Employment Contracts in Egypt

 

Introduction

In 2003, the Egyptian Parliament enacted a new law No. 12 of 2003 (hereinafter referred to as “Labor Law”), replacing the previous labor law No. 137 of 1981. However, given that the Labor Law was designed to protect the employee, the provisions of the Labor Law remain similar, to a large extent, to those of the old Labor Law.

It should be noted that, where the Labor Law lacks any rules or provisions to govern an issue arising from an employment relationship, the provisions of the Egyptian Civil Code ought to be applied to such issue.

Indeed, a contract is the foundation of any binding legal employment agreement, accordingly, it should be drafted with precision to cater each accurately. In Egypt, an employment contract must meet certain requirements to be considered:

  1. It must be in writing.
  2. It must be in Arabic.
  3. It must be made in triplicate. (The employer, the employee and social insurance office each keeps a copy of the employment contract.)

In addition, the contract shall include the following data:[1]

  1. The name of the employer and the address of the place of work.
  2. The worker’s name, qualifications and profession or craft, social insurance number and home address and ID.
  3. Nature of the employee’s work and responsibilities
  4. Wages and the timing of wage payment
  5. The length of the probationary period, if applicable.

The Probationary Period

Under the Labor Law, the probationary period for the employee should not exceed 3 months as it is an issue that pertains to public policy. Consequentially, if the probationary period agreed upon between the employer and the employee exceeds 3 months, such term shall become null and void while the contract remains valid. However, the parties could agree on a probational period of less than 3 months in the contract.   Additionally, according to the Labor Law, the probationary period is not valid unless it is stipulated clearly and explicitly in the contract.

During the probationary period, not only does the employer has discretionary power to evaluate the employee’s work but also the employee’s behavior and cooperation with his superiors and colleagues. Further, a contract with a probation clause is considered a complete employment contract subject to a condition subsequent of failure of the trial. If the trial succeeds, the contract becomes final and is considered valid from the date of its conclusion and not from the date of the end of the probation period.  If the trial fails, the contract is terminated without retroactive effect.

 

A contract with a probation clause is considered a complete employment contract subject to a condition subsequent of failure of the trial. If the trial succeeds, the contract becomes final and is considered valid from the date of its conclusion and not from the date of the end of the probation period.

Salary

Minimum Wage:

Considering the challenges workers have been facing since the spread of COVID-19 and its impact on workplaces, the Minister of Planning and Economic Development raised the minimum wage of private-sector employees from EGP 2,000 to EGP 2,400 ($153) per month effective January 2022.[2] Additionally, a periodic bonus would be handed to workers for the fiscal year of 2021/2022 at a value of 3% of the insurance contribution wage for the worker. This is expected to be a minimum of EGP 60 and is also equivalent to 7% of the basic wage according to the Labor Law.

Payment:

The employer does not fulfil his obligation to pay the salary unless the employee signs an acknowledgment of receipt in a specific form, containing clear details of the salary, prepared for this purpose.

Leaves

Holidays:

The following public holidays are fully paid: [3]

  1. Orthodox Christmas Day
  2. January 25 Revolution Day
  3. Sinai Liberation Day
  4. Labor Day
  5. Sham El-nessim
  6. Eid al-Fitr
  7. *June 30 Revolution[4]
  8. Eid al-Adha
  9. Revolution Day
  10. Islamic New Year
  11. Armed Forces Day
  12. Prophet’s Birthday (Moulid El-Nabi)

It should be noted that, unless the Prime Minister issues a decree applicable to the private sector substituting the public holiday with a weekday, if one of these holidays falls on a weekend day, the employer is not obliged to give the employee an extra day off.

Annual Leave: [5]

An employee who spent a year in service has an annual leave of 21 working days. Employees older than 50 years or who spent 10 years or more in the service of the employer are entitled to annual leave of 30 working days. Employees do not have the right to take leave in the first 6 months of employment, however, for employees employed for more than 6 months but less than a year, annual leave is prorated to the period of service. [6]

Sick Leave:

The number of days of sick leave is determined on a case-by-case basis by the competent medical authority.  An employee whose sickness is established and determined by the competent medical authority is entitled to sick leave and shall be compensated according to the Social Insurance Law.[7] 

 

The Minister of Planning and Economic Development raised the minimum wage of private-sector employees from EGP 2,000 to EGP 2,400 ($153) per month effective January 2022.

The employer does not fulfil his obligation to pay the salary unless the employee signs an acknowledgment of receipt in a specific form, containing clear details of the salary, prepared for this purpose.

An employee who spent a year in service has an annual leave of 21 working days. Employees older than 50 years or who spent 10 years or more in the service of the employer are entitled to annual leave of 30 working days.

An employee whose sickness is established and determined by the competent medical authority is entitled to sick leave and shall be compensated according to the Social Insurance Law

Types of Employment Contracts under the Labor Law:

Definite Contracts:[8]

A definite term employment contract expires automatically upon the lapse of its term. For the contract to be considered a definite contract, the parties should include a definite term to the contract and whether the term shall be renewed automatically or not. Upon the lapse of its term, if the employer and employee continue implementing the contract, it shall be considered an implicit renewal of the contract.[9] Further, if the contract is concluded for more than five years, the employee may terminate it without indemnity by providing three months’ notice prior to such termination. [10]

Indefinite Contracts[11]

An Indefinite term employment contract is characterized by its lack of a specific expiration date, and the prohibition of termination without adequate cause by the employer.  Both parties to the contract have the right to terminate the contract, provided that the other party is notified in writing before the termination.

