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Employer of Record in Ethiopia

Updated on:
16 Jan, 2024
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Employer of Record in Ethiopia

Skuad’s Ethiopia Employer of Record Solutions provides an integrated, tech-enriched HR platform to help companies expand their business operations in Ethiopia. The platform is a unified interface for the onboarding and management of remote teams in over 150 countries across the globe. 

Whether it is recruitment and hiring of a talented local workforce or setting up the payroll to manage employee compensations and benefits, Skuad’s Employer of Record Ethiopia solutions will ensure 100% compliance with the local labor and employment laws. Contact Skuad to know more about our customized EOR solutions.

Ethiopia at a Glance

Population: 114.96 million (in 2020)

Currency: Ethiopian Birr (ETB)

Capital city: Addis Ababa

Languages Spoken: The five official languages of Ethiopia are Amharic, Oromo, Somali, Afar, and Tigrinya. English is the foreign language that is most widely spoken and also taught in schools. 

GDP: USD 91.913 Billion (2019)

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Employment in Ethiopia

What Should You Know Before Employing In Ethiopia?

Ethiopia is a landlocked country sharing borders with Sudan, South Sudan, Kenya, Somalia, Djibouti, and Eritrea. It is the second-most densely populated country in Africa after Nigeria. Global companies are attracted to lucrative Business opportunities in Ethiopia and are looking to expand their businesses here. 

Ethiopia’s labor and employment laws are governed by the Labor Proclamation. The immigration laws allow foreign nationals to live and work in Ethiopia on work and residence permits.

However, obtaining the permits in compliance with the local laws and legislation can be complicated and overwhelming. In such a scenario, employing the services of a localized Employer of Record can prove immensely beneficial for companies expanding to Ethiopia.

Learn more on how Skuad’s Employer of Record Ethiopia services eliminate the risk of non-compliance and ensure a smooth recruiting and onboarding of employees. Here are a few important aspects of employment in Ethiopia:

Entitlements Explanation
Standard Working Hours 48 hours per week
Overtime Eligibility With a mutual agreement between the employer and the employee, in special circumstances, employees can work overtime as follows:
In a day 2 hours
In a month 20 hours
Annually 100 hours
Employers compensate the employees for overtime as follows:
Overtime is paid at 125% of the basic wage unless it is between 10 pm and 6 am when it is 150%. Weekend overtime is paid at double the standard rate and 250% on a public holiday.
Paid Public Holidays The public holidays in Ethiopia are as followed:
  • Ethiopian Christmas (January 07)
  • Eastern Orthodox Epiphany (January 19
  • Adwa Victory Day (March 02)
  • Ethiopian Good Friday (April 30)
  • May Day/ Labor Day (May 01)
  • Orthodox Easter (May 02)
  • Patriot’s Victory Day (May 05)
  • Eid al-Fitr (May 13)
  • Derg Downfall Day (May 28)
  • Eid al-Adha (July 20)
  • Ethiopian New Year (September 11)
  • Meskel (September 27)
  • Moulid (October 19)
Holiday Pay Employees are entitled to fully paid public holidays that include memorial holidays as well as religious holidays (both Christian and Muslim)
Medical Leave Employees are granted up to six months of sick leave as follows:
  • First month – 100% of their pay
  • Next two months – 50% of the pay
  • Any sick leave beyond three months is unpaid.
Maternity Leave Female employees in Ethiopia receive 120 days of paid maternity leave, of which up to 30 days of leave can be availed before the due date, and the remaining can be availed post-partum.
Male employees in Ethiopia are entitled to up to three days of paternity leave.
Annual Leave Accrual Entitlement Employees who have served for more than a year are eligible for 16 days of paid annual leave.
One additional day per year is then provided to employees after completing two years of service
Leave Expiry Employees can defer a part of their annual leave (with the employer’s consent). However, the leaves cannot be deferred for more than two consecutive years.
Leave Cash Out Employees can cash out their annual leave only upon the expiry of the employment contract. Any other arrangement that provides compensation against annual leave is null and void.
Accrued Leave At Termination If the contract of employment expires before the employee can avail of the annual leave, they are entitled to proportionate compensation.
Employee Protection and Anti-discrimination Rights As per the Ethiopian Constitution, every person is equal in the eyes of the law. Accordingly, as per the Labor Proclamation:
  • Every employee is entitled to equal pay for equal work, and no employee can be discriminated against when it comes to remuneration.
  • No employee can be discriminated against based on nationality, race, social origin, sex, color, religious beliefs, political opinion, language, pregnancy, lineage, marital status, etc.
  • Every Ethiopian citizen has the freedom to choose their profession.
Confidentiality of Personal Information The Draft Data Protection Proclamation issued by the Ministry of Innovation and Technology is yet to be approved. However, the Ethiopian Constitution provides the right to privacy for every Ethiopian individual.

