How to hire and pay independent contractors in Egypt

If you’re looking to bring diversity to your team, you can’t overlook the Middle East. There have been solid technological and economic advancements in the region, and Egypt is no exception. Egypt has a workforce of 29 million, and the country is the second-largest economic powerhouse in Africa. 

However, hiring independent contractors in Egypt is not easy. You’ll need to consider local requirements, including tax regulations, payroll practices, and employee benefits. You also have to be careful about avoiding misclassification risks.

But you’re in luck! This article will explain what you have to consider before hiring and paying independent contractors in Egypt. We’ll take you through employment laws, compliance practices, and how to pay contractors in the country.

Unique considerations of managing contractors in Egypt

The first thing to do when hiring independent contractors in Egypt is to learn about the country's laws and how the government classifies workers. Once you do that, the next step is to find out the right method to pay your contractors.

Like any other country, Egypt has laws that apply to local and international workers. As an employer, you must be aware of Egyptian compliance regulations to avoid possible mishaps.

What are the labor laws in Egypt?

The Egyptian Labor Law of 2003 defines the laws for workers in the country and protects workers' rights. The law treats all Egyptian employees equally, regardless of their job type, caste, age, religion, race, and gender.

Here are some key points from the country's labor law you should know when hiring independent contractors in Egypt:

• Minimum wage: The Egyptian government has specified the minimum salary for private sector employees to be EGP 2,700 (approximately $87) per month. 

• Payroll frequency: The payroll frequency of the country is monthly.

• Paid annual leave: Employees in Egypt enjoy 21 days of annual paid leave if they have worked for six months. 

• Public holidays: The government grants 14 public holidays to employees. If, in any case, an employee works even on a public holiday, the employer has to compensate them three times their regular monthly wage.

• Probation Period: The probation period lasts up to three months.

• Termination of employment: Beyond the three-month probationary period, an employer can only terminate employment if there are “reasonable reasons” to do so, or in case of employee misconduct. Employees who are terminated unfairly are entitled to severance pay.

• Employment contracts: All employment contracts must be written in Arabic and include an offer letter.

• Working hours: The maximum working hours for Egyptian employees are 8 hours a day. If the employee is at work for six or more hours, they should get a break for an hour in between.

Employees in Egypt are entitled to many benefits such as paid holidays, supplementary private insurance, life insurance, paid adoption leave, and flexible working, among others. Independent contractors do not receive the same protections and benefits as employees. So, if you’re looking to convert your exceptional contractor into a full-time employee someday, you’ll have to consider these Egyptian labor laws.

Tax and compliance practices for hiring independent contractors from Egypt

Contractors working in Egypt need to be registered with Egyptian tax institutions within 30 days of signing the contract. Contractors can do this online by visiting the Egyptian government's official website.

If you’re a US employer, you should be aware of the tax treaty signed between Egypt and the USA. 

US employers also have to consider the tax compliance regulations specified by the Internal Revenue Service (IRS). US employers have to fill out Form W-8 BEN by collecting tax information from independent contractors working outside the US. They may also need to fill out the 1096 form that covers all the information related to contractors. 

If you try to handle all this legal paperwork yourself, there is a chance you may slip at some point, especially if you’re managing multiple contractors based all over the world. Luckily for you, tax compliance has become much easier, thanks to Remote. Our global contractor management platform generates the right tax forms for your contractors, helping you stay compliant with IRS regulations.

What are the risks of misclassifying Egyptian independent contractors as employees? 

The Egyptian government treats self-employed contractors differently from employees. Misclassification of workers may cost employers heavy fines and penalties. 

Employees and independent contractors are classified based on the following factors:

• Definition: An employee is an individual who works for one employer at a time, while an independent contractor can work for one or more employers simultaneously.

• Job dynamics: An employee’s working hours, contractual terms, and place of work are set by the employer. On the other hand, a contractor is free to decide their working hours and location of work. The duration and terms of the working relationship are decided in agreement with the employer.

• Payer's tax requirements: The employer usually files employee taxes under the PAYE (pay-as-you-earn) system. The employer calculates the employee’s taxes, health insurance, social security contributions, and other deductions, and then sends them a net wage. An independent contractor who works in Egypt does not get this benefit.

• Payment frequency: The employee receives a regular salary from the employer. Whereas, the contractor and the employer mutually agree on the mode and frequency of payment before the start of the working relationship.

There can be serious consequences if you misclassify your Egyptian contractors and employees. You might end up:

• Paying regulatory fines and penalties: You may have to pay heavy fines or penalties if you misclassify workers. 

• Paying back employee benefits: You may have to pay back all the benefits and unpaid salaries to misclassified workers.

• Bans: If you are found guilty of misclassification, your business can be banned.

• Loss of intellectual property (IP): If the independent contractor challenges the ownership of any project or task, you can risk losing your IP rights.

You don’t have to stress, though. Remote’s contractor management system has been designed to make your life easier when you’re managing contractors. Our team has a solid understanding of international labor laws, and we can help you minimize classification risks when you hire independent contractors in Egypt. In addition, the Remote IP Guard offers strong protection for your IP, so you don’t have to worry about losing your IP and invention rights.

How do I convert an independent contractor in Egypt to an employee?

If things are going well with your current contractors, you can convert them into employees anytime you want. This strengthens your team in the long term and offers your workers a better employee experience. Moreover, you can have more control over the responsibilities and working hours of your employees. 

But the process of converting your contractors to employees is tricky. You’ll have to understand Egyptian labor laws and offer an array of benefits that Egyptian employees are entitled to, including paid holidays, sick leave, insurance, and more. 

When you’re ready to convert your contractors to employees, Remote can make the switch for you in a few steps. Our contractor management platform can help you create localized contracts, set up efficient payroll processes, and make sure you’re compliant with Egyptian labor laws.

How do I pay an independent contractor in Egypt?

Online payment services are one of the most common payment methods used to pay contractors in Egypt. Other popular platforms for international payments are:

• Credit card payments

• PayPal 

• Western Union

• Online money transfer service

Although these methods are fast and easy to use, less tech-savvy employers could run into issues along the way, especially if you’re processing payments for several contractors across the globe.

Managing the payroll process for your contractors can be time-consuming. Besides, you might lose money in transfer charges and high currency exchange rates.

So, why not make your life easier with a reliable contractor management system like Remote? We can help you manage invoices and automate payments with a few clicks— our payroll services offer everything you need to pay your global contractors quickly and easily.

The best way to hire independent contractors in Egypt

Hiring independent contractors in Egypt can be a great option for your business, but you have to be compliant with Egyptian labor laws. Apart from misclassification risks, you’ll have to navigate tax and compliance and make sure that your contractors are paid on time.

Remote makes it easy for you to hire, onboard, and pay international contractors in Egypt. Our contractor management services can help you:

• Create customized contracts which are compliant with Egyptian laws

• Approve and pay invoices quickly

• Manage all your contractors in one place

It’s that simple. Check out our international contractor management services to see how we can take your business to the next level. If you’re ready, sign up with Remote and start onboarding your contractors right away!