Back to the complete issue
Wednesday, 22 December 2021

Companies buy themselves time on minimum wage hikes

Thousands of companies will be given a six-week reprieve from the new private sector minimum wage requirement coming into force at the beginning of 2022 under a decision by the National Council for Wages (NCW), the Planning Ministry said in a statement yesterday. Thousands of companies had filed requests for exemptions from a requirement to start paying all employees a minimum wage of EGP 2.4k per month from 1 January.

What’s changed? Companies that have filed for an exemption can continue with their salary structures unchanged until mid-February, by which time the council aims to have finished ruling on requests.

Some 3k companies have already gotten approvals on their requests for exemptions and will be notified in the coming days, Planning Minister Hala El Said told Kelma Akhira’s Lamees El Hadidi (watch, runtime: 14:32). All of those businesses are in industries that faced either partial or complete closures because of the pandemic, the minister said.

Who’s angling for postponement or exemption? The council received requests from companies in the textiles and readymade garments, tourism, paper, and retail industries, among others, as well as some private schools with annual tuition fees below EGP 10k, according to El Said.

Companies have been pushing back against the new minimum wage since it was announced earlier this year, with thousands of firms telling their government they will not be able to afford the wage hikes. Companies have claimed that high employment counts, increased production costs, and the pandemic have left them unable to pay for the additional labor costs.

So what happens in the middle of February? There hasn’t been a decision yet on whether or not companies whose exemption requests are tossed out will then be required to retroactively pay their employees the minimum wage, NCW member Magdy El Badawy told Enterprise.

And what happens in cases of non-compliance? The government will ensure the minimum wage is being enforced through regular inspections from the Manpower Ministry, as well as by relying on complaints and reports of noncompliance filed to the council, El Said told Lamees. The penalties for proven cases of non-compliance will be outlined in the Labor Act, which is currently with the Senate for its opinion, advisor to the NCW Hanan Nazir told Masaa DMC’s Ramy Radwan (watch, runtime: 9:03).

SMART POLICY- Companies need to pay a liveable wage, and if anything, we think the EGP 2.4k line probably isn’t high enough. El Said and her team have handled the minimum wage file with aplomb — we hope they stay the course. Grant as few exceptions as possible. And if a company gets an exemption, it should have to commit to a clear deadline by which it will meet the minimum and pay a living wage.

In addition to the minimum wage, private sector companies will also need to provide periodic raises, for which the NCW has set a minimum threshold of 3% of the social insurable amount (known in most financial departments as “agr ta’meeny”) — which is equivalent to EGP 70 in the case of the new minimum wage.

The wage is inclusive of bonuses, incentives, and other allowances companies give their employees and is not the base amount, El Said told Lamees. The private sector minimum wage is in line with the same floor set for the public sector, which rose to EGP 2.4k from EGP 2k at the beginning of FY2021-2022.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.