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Payroll in EtEthiopia.










Country Capital

Addis Ababa


Birr (ETB)

When you’re establishing your company abroad, setting up payroll is a critical consideration. You need to ensure that your employees receive payments accurately and on time each pay cycle, and you also need to manage any legal requirements for compensation.

The G-P team can administer payroll for you through our established legal entity so you can focus on other aspects of your expansion.

Taxation Rules in Ethiopia

Each month, you are responsible for withholding a percentage of each employee’s paycheck and paying it to the Ethiopian Revenues and Customs Authority (ERCA). Taxation is based upon income:

  • Income of 0-600 Ethiopian Birr: 0 percent tax
  • Income of 601-1,650 Birr: 10 percent tax with a deduction of 60.00 Birr
  • Income of 1,651-3,200 Birr: 15 percent tax with a deduction of 142.50 Birr
  • Income of 3,201-5,250 Birr: 20 percent tax with a deduction of 302.50 Birr
  • Income of 5,251-7,800 Birr: 25 percent tax with a deduction of 565.00 Birr
  • Income of 7,801-10,900 Birr: 30 percent tax with a deduction of 955.00 Birr
  • Income over 10,900 Birr: 35 percent tax with a deduction of 1500.00 Birr

You will also need to pay 11 percent of employee payments toward the country’s social insurance system.

Termination and Entitlement Terms

If you terminate employment due to employee misconduct or unlawful activities, you do not need to provide notice. However, if you dismiss workers for another justified reason, you must give appropriate notice and compensation. If you provide proper notice and terminate with justified reason, you must give these severance rates:

  • 30 times the employees’ daily wages during the first year of employment
  • 30 times daily wages plus an additional one-third of salary for each year of service after the first
  • 60 times the daily wages of workers’ last week of service plus the previously mentioned payments if termination is due to redundancy

A worker who terminates the employment contract due to misconduct by the employer may be entitled to additional severance pay.

How to Set up Your Ethiopia Payroll

For some companies, establishing a subsidiary is a solution for administering payroll, as it gives them the legal capacity to address requirements in the country. If you want a more time- and cost-effective option instead of setting up a new business entity, G-P can provide payroll outsourcing services for your company. We use our existing legal entities to administer payroll in compliance with all local regulations.

Ethiopia Payroll Options for Businesses

Companies expanding abroad have several choices for payroll administration:

  • Internal payroll administration: With an internal team handling payroll processing, you’ll be able to reduce transactional costs. You will need dedicated personnel, and your company will carry all liability for processing.
  • Payroll processing company: In many countries, you may have the option of hiring a local processing company to manage your payroll operations. However, you should be aware that you may need to pay high fees for these services, and any processing errors will be your business’s legal responsibility.
  • Subsidiary: Establishing a subsidiary gives you a legal presence in a new country of business. This option can simplify payroll management for you. That said, it can require a significant financial and time investment.
  • Global Employer of Record (EOR): When you need a solution that offers streamlined, liability-free management, G-P can address your requirements with our extensive resources and country-specific expertise. We’ll assume all legal responsibility on your behalf while administering payroll efficiently and accurately.

Let G-P Administer Payroll for You

Are you interested in learning how our expert team can simplify international payroll administration for you and help you provide optimal services for your employees? Reach out to our team for more information.


THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). G-P does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect G-P’s product delivery in any given jurisdiction. G-P makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.

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