Talk to Skuad experts today to know more about employment laws!

Full-time Employees Vs. Contractors

The employment agreement in Ethiopia can be either full-time or contractual based. Fixed-term employment contracts must specify the location of the workplace, agreed-upon compensation and benefits, the exact duration of the contract, and other specific details of employment if any. Employment contracts in Ethiopia cannot lay down unfavorable stipulations and must adhere to the provisions of Ethiopia employment laws and collective agreements. 

Although the Ethiopia economy is rapidly improving, full-time employees are taken more seriously and are treated as full-fledged working adults inEthiopia, whereas contractors, freelancers, or part-time employers are a less favorable option as they are not subjected to benefits provided to full-time employees nor they bring financial security. 

If you’re looking to hire employees in Ethiopia, employers must follow the HR compliance laws of the country. Get in touch with Skuad to experience the smooth hiring process of the best talents, whether full-time or contractually.

Hiring in Ethiopia

Recruitment and hiring of employees in Ethiopia must comply with the Ethiopia Labor Laws. If you want to hire employees in Ethiopia, you can begin advertising the job openings in your company on local job portals in Ethiopia such as Geez Jobs, Ethio Jobs, and Employ Ethiopia.

The next step in the hiring process would be to shortlist all the suitable employees and schedule personal interviews to gauge their capabilities. Upon finding and finalizing the employees you want to hire; it is important to conduct detailed onboarding and orientation programs where they can become acquainted with the working culture of your company as well as the other team members they’re expected to work with. 

Another important aspect of completing the hiring process in compliance with the local labor laws is to obtain valid visas and work permits that enable international employees migrating to Ethiopia to legally live and work in the country. 

The entire process of hiring and recruitment of employees in Ethiopia can take up to several months to complete if you choose to do it in-house. Skuad’s Employer of Record Ethiopia solutions can handle HR management and allied compliances on your behalf so that you can focus on the other aspects of international expansion. Connect with Skuad experts to know more about the hiring process in Ethiopia.

Probation & Termination

As per the latest Labor Proclamation adopted by the House of Peoples’ Representatives in 2019, the standard probation period in Ethiopia is 60 working days during which the employers can test the suitability of the employees. The probationary period must be mentioned in writing in all employment contracts and must be mutually agreed upon between both the employer and employee. 

In the absence of a specific clause, probation cannot be presumed. During the probationary period in Ethiopia, either party can terminate the employment contract without serving a notice period. Upon the expiry of the agreed probationary period, the employment contract is automatically presumed to have been confirmed. 

Termination of the employment contract is possible only by the provisions of the Labor Proclamation. The following are the grounds of termination of the contract by either party:

  • Expiry of the duration of the contract.
  • Upon the death of the worker. 
  • When the employee retires. 
  • It is impossible to fulfill the requirements of the contract due to force majeure. 
  • With mutual agreement. 

In any case, serving a notice of termination by either party is mandatory unless there is misconduct on the employee’s part, or he/she repeatedly fails to do their job and a warning has been issued to them in this regard. In that case, the employment contracts can be terminated without any notice. 

The notice period varies as follows:

Notice for termination of employment Ethiopia
  • An employee can terminate the employment contract by serving 30 days prior notice to the employer.
  • An employer may terminate the employment contract of a worker by observing a notice period as follows:
Notice Period Period of Service
Two months 1-9 months
Three months Less than 9 years of service
Two months Terminated due to reduction of the workforce

Any termination of employment contract which is not in line with the above-mentioned provisions will be considered unlawful which can lead to:

  • Reinstatement of the employee on his/her old position; or
  • The employee becomes entitled to severance compensations. 

Learn more on how Skuad's EOR services eliminate the risk of non-compliance and ensure a smooth expansion into Ethiopia.

