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Thursday, 11 November 2021

More sectors angling for exemption from private sector min wage

Business leaders want to exempt companies in eight sectors from complying with the new private sector minimum wage, which will take effect at the beginning of 2022. The Federation of Egyptian Chambers of Commerce (Fedcoc) has handed a formal request to Planning Minister Hala El Said requesting that businesses in the healthcare, building materials, construction, pharma, education, security services, and workers’ expatriation services be given a pass from paying the new wage, it said in a statement yesterday. From 1 January all private sector companies will be required to pay their employees a minimum wage of EGP 2.4k per month.

The reasoning: The federation cites these sectors’ high employee count and the nature of their employment, high production costs in some instances, and the negative impacts of covid-19 on business. Employers in these sectors are already paying wages that average 25% of production costs, higher than the global standard of 15-19%, according to the letter. Applying a minimum wage would raise the figure to some 30%, which could drive some of them out of the market. Many companies in those industries also use seasonal labor, youth workers that often need costly training, and a large number of blue collar workers.

Other proposals target partial and temporary exemptions: The federation alternatively suggested excluding 40% of the blue collar support jobs that don’t contribute directly to production lines from the minimum wage and excluding new hires for their first 12 months of employment. The commerce federation is also calling for a clearer definition of the minimum wage to differentiate between fixed and variable wages and factor in other non-cash benefits and other bonuses workers sometimes receive.

There are other sectors that already asked for exemptions: Notably, the Egyptian Tourism Federation argues that companies it represents have yet to fully recover from their covid-19 setback. The industry lobby group fielded a similar set of demands of the commerce federation to the National Council for Wages last month.

Background: Employees of private-sector companies will for the first time receive a minimum wage of at least EGP 2.4k starting January 2022 when the minimum wage comes into effect. The decision means higher labor costs and larger contributions to the nation’s Social Ins. Authority when it goes into effect. Companies have until the end of this month to submit a request to the National Wages Council if they claim they cannot afford the wage hike.

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