1. The big picture: what changed in 2025
Until April 2025, Egyptian employment was governed by Labor Law 12/2003 — a workable but outdated framework that pre-dated remote work, gig platforms, and modern data-protection norms. Egypt's parliament replaced it with Law 14/2025, effective from September 2025, after a 12-month transition window.
For foreign employers, the practical changes that matter most are:
- New contract templates are mandatory for any contract signed after September 1, 2025. Older contracts remain valid until renewal but must be updated on renewal.
- Fixed-term contracts can now be renewed up to three times before they must convert to indefinite-term — previously, any second renewal triggered automatic conversion.
- Probation period reduced from a maximum of 6 months to 3 months for most roles.
- Remote work is formally recognized for the first time — including rules on equipment provision, working-hour tracking, and right-to-disconnect.
- Termination by mutual agreement now has a formal procedure (previously informal and often litigated).
- Minimum statutory leave raised from 21 to 25 working days per year for employees with 1+ year of service.
2. Contract types you'll encounter
Egyptian labor law recognizes three primary employment relationships. Misclassifying one as another is the single most common compliance failure for foreign employers.
2.1 Indefinite-term contract (open-ended)
The default for permanent staff. No end date. The employer can only terminate for cause, by mutual agreement, or with statutory notice and severance. This is what most senior employees and team leads will hold.
2.2 Fixed-term contract
Bound to a specific period (months or years). Can be renewed up to three times under Law 14/2025. After the third renewal, it converts automatically to an indefinite contract. Useful for project-based hires (typical for engineering teams or specific implementations).
2.3 Service contract (مقاول / freelancer)
For genuine independent contractors who provide a deliverable, not labor. This is where misclassification risk lives. If a "contractor" works fixed hours, uses your equipment, takes daily direction from you, and works for you exclusively — Egyptian labor courts will reclassify them as an employee and impose back-payments, social insurance arrears, and penalties. The penalties are joint between client and the hiring entity.
3. Working hours and overtime
| Item | Standard | Notes |
|---|---|---|
| Daily working hours | 8 hours max | Excludes 1-hour break |
| Weekly working hours | 48 hours max | 6-day week or 5-day week (40h) |
| Weekly rest | 1 day minimum (24h continuous) | Usually Friday |
| Overtime rate (weekday) | +35% of normal hourly rate | |
| Overtime rate (weekend/holiday) | +70% of normal hourly rate | Or +100% with paid replacement day |
| Night shift premium | +10% (between 7pm–7am) | For schedules that systematically include nights |
For remote work — which Law 14/2025 now formally recognizes — working hours must still be tracked, but the form of tracking is flexible (self-reporting, system logs, or hour bands). The right-to-disconnect provision means employees aren't required to respond to communications outside their declared working hours.
4. Social insurance (NOSI) — the part that confuses everyone
Every Egyptian employee must be registered with the National Organisation for Social Insurance (NOSI) under Law 148/2019. This is non-optional. Trying to avoid it via "contractor" labels is the most expensive mistake foreign employers make in Egypt.
2026 contribution rates:
- Employee contribution: 11% of insurable salary
- Employer contribution: 18.75% of insurable salary (private sector)
- Insurable salary band (2026): Minimum EGP 2,700/month, Maximum EGP 16,700/month
- Annual increase: The salary bands rise 15% per year until 2027
- Minimum pension: EGP 1,755/month · Maximum: EGP 13,360/month
5. Statutory leave entitlements (2026)
- Annual leave: 21 working days (under 1 year service) / 25 working days (1+ year) — paid
- Casual leave: 6 days per year — paid, max 2 consecutive days
- Sick leave: Up to 180 days per year, paid on a sliding scale (75% first 90 days, 85% next 90 days, via NOSI)
- Maternity leave: 4 months at full pay (up to 3 children over career)
- Paternity leave: 7 working days at full pay (new in Law 14/2025)
- Hajj/Umrah leave: One month, once per career, unpaid
- Bereavement leave: 3 days for close family
- Public holidays: ~15 days per year (varies based on Hijri calendar)
6. Termination: notice and severance
This is where foreign employers most often run into trouble — usually because they apply Western "at-will" thinking to a jurisdiction that has none.
