paid in the beginning 8 days of the month), benefits, and probation period (if any). Let us look at employee benefits, working hours, national holidays, etc as per employment laws in Djibouti.
Contractors Vs. Full-time Employees
The country’s labor laws have scope for both full-time and contract workers. All employment contracts fall under four categories namely – indefinite, full-time, part-time, and definite fixed-term contracts.
Fixed-term contracts cannot exceed one year and can be extended only once. These contracts are also work-based and end after the completion of the work. All contracts without a definite term are considered indefinite contracts. A contract is expected to spell out the terms and conditions of the employment.
Whether your organization requires contractors or full-time employees, Skuad’s EOR solution can cater to all your hiring requirements. Learn more by talking to Skuad experts.
Hiring in Djibouti
The economy of Djibouti is weak and job opportunities are scarce. However, its favorable location on the Red Sea makes it a destination of interest among foreign investors. The country has struggled with social and political factors that have hampered development. However, several industries show growth and offer good employment opportunities.
Some prominent online job portals are LinkedIn, JobsnetAfrica, Indeed, etc. Recruiting employees at a short notice is a big task in Djibouti. Hiring online might seem simple but it entails thorough background checks. The process can be made smooth by partnering with an EOR that can take care of all compliance regulations, background checks involving the hiring process. It also can expedite the hiring process through novel solutions like virtual onboarding and e-signing of documents.
At Skuad we believe in helping our clients most comprehensively. You can remain assured of us managing all functions like payroll, expense management, tax filing, and so on. We continually try to make it a better experience for both the company and the aspiring job applicant. Call us to know more about our hiring solutions.
Probation & Termination
The probation period is permitted in Djibouti and is governed by certain pre-conditions. Probation for indefinite contracts cannot exceed:
- 15 days for part-time hourly employees
- 30 days for monthly paid non-executive positions
- 90 days for full time monthly paid executive positions
That being said, the probation period for fixed-term definite contracts cannot exceed two months. Any termination during the probation period shall not require notice or compensation.
Employment in Djibouti can be terminated by either party by giving a minimum notice period. It amounts to 1 month for regular positions and 3-months for executive positions.
The notice would have to state the reason for termination, name of the employer, social security registration number, employer’s address, name of the employee, date of employment, and professional qualifications of the employee.
Employers who fail to provide the notice are required to pay the wages that the employee would have earned during the notice period. Any accumulated or unused leave is also paid during the separation from service.
An employment contract can also be terminated due to non-performance or inability to perform following the demands of the job. It can also include reasons related to health, lack of professional skills, and even misconduct. For all such cases, a 48-hr notice is provided to the employee.
A pregnant employee can choose to break an employment contract emanating from medical reasons. This breach does not attract damages. Fixed-term contracts become invalid after the expiry of the defined period. They can even be terminated by either party due to misconduct, force majeure, economic and financial difficulties, judicial interventions, or an unjustified breach by either of the parties.
Breach of contract happens when there is a refusal to perform work, assault or secrecy violations, or unexcused absence from work. An employee is entitled to damages for unjustified dismissal. This can vary between 2-months to 6-months of salary depending on the number of employees working under the employer.
Skuad EOR comes with in-depth experience and expertise in HR and allows organizations to remain compliant when carrying out actions like termination.
The Employers of Record (EOR) model is a smart solution for companies seeking to enter and expand in Djibouti fast and agilely. With the help of Skuad's Employer of Record solution, business entities abroad can quickly source and hire the right professionals as per the organization's requirements. Hired employees get onboard seamlessly, helping your business save up a huge percentage of hiring and onboarding costs. Skuad’s End-to-end solutions help manage employment contracts, process payroll and income tax, blend statutory benefits, and manage overall administration of the backend HR processes. Skuad EOR solution works as a unified employment platform with automated workflows, digital signatures, employee payroll, contractor payout, and all types of compliance solutions. Book a demo today.
Outsourcing Employment Through an EOR in Djibouti
An EOR, by and large, allows a company to save on valuable resources from getting invested in functions like tax management, payroll management, hiring, and other aspects specifically managed by the HR department.
Skuad comes with the expertise towards creating bespoke contracts in conjunction with local Djiboutian laws. This notwithstanding, our expertise also extends to practices like amending labor contracts and fastening the hiring process with practices like e-signing of documents. Book a demo today to know more about EOR solutions
Types of Visas in Djibouti
Work Permits in Djibouti
An employer can hire a foreign national if the required competency is not available in Djibouti. The employer needs to obtain a work permit from the National Agency for Employment with a validity of 1 year.
