Hiring in Ethiopia

The terms set out role, salary in ETB, working time, leave, notice and the grounds for termination. The EOR is the counterparty to the employee, which is what removes the need for your own entity.

Amharic is the federal working language, so contracts are often issued in Amharic or as a bilingual Amharic and English document.

Fixed-term contracts are only lawful in the situations the Labour Proclamation lists, and any other contract is presumed indefinite, so most EORs default to indefinite terms.

Agree probation in writing from day one. An employee rehired into the same role cannot be put on probation again.

Some EORs shorten probation as policy because they, not you, carry the dismissal risk. Ask before you agree a start date.

Overtime is paid at 1.5 times the hourly rate during the day, 1.75 at night, 2 on the weekly rest day and 2.5 on public holidays, capped at 4 hours a day and 12 hours a week.

Managerial employees sit outside the Labour Proclamation, so their hours become a contractual matter rather than a statutory one. The label has to reflect genuine authority, so put the position in writing either way.

The statutory scale rises with tenure, so budget for longer entitlements on long-serving hires. Leave cannot be exchanged for cash except when employment ends.

Sick leave runs to six months in any 12-month period, paid in full for the first month and at half pay for the next two. Maternity leave of 120 days is paid in full by the employer rather than the state, so confirm the EOR has priced it in.

Dismissal must rest on one of the grounds the Labour Proclamation lists. Severance is a fixed statutory formula: 30 days' wages for the first year, 10 days for each further year, capped at 12 months, with an extra 60 days on redundancy.

The EOR runs the process as the legal employer and will want the paperwork in order, including final pay, unused leave and severance. Unlawful dismissal can lead to reinstatement or compensation of 180 days' wages on top of severance and notice pay, so keep a documented reason.

Private medical cover is standard for professional roles even though it is not mandatory. A social health insurance scheme for formal-sector staff has been on the statute book since 2010 but is still not fully implemented, so ask the EOR how it will handle the rollout.

EORs often bundle benefits through a group scheme. Ask what is included in the fee and what is billed on top.

Employer pension contributions add 11% of basic salary on top for Ethiopian citizens. That is before the EOR fee.

Currency is the trap. The birr has lost well over half its value against the dollar since it was floated in July 2024, and inflation is still in double digits. Agree a salary review mechanism in the offer so pay does not quietly erode.

Ask whether the EOR sponsors directly or refers to a partner. A partner-model EOR often cannot sponsor at all, and the sponsor may have to show the skills are not available locally and name an Ethiopian understudy to take over the role.

Set start dates after approval, not before.

Get the data processing terms in the service agreement, not just the privacy notice. Transfers out of Ethiopia need adequate protection in the receiving country or the employee's explicit consent.

Ask where payroll data is hosted and who in the partner chain can see it.

Incorporation is the hurdle here. Foreign investors need an investment permit from the Ethiopian Investment Commission and minimum capital of USD 200,000 for a wholly owned company, or USD 150,000 in a joint venture, with lower thresholds for some consultancy and ICT work. Several sectors remain reserved for domestic investors.

Permanent establishment risk is about what people do, not where payroll sits. Revenue-generating activity can create exposure regardless of the employment route.