Navigating the latest Ethiopian Labor Proclamation: Key Changes and what it means for HR outsourcing firms

In 2019, Ethiopia introduced Labor Proclamation No. 1156/2019, a significant update to the previous Labor Proclamation No. 377/2003 and its amendments, addressing the fast-paced changes in Ethiopia’s economy, employment dynamics, and global labor standards. As HR outsourcing firms play a crucial role in connecting talent with organizations, it’s essential to understand how these new regulations impact their operations and responsibilities. This article delves into the main updates relevant to HR outsourcing firms, from updated definitions and employee protections to new termination policies and compliance requirements. 1. Enhanced Protections Against Workplace Harassment and Violence One of the landmark changes in the 2019 proclamation is the clear, legal stance on sexual harassment and violence in the workplace, a topic previously lacking explicit definitions and enforcement mechanisms in Ethiopian labor law. For HR outsourcing firms, these updates require not only greater vigilance but also the need to advise clients on creating safer, harassment-free workplaces. Definition and Legal Consequences: Sexual harassment is defined as any unwelcome act for securing sexual favors. Sexual violence escalates to situations involving force or attempted force. Implications for HR Firms: Outsourced HR departments should work closely with client organizations to create policies that address harassment and provide clear reporting channels. They may also need to facilitate or deliver training sessions on workplace conduct and ensure compliance with these anti-harassment provisions. Employees who resign due to unaddressed harassment are entitled to severance pay, adding a layer of accountability for firms managing these employee relations on behalf of their clients. 2. Updated Probation Period Rules for Employee Suitability The 2019 Proclamation has extended the probation period from 45 consecutive days to 60 working days. This change gives employers more time to assess a new hire’s suitability for the role, a period that HR outsourcing firms can also use to demonstrate the value of thorough recruitment and assessment processes. Best Practices: During this probation period, firms should provide regular feedback and performance assessments to both clients and employees to clarify expectations and improve integration. By doing so, firms can reduce turnover and ensure more seamless staffing transitions. Why It Matters for HR outsourcing firms: HR outsourcing firms must adjust their contract structures to align with the 60-day probationary period. The extended period allows firms to employ advanced evaluation metrics and ensure clients receive well-vetted employees. 3. Streamlined Termination Policies for Attendance and Performance Issues Termination rules under the 2019 proclamation introduce more structure to address attendance and performance-related dismissals. Guidelines on Absenteeism and Tardiness: Now, eight instances of tardiness within six months, despite written warnings, justify dismissal. The previous law was vague on tardiness, often leaving it open to interpretation. Implications for Outsourcing Firms: HR firms are now better equipped to handle attendance-related issues for their clients. Clear guidelines provide outsourced HR teams with a standardized process, making terminations based on attendance less contentious. The Proclamation also stipulates that employee performance standards must either be set through collective agreements or regular assessments. This means firms should establish transparent, measurable KPIs and provide feedback mechanisms for their clients’ workforce. 4. Clearer Regulations on Overtime Work and Payments The revised proclamation permits up to four hours of overtime per day in special circumstances, increasing the flexibility for employers who may need extended shifts. Overtime pay has also been revised, with specific pay multipliers depending on the time and day the work occurs. Overtime Pay: Overtime during the day now pays at 1.5x the normal rate, and nighttime (after 10 PM) pays at 1.75x, up from 1.5x in the previous law. Work on rest days and holidays retains the 2x or 2.5x multiplier. HR Outsourcing Firm Compliance: These changes impact payroll and workforce management, areas where HR outsourcing firms often play a significant role. Firms must ensure accurate tracking of work hours, especially when managing large workforces or shift schedules for clients. They must also ensure that clients adhere to the prescribed overtime pay rates to avoid legal issues. 5. New Framework for Minimum Wage Policy Development While the revised proclamation does not set a specific minimum wage, it empowers the Council of Ministers to establish a Wage Board. This Wage Board will be responsible for periodically reviewing and setting minimum wages based on Ethiopia’s economic conditions. Future Implications: Though the minimum wage is yet to be defined, HR outsourcing firms should prepare to adjust salary structures accordingly once minimum wages are introduced. Strategic Guidance: Firms can advise clients on budgeting and workforce planning to anticipate potential minimum wage adjustments. By staying updated with Wage Board announcements, HR firms can ensure their clients are always in compliance. 6. Enhanced Annual Leave and Parental Leave Policies The new proclamation increases annual leave to 16 working days, plus an additional day for every two years of service, up from one day per year. Parental leave also sees positive changes, with post-natal leave extended to 90 days and a new three-day paternity leave introduced. Managing Leave Entitlements: HR outsourcing firms must update their leave management policies to reflect these entitlements. By implementing digital leave-tracking systems or payroll software, they can simplify compliance with these new leave requirements for their clients. This update reflects the Proclamation’s focus on employee well-being, and HR firms can add value by offering leave-management solutions to ensure their clients are compliant and support work-life balance. 7. Broader Employee Protections and Affirmative Action New protections are included for vulnerable groups during workforce reductions, such as newly added protections for individuals with disabilities (even those unrelated to work) and new mothers with infants under four months. Additionally, the Proclamation emphasizes affirmative action, giving women priority in hiring, promotion, or benefits if they score equally with male applicants. These changes underscore the importance of equitable recruitment and retention practices. Firms can enhance their recruitment services by aligning candidate evaluations with these updated affirmative action requirements. The Ethiopian Labor Proclamation 1156/2019 not only brings labor laws closer to international standards but also offers an opportunity for HR firms to enhance their service offerings and solidify their role as essential partners in compliance and workforce management. For further reference, you may download The Ethiopian Labor Proclamation 1156/2019 from our resource page.