EOR Solution

Business expansion is a long-drawn process that calls for extensive planning, especially when expanding to a foreign country. It is complicated and can take up to several months to complete but by choosing the EOR route for hiring employees in Ethiopia, you can fast-track the expansion process. Employer of Record Ethiopia (EOR) solutions by Skuad can make expansion to Ethiopia much simpler and a lot quicker for business. Our global outreach and a tech-enriched HR platform ensure compliance with local labor laws by managing employment responsibilities such as monthly payroll, work permits, employment contracts as well as taxation for your employees in Ethiopia.

Learn more about Skuad’s EOR solution from experts at Skuad.

Types of Visas in Ethiopia

Anybody traveling to Ethiopia, apart from the residents of Djibouti (up to three months) and Kenya (up to a year), must obtain an Ethiopian visa.

Contact Skuad for all your work Visa requirements.

Work Permits 

International citizens immigrating to Ethiopia to legally work and live in Ethiopia for an extended period must obtain Work and Residence Permits issued by the Ministry of Labor and Social Affairs.

Visa Category Explanation
Ethiopia Tourist Visa Issued to foreign nationals visiting Ethiopia for non-business-related purposes.
Ethiopia Work Visa It is issued to foreign nationals visiting Ethiopia for business-related purposes. It is further categorized into different types of work visas based on the nature of the business.
International citizens, employed by businesses operated by foreigners, who want to live and work in Ethiopia, must apply for Foreign Business Firm Employment Visa
Ethiopia Work Visa Requirements International citizens applying for Foreign Business Firm Employment Visa (WV) must submit the following:
  • Latest passport-sized photograph.
  • Valid passport (for at least six months)
  • Official letter by the organization inviting them, addressed to Immigration, Nationality and Vital Events Agency of Ethiopia.
  • Valid Business license and TIN (Taxpayer Identification Number) Certificate of the inviting company.
  • Contract of Employment
Processing Time Three days (under normal circumstances)
Validity The business visa becomes valid from the intended date of entry in Ethiopia
Extension Extension must be applied for before the expiry.

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Payroll & taxes in Ethiopia

To expand your business in Ethiopia, you will need to build a team and look after its payroll management. For this, you have two options:

  1. In-house HR management
  2. Payroll outsourcing

Setting up an in-house team for payroll and HR management can be a long-drawn and complicated process. Additionally, it is subject to various local taxation regulations. Payroll outsourcing with Skuad’s Employer of Record Ethiopia services makes payroll and taxation compliance easy and hassle-free. 

Taxes in Ethiopia:

Employer Taxation

Tax Type Rate
Income Tax Rates
Tax Base (in ETB) From employment Tax %
Up to 600 0%
601 – 1650 10%
1651 – 3200 15%
3201 – 5250 20%
5251 – 7800 25%
7801 – 10900 30%
Above 10900 35%
Financial Year End Date The fiscal year in Ethiopia starts on July 08 and ends on July 07 of the following year
Corporate Tax 30%
Withholding Tax 10%
Ethiopia employer payroll taxes/ Ethiopia payroll tax rates 20 percent tax with a deduction of 302.50 Birr
VAT 15%
Employers Social Security and statutory contributions 11% (civilian), 25% (military)
Employees Social Security and statutory contributions 7%
Public Pension Employees aged over 60 are eligible for a pension with contributions of at least ten years.

Employee Taxation

Taxs Explanation
Income tax on employment income Employment income tax rates are progressive, with the maximum being 35% for employment income that is greater than 10,900 Birr (US$402).

Connect with Skuad experts to know more about Payroll and Taxation in Ethiopia.


In Ethiopia, bonuses are frequent, although they aren't required.

Incorporation: Incorporating A Subsidiary in Ethiopia

When as an organization you decide to undertake business expansion in Ethiopia, you can do so by setting up a subsidiary company, or a branch or liaison office locally. It will provide you with the necessary infrastructure for carrying out the business activities that you choose as well as various other in-house activities such as HR management. 

If you wish to set up a separate legal entity in Ethiopia, you can:

  • Set up a Private Limited Company (PLC)
  • Set up a Branch Office. 

