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Outsourcing high employment tasks

 

Outsourcing refers to contracting out non-core operation of an enterprise to an external entity (supplier) specializing in the delivery or management of that operation. According to current jurisprudence in Ethiopia, outsourcing of operations of an enterprise for the purpose of raising productivity is lawful. Thus, where an employer lays off employees following a decision to outsource operations, such lay off shall be regarded as lawful termination of employment (Commercial Bank of Ethiopia vs. Haile Gebreselassie, Cassation file no.22275 (2007), and SOS Children's Village vs. Kebede Kumsa et al., cassation file no.38435(2009)).

To Whom can enterprises outsource their operations ?

Outsourcing recruitment, security and janitorial operations has become a common practice in Ethiopia with security service being the most outsourced activity of major international organizations and NGOs. Presently, there are more than 260 private agencies providing security services to various international organizations, Embassies, NGOs etc. According to the Directive to regulate private employment agencies issued by the Ministry of Labor and Social Affairs in 2020, only agencies holding valid permit from the Labor and Social Affairs Bureau of their respective regions can enter into outsourcing contracts.

How should outsourcing contracts be structured?

The Outsourcing Contract specifies, inter alia, the number and qualifications of the workers provided by the Agency, the duration of the contract and the remuneration which the Agency receives for the service it provides to the Client. Furthermore, this contract often covers issues concerning liability and warranty between the Agency and the Client.

What are the major obligations of the Agency to the Client?

The Agency bears the obligation to pay the worker/employee. It is also the Agency that is obliged to pay the employee’s pension contributions and income tax.

The Agency is responsible for terminating the employment relationship in accordance with lawful grounds and procedures laid down under the Ethiopian Labor Law.

The Client has no right to dismiss the Agency worker. However, the Client does have the right to force the Agency to take back a worker who is unable to perform the agreed work or does not carry out the work as efficiently as agreed. The Client can also demand the Agency to provide a suitable replacement.

What legal measures are in place to ensure liability of an Agency?

According to the Directive cited above, every Agency shall post a workers' compensation bond in addition to purchasing workers' compensation insurance to cover all liabilities arising from any claim by employees.

 

Agencies' Obligation to Post Bond

 
  Number of Employees Amount in Birr
  Less than 100 100,000
  100-500 250,000
  Above 500 350,000

 

 

What are the major responsibilities of the Client?

While negotiating an outsourcing contract with an Agency, the Client has an obligation to make sure that the rights of the Agency workers are taken into due consideration. The Client must also make sure that the rights of workers enshrined in the Ethiopian labor law are protected during the period of Agency work. In particular, the Client must make the worker aware of the health and safety dangers to which he may be exposed in the course of the work, as well as measures and facilities for averting such dangers.


We have a team of specialists who can provide guidance and advice on outsourcing and labor issues. To speak to a member of our team, simply get in touch with us by using the contact form at the bottom of the webpage. You can also send your email to This email address is being protected from spambots. You need JavaScript enabled to view it..

Machinery as movable collateral

Access to Credit Against Movable Collateral Under Ethiopian Law