6.1 Probation period
During the 3-month probation, either party can terminate without notice or severance. After probation, the rules below apply.
6.2 Notice periods
- Under 10 years of service: 2 months' notice
- 10+ years of service: 3 months' notice
- Notice can be replaced by payment in lieu (same value)
6.3 Severance (end-of-service indemnity)
Mandatory for terminations not for cause:
- First 5 years: Half a month's salary per year of service
- After 5 years: One month's salary per year of service
6.4 Termination for cause (no severance)
Permitted only for specific listed reasons: criminal conviction, gross misconduct documented through a formal disciplinary process, repeated absence without justification, breach of confidentiality, etc. "Performance issues" alone are not sufficient cause — they must be documented through a formal performance improvement plan with written warnings.
7. Income tax brackets (2026)
Egyptian personal income tax is progressive, with brackets that changed in the 2024 budget:
| Annual income (EGP) | Tax rate |
|---|---|
| Up to 40,000 | 0% |
| 40,001 – 55,000 | 10% |
| 55,001 – 70,000 | 15% |
| 70,001 – 200,000 | 20% |
| 200,001 – 400,000 | 22.5% |
| 400,001 – 1,200,000 | 25% |
| Over 1,200,000 | 27.5% |
The employer is responsible for monthly withholding via Form 1, Form 2, and Form 6 submissions to the Egyptian Tax Authority. Annual reconciliation happens through Form 4.
8. What the EOR handles vs what you handle
If you hire through WEM as an Employer of Record:
| Responsibility | WEM | You (Client) |
|---|---|---|
| Employment contract drafting | ✓ | |
| NOSI registration & monthly filings | ✓ | |
| Tax authority registration & withholding | ✓ | |
| Payroll execution | ✓ | |
| Statutory leave administration | ✓ | |
| Termination procedures & severance | ✓ | |
| Labor law compliance updates | ✓ | |
| Day-to-day work direction | ✓ | |
| Performance reviews | ✓ | |
| Salary level decisions | ✓ | |
| Role definition | ✓ |
9. Penalties for non-compliance
The penalties under Law 14/2025 increased significantly from the 2003 version:
- Unregistered employee: EGP 10,000–50,000 per employee + back-payment of all NOSI contributions + interest
- Misclassified contractor: Same as unregistered + double back-payment of insurance during the misclassification period
- Wrongful termination: Reinstatement OR damages equal to 2 months' salary per year of service (no cap)
- Failure to file Form 1/2/6: EGP 5,000 per missed filing per employee
- Criminal liability: For repeat or systematic violations, including imprisonment of company representatives
10. Practical checklist for foreign employers
Before you sign your first Egyptian employee directly (without an EOR), make sure you can answer "yes" to all of these:
- ✓ I have a registered Egyptian legal entity that can employ
- ✓ My HR team understands Law 14/2025 (not just the old Law 12/2003)
- ✓ I have NOSI registration and an active employer file
- ✓ I have tax authority registration and a tax file number
- ✓ I have local legal counsel for terminations and disputes
- ✓ I have an Egyptian bank account for payroll
- ✓ I have someone who can file Forms 1/2/6 every month
- ✓ I understand that wrongful termination is very expensive in Egypt
If any of these are "no" — an EOR is faster, cheaper, and lower-risk than building these capabilities for a team of fewer than 20 people.
Want this handled, not learned?
WEM is a licensed Egyptian Chartered Accountant practice running EOR services for GCC companies. We carry the legal weight of Law 14/2025 — you get the team. Open the funnel and we'll respond within 24 hours with a scoped proposal.
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