Fulfilling a particular purpose:

This type of contract is dependent on the purpose and subject of the contract. Usually, once the purpose of the contract is fulfilled, the contract expires automatically. It should be noted that this type of contract is not mainly dependent on the term of the contract but on the fulfillment of the purpose of the contract. Further, for contracts which terminate upon the completion of a work and the accomplishment of that work exceeds five years, the employee cannot legitimately terminate the contract prior to the accomplishment of that work.[12]

Alternatively, if upon the completion of the specific work the two parties continue to perform their duties, the contract will be considered renewed for an indefinite period.[13] Additionally, If the work is renewable by nature and the contract continues to be performed upon completion of the main project, the contract is renewed implicitly for the term necessary to perform the same work again under the same terms of the first contract. [14]

 

A definite term employment contract expires automatically upon the lapse of its term.

An Indefinite term employment contract is characterized by its lack of a specific expiration date, and the prohibition of termination without adequate cause by the employer.

Contracts which terminate upon the completion of a work and the accomplishment of that work exceeds five years, the employee cannot legitimately terminate the contract prior to the accomplishment of that work.

Termination:

Generally, an employer cannot terminate the contract unless the employee has committed a fundamental breach among those listed in Article 69 of the Labor Law. [15] Including but not limited to:

  1. Committing a mistake that causes gross damage to the employer, provided that the employer informs the competent authorities of the incident within 24 hours from the time he became aware of its occurrence.
  2. Disclosing confidential information which causes gross damage to the employer.
  3. Assuming a false identity or submitting forged documents.
  4. Competing with the employer in the same business field.

Or it is proven that the employee is incompetent in accordance with the provisions of the approved regulations. In all cases, it shall be taken into account that the termination shall take place in a time appropriate to the working conditions.[16]

In general, if an employer wishes to terminate a contract, they must give the employee two months’ notice prior to terminating the contract if the employee has been working at the establishment for less than 10 years. [17] In case the employee has been working for the employer for more than 10 years, the employer must notify the employee 3 months prior to the termination.

Accordingly, if the employee wishes to terminate the contract, the employee shall rely on the adequate and legitimate cause related to his health, social or economic conditions.[18]

 

Generally, an employer cannot terminate the contract unless the employee has committed a fundamental breach among those listed in Article 69 of the Labor Law.

If an employer wishes to terminate a contract, they must give the employee two months’ notice prior to terminating the contract if the employee has been working at the establishment for less than 10 years.

Accordingly, if the employee wishes to terminate the contract, the employee shall rely on the adequate and legitimate cause related to his health, social or economic conditions.

Unjustified Termination:

If either party to the contract wishes to terminate the contract without legitimate or adequate cause, they must compensate the other party for the harm incurred because of the termination. [19] Moreover, when the contract termination is notified by the employer, the latter is obliged to allow the employee a full day per week or eight days during the week to look for other work; whilst still receiving full wages. [20]

Additionally, the term of the contract begins on the day the employee receives his work, including the probationary period, and remains valid till the date of termination, including the notification period. [21]

Moreover employees, similar to employers, have the right to terminate the contract and are entitled for compensation if the employer defaults on any of the substantial obligations agreed upon arising from the law or regulations or contract, or if the employer or his representative commits a harmful act towards the employee or a member of his family.[22] Finally, if the employer is found to have lead the employee to resign by violating the terms of the contract and gave the impression that this was the employee’s desire, the court may order additional compensation for the employee. [23]

 

If either party to the contract wishes to terminate the contract without legitimate or adequate cause, they must compensate the other party for the harm incurred because of the termination.

Employees, similar to employers, have the right to terminate the contract and is entitled for compensation if the employer defaults on any of the substantial obligations agreed upon arising from the law or regulations or contract, or if the employer or his representative commits a harmful act towards the employee or a member of his family.

 

In conclusion, the Labor law protects both the employee and employer, however, both parties should be aware of the clauses included in the contract, whether definite, indefinite, or for a particular purpose, and the obligations they commit to in the contract.

 

[1] Article 32 of Labor Law no. 12 of 2003

[2] https://www.egypttoday.com/Article/3/105474/Egypt%E2%80%99s-NWC-sets-minimum-wage-at-LE-2-400-for

[3] Decree of Minister of Manpower and Emigration No. 49 of 2009. *June 7th is not included in the Decree, however, in practice it is considered a fully paid holiday.

[4] https://www.elwatannews.com/news/details/5549317

[5] Article 47 of Labor Law no. 12 of 2003

[6] The proportion of holiday will depend on how much an employee works, relative to a full-time employee.

[7] Article 54 of Labor Law no. 12 of 2003

[8] Article 104 of Labor Law no. 12 of 2003

[9] Article 108 of Labor Law no. 12 of 2003

[10] Article 104 of Labor Law no. 12 of 2003

[11] Article 110 of Labor Law no. 12 of 2003

[12] Article 107 of Labor Law no. 12 of 2003

[13] Article 108 of Labor Law no. 12 of 2003

[14] Article 109 of Labor Law no. 12 of 2003

[15] Article 69 of Labor Law no. 12 of 2003

[16] Article 110 of Labor Law no. 12 of 2003

[17] Article 111 of Labor Law no. 12 of 2003

[18] Article 110 of Labor Law no. 12 of 2003

[19] Article 112 of Labor Law no. 12 of 2003

[20] Article 113 of Labor Law no. 12 of 2003

[21] Article 114 of Labor Law no. 12 of 2003; Ahmed Hasan El-Borai, 2013.

[22] Article 121 of Labor Law no. 12 of 2003

[23] Ahmed Hasan El-Borai, 2013.

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