Implementation of New Minimum Wage Decree in Egypt: Implications and Considerations

Introduction

In furtherance of governmental efforts to safeguard employee welfare amidst prevailing economic circumstances, both domestically and internationally, and in alignment with the aim of upholding equilibrium between employer and employee interests while furnishing requisite employee assistance, the National Wage Council (referred to as the “NWC”) has endorsed a substantial elevation in the minimum wage for private sector employees, effectively nearly doubling the prior minimum wage established earlier this year.

Overview

On April 8, 2024, the Egyptian National Council elevated the minimum wage for private sector employees by promulgating Decree No. 27 of 2024 (hereinafter the “Decree”), under the auspices of the Ministry of Planning and Economic Development. The Decree mandates the new minimum wage for private sector employees to be EGP 6,000 (six thousand Egyptian pounds), effective May 1, 2024, inclusive of the employer’s social insurance contribution

It is noteworthy that the minimum wage for private sector employees has progressively risen since 2022, as delineated below:

Date

Minimum Wage

January, 2022

EGP 2,400

January, 2023

EGP 2,700

July, 2023

EGP 3,000

January, 2024

EGP 3,500

May, 2024

EGP 6,000

The Decree specifies that the new minimum wage is computed pursuant to the salary definition elucidated in the extant Labour Law No. 12 of 2003 and encompasses the employer’s social insurance contribution. Typically, subsequent to a minimum wage hike or issuance of any employee-centric decrees, written circulars are disseminated to expound on their practical implementation

Moreover, the Decree affords leeway to companies grappling with economic adversities hindering compliance with the new minimum wage, permitting them to submit an exemption plea (through their respective competent trade union) by May 15, 2024. Such plea must furnish justifications for exemption along with corroborative documentation substantiating the same. It is further underscored that the Decree exempts small enterprises employing 10 (ten) or fewer individuals

The applicant employer is required to submit a request for exemption to the pertinent labor union, which will then act on behalf of the employer to present the request to the Ministry for deliberation. Requests for collective or group exemptions from industrial or business sectors will not be entertained

The request must meet the following criteria:

1. Furnish details regarding the applying employer, including the name of the employer/entity, registration number, location, nature of activity, name of the responsible manager, and their contact information.
 
2. Incorporate the subsequent information and documents: 
 
a. A memorandum elucidating the grounds for seeking an exemption. .
 
b. Financial statements of the company for the past three years.
 
c. Monthly payroll records of the company for the previous year.
 
d. Social insurance registration form (#2) of the company.
 
e. A copy of the company’s commercial register and tax card.
 
Concerned Entities
• Ministry of Planning and Economic Development
• Ministry of Labour
 
Directive and Penalties
In accordance with the directives established by the Minister of Manpower
 
All private sector entities and employers are obligated to adhere to the minimum wage without any automatic exemptions for any entity or sector.
 
Entities found in breach of this requirement will be liable to a fine ranging from EGP 100 to EGP 500, multiplied by the number of employees affected by the violation.
 
Legal action may be pursued against non-compliant entities to secure an injunction mandating the adjustment of salary payments to meet the mandated minimum
 
Our Perspective
We acknowledge that the minimum wage augmentation will impact the social insurance wage recorded with the National Organization for Social Insurance. Nevertheless, the pertinent issue persists that all companies had submitted Social Insurance Form 2 earlier this year, encompassing the comprehensive wage and social insurance wages
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