Our guide to Payroll in Ethiopia

Doing Business in Ethiopia

Ethiopia offers growing investment potential in agriculture, energy, and manufacturing. While foreign investment is welcomed, there are restrictions on certain entity types. Investors are encouraged to navigate registration and tax processes with local support.

Basic Facts about Ethiopia

Common Phrases

Hello: ሰላም (Selam)
Good morning: እንደምን አደርክ (Endemin aderk)
Good evening: እንደምን አመሸህ (Endemin amesheh)
Do you speak English?: እንግሊዝኛ ትናገራለህ? (Ingilizigna tinageraleh?)
Goodbye: ደህና ሁን (Dehna hun)
Thank you: አመሰግናለሁ (Amesegenallo)
See you later: እንገናኝ (Engegnalen)

Registrations and Establishing an Entity

• Must register with local authorities before payroll processing
• Employer submission preferred for regulatory filings

Banking

• Not mandatory to use a local bank, but cross-border transfer fees are high

Working Week

• Monday to Friday 08:00–17:00, Saturday 08:00–12:30
• Lunch: 30–60 minutes

Holiday Accrual

• Leave based on average of last 3 months' variable pay

Maternity Leave

• 84 days paid; 100 days for multiple births
• 4 weeks pre-birth; 6 weeks post-birth minimum
• Cannot resume work <6 weeks post-birth unless certified fit

Paternity Leave

• 3 paid days within 7 days of childbirth (regardless of multiple births)

Sick Leave

• 126 days/year max: 63 days full pay, 63 days half pay
• Must provide a medical certificate

National Service

• Not mandatory

Tax Year

July 1 – June 30

Income Tax (Monthly, in ETB)

• 0–600: 0%
• 601–1,650: 10%
• 1,651–3,200: 15%
• 3,201–5,250: 20%
• 5,251–7,800: 25%
• 7,801–10,900: 30%
• 10,901+: 35%

Social Security

• Employee: 7% of gross salary
• Employer: 11% of gross salary
• Paid to NSSF within 1 month after deduction month

Payroll

• Online payslips allowed (must be access-controlled)
• Barter not permitted

Reports

• Monthly PAYE by 7th; NSSF within 1 month
• PAYE summary due within 30 days post each 6-month period
• Records kept for 7 years

 New Employees

• Employer files PAYE and pension registration
• Client signature and documentation required

Leavers

• Standard termination and final pay rules apply

Employee Benefits

• All allowances (e.g., housing, fuel, telecom) are taxable
• Benefits-in-kind (cars, housing) taxed per official guidance

Expenses

• Expense reimbursements included in salary and taxed accordingly

Visas and Permits

• Class B permit for foreign workers
• Submit Form TIF.1 to Department of Immigration

Required:

• 5 photos, birth certificate, CV, qualifications, experience proof
• Offer letter, contract, organizational chart

Fees:

• $600 (2 years), renewal $300

• Expense allowances are taxed unless specifically exempted
• Employer recommended to file payroll reports directly for accuracy

Further Information For more information, or assistance with Ethiopia tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.