The new draft law aims at regulating the relationship between employers and workers to match the evolving labor market economy. The draft law creates the following new entitlements for employees.
Employees with a permanent (indefinite-term) employment agreement will be entitled to two months’ pay per year of service if they are dismissed without just cause by their employer. Dismissals without just cause include terminations on the basis of sex, gender, religion, political opinions, pregnancy, etc.
If the draft law passes, maternity leave will increase from 90 days to 120 calendar days for a maximum of three births instead of the current limit of two births. Maternity leave pay would remain the same at 100% of salary, covered by Egyptian social security at 75% of salary and by the employer for the remaining 25%. In addition, the entitlement to two years of unpaid child care leave for working mothers would apply to employers with at least 25 workers instead of the current limit of 50 workers or more.
Working fathers will be entitled to one day of employer-paid leave.
Sick leave entitlement would increase from six months to 12 months. In addition, government-funded sick leave pay would increase from the current benefit of 75% of the insured salary for the first three months and 85% for the last three months to:
- 100% of insured salary for the first three months
- 85% of insured salary for the following six months
- 75% of insured salary for the last three months
Currently, employees are entitled to 21 days of annual leave with full pay after one year of service. Annual leave increases to 30 days after 10 years of service and for employees aged 50 and over.
The draft law creates an entitlement for employees with less than one year of service of 15 days of paid annual leave. In addition, the new draft law increases the leave entitlement for employees aged 50 and over from 30 days to 45 days.
Casual leave, which counts as part of the annual leave, is a personal leave that allows employees to take time off without stating any reason for taking such leave. Under the draft law, casual leave would increase from six days to seven days per year.
Fixed-term vs. permanent employment agreements
All fixed-term employment agreements signed for a period of greater than four years (whether under one or more agreements) would automatically be converted to permanent employment agreements (indefinite-term). Currently, any extension of a fixed-term contract converts it to an indefinite-term agreement.
Fixed-term employment agreements: Notice and severance requirements
Employers will be required to give their employees two months’ notice (instead of the current three months) should they decide not to renew a fixed-term agreement. Employers will also be required to pay an end-of-service indemnity of one month’s salary per year of service in case of nonrenewal of a fixed-term contract.
Permanent employment agreement: Notice requirement
Currently, employers are required to provide their employees with three months’ notice to terminate their permanent employment agreements. The notice period may be reduced for employees with less than 10 years of service.
The draft law requires employers to provide their employees with three months’ notice to terminate their permanent employment agreements (regardless of the length of service) with the possibility to provide pay in lieu of notice.
Annual pay raise
The draft law creates a guaranteed minimum annual pay increase of 3% of the wages covered by social insurance.
The draft law reinstates the training fund (to fund employee training programs) that was established under the current labor law, but which was never implemented. If the draft law passes, employers will be required to contribute to such fund 0.25% of payroll (instead of 1% of net profits which was initially planned under current labor law).
The draft law creates new employee entitlements that are likely to be costly for employers. Employers should monitor the implementation timeline of the draft law, audit their employment contracts and plan for budget increases to ensure compliance.