Any foreign national can obtain paid fixed-term contract under the following conditions:
- Contract must be obtained in writing and the individual must have a visa issued by the Minister of Labor
- Foreign workers are not permitted to have residence visas if they have not obtained a work permit previously.
- This residency authorization is temporary but can be renewed several times. It can be done at the Ministry of Labor or the visa services of the Ministry of Interior Services.
- Upon termination of the foreign worker, the termination statement needs to be sent to the Workforce Service.
- The process of visa application is the responsibility of the employer, if the visa is refused then the employment contract stands void.
Payroll and Taxes in Djibouti
To set up payroll in Djibouti, you need to be knowledgeable on the prevailing laws of the country. Any company that wants to start payroll in Djibouti come with 4-options:
Remote: If the parent company has a large global payroll, then you can add employees from Djibouti into the same payroll as remote employees. Every employee from a different country will have separate laws to be followed.
Internal: An internal payroll serves a company best but it is only suited for companies with a large HR staff and who intend to do business in the country for a long period.
Local outsourcing company: Your company can outsource the payroll formalities to an outside company that specializes in payroll processing. That being said, these companies would not be able to handle compliance that will still be the responsibility of your company.
Global PEO: A company can tie up with a global PEO company to completely take over the payroll processing.
Taxation in Djibouti
Djibouti uses a progressive income tax rate that ranges from 2–30 % depending on the income of the individual. This notwithstanding, employees are required to contribute 4% of their wages to social security every month.
The tax is deducted at the source by the employer. An income of less than DJF 50,000 ($280) is exempt from tax.
Employers are obligated to pay 4% of the income to social security followed by 6.2% of monthly wages to disability insurance and 5.5% of monthly wages to family allowances.
Non-residents earning an income are subject to a withholding tax. The tax rate is set at 10%. Taxable income will consist of the following:
- Remuneration paid for services of any kind used in Djibouti
- Amounts collected as copyright for industrial and commercial activities
- Transport operations to and from foreign destinations
- Rentals and repairs for ships, aircraft, and other equipment used for carrying international transport.
Incorporation: How to set up a Subsidiary in Djibouti
Before you set up a subsidiary, it is important to consider certain factors that can affect the incorporation process, which could be location, entity, and so on. Certain parts of Djibouti can have their subsidiary laws to be adhered to.
Once you are settled with the physical office, you could choose the subsidiary that fits you the best. The most common subsidiary opened by foreign businesses is the Limited Liability Company (LLC), most companies go by this because it protects both the subsidiary and the parent company.
The prescribed steps to set up an LLC are as follows:
- Create a local bank account to deposit the initial capital
- Submit relevant documents stating your intention to start a business
- Get the company’s statutes drafted by a notary
- Register the statutes with the Direction des Impots
- Register the Company Name
- Register with Chamber of Commerce
- Publish notice informing the public about the initiation of business activity
- Obtain all required documents for registration
You would be required to have identity cards for all the associates, repartition of associate’s shares with the company name, purpose, and address. Failing to comply with Djiboutian laws can attract fines and can delay the entire incorporation process.
Know more about setting up a subsidiary in Djibouti with Skuad’s potent EOR solution
Professional Employer Organization (PEO)
A PEO is the practice of all-inclusive outsourcing of HR functions to an outside HR organization including employee benefits and payroll. In this, the outside HR organization becomes the professional employer of your workforce without them providing any staff.
All day-to-day assigning and managing of tasks rests with the main employer i.e., your organization. The scope of control of the workforce is dependent on the service level agreement (SLA).
With an EOR, the external organization has partial responsibility for the HR functions. On the other hand, with PEO – the HR organization takes complete responsibility for the HR functions. This is one of the stark differences between PEO & EOR.
While it may be a good thing that the main employer retains control over decision-making, it can be time-consuming for the organization that is amidst an expansion of its business operations.
Skuad's EOR solution is a good way to expand your business in Djibouti without setting up a separate entity. Our solutions help you to stay focused on your business and leave all business compliances, payroll processing and complete management work to us. Connect with Skuad to know more.
Conclusion: What Gives Skuad’s Djibouti Solutions an Edge?
Whenever a company decides to set up remote teams, a lack of knowledge of the local laws impacts the hiring process. Several factors including – payroll, taxation, the Djiboutian negotiation process, and state laws can become hurdles in the process of business expansion.
That being said, there is a definite alternative to getting immersed in the legal complexities of the hiring process. By partnering with an EOR, the process of handling HR functions becomes much simpler and streamlined. Skuad’s globally distributed teams and in-depth experience can make it simple to hire exceptional talent from Djibouti. Connect with Skuad experts and engage with them to give your business the much-needed boost when it comes to business expansion in Djibouti.