To incorporate a PLC, the following procedure must be followed:

  • Collect the Investment Permit Application Form.
  • Gather the sample Memorandum and Articles of Association along with other information required for incorporating a PLC from the Investment Promotion Directorate.
  • Submit a correctly filled and duly signed application form along with all the supporting documents like 
  • The Memorandum and Articles of Association. 
  • Business background of the holding company.
  • Investment/business visa and copy of the valid passport of each shareholder to the Licensing and Registration Department.
  • Submit the additional documents required in case if a company is a shareholder.
  • Submit a duly filled company name application form.
  • Once the company name is approved, submit the edited and authenticated MOA and AOA.
  • Open a foreign currency bank account in the National Bank of Ethiopia and transfer the share capital.
  • Submit 5 copies of the latest passport-sized photographs of the general manager. 
  • Upon completion of the above-mentioned process, you will receive a certificate permitting investment and the certificate of commercial registration. 

To set up a branch office, the following procedure must be followed:

  • Collect the Investment Permit Application Form.
  • Submit the duly filled form with supporting documents of the parent company and the valid passport or investment/business visa to the Licensing and Registration Department.
  • Open a foreign currency bank account in the National Bank of Ethiopia and deposit the share capital.
  • Collect the investment permit certificate.

The process of incorporating a separate legal entity in Ethiopia can take up to several months to complete – especially in the absence of a local point of liaison. While executing international expansion plans, we understand that time is of the essence. Leveraging the right business opportunities at the right time is of utmost importance. Skuad’s Employer of Record Ethiopia services can handle all the regulatory compliances with regards to hiring, recruiting, and managing your employee payroll so that your business expansion process can follow a quick timeline. 

Book a demo with Skuad today!

Professional Employer Organization

Hiring the right people and compensating them properly forms an integral part of your business expansion in Ethiopia. But ignorance of the local law leaves a lot of room for error which can result in heavy penalties. 

To safeguard from this, companies can opt to engage the services of a Professional Employer Organization (PEO) or Employers of Record (EOR). Even though you can outsource your HR requirements to both PEO and EOR organizations, understanding the minor differences between the two will help you choose better. 

A PEO acts as a co-employer, wherein it manages all the HR-related functions such as setting up the payroll, processing the compensation and other benefits, handling all the tax-related compliances, etc. However, you, as a company, will hold the allied liabilities and responsibilities. 

On the other hand, an EOR is a complete payroll outsourcing that provides all the services offered by a Professional Employer Organization in Ethiopia, and in addition, it becomes the legal employer of all the employees on your payroll. This means that they are responsible for compliance with the regulations and liable for non-compliance as well.

Skuad's EOR solution is a good way to expand your business in Ethiopia 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.


If your business is ready to strategically benefit from Ethiopia’s growing economy, Skuad’s Employer of Record Ethiopia services can cater to all your expansion-related HR requirements. Want to know more about how Skuad’s EOR solutions can help with your expansion plans into Ethiopia? Get in touch with us today!


1) What is the employer of record in Ethiopia?

An Employer of Record (EOR) streamlines your Ethiopia workforce management by assuming legal employer responsibilities. They handle critical HR functions like payroll, tax administration, and benefits management allowing you to focus on your strategic business priorities and eliminating the need for a local legal entity setup. EORs navigate the complexities of Ethiopian labor laws, minimizing legal hurdles associated with international recruitment.

2) What is the difference between eor and PEO?

An employer of record (EOR) legally employs individuals on behalf of another company and handles all compliance, payroll, and HR tasks. A Professional Employer Organization (PEO) co-employs staff, sharing responsibilities with the client company but typically requires the client to have an established business entity in the country.

3) What is the difference between payroll and employer of record?

EORs act like your global HR department, handling everything from hiring to benefits for your overseas team. Payroll companies, however, focus on software solutions for wage disbursement.

4) What is the employer of record for foreign employees?

Employer of Record acts as a bridge for companies seeking top international talent. They assume legal employer responsibilities for overseas workers, handling critical HR functions like payroll, tax administration, and benefits management. This lets you focus on talent acquisition without the burden of establishing a local legal entity.

5) Why use an employer of record?

Employer of Record can simplify hiring. They act as the legal employer for your overseas talent, handling HR complexities like payroll, taxes, and compliance. This eliminates the need for a local entity setup, saving you time and resources. 

EOR in 
best value
Pay monthly at a discounted rate with a 12-month commitment
(billed annually)
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Employ contractors and employees in 160+ countries

G2 badge
EOR in 
(billed annually)
Pay monthly at a discounted rate with a 12-month commitment
(billed monthly)
G2 badge

Employ contractors and employees in 160+ countries

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EOR in 
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Employ contractors and employees in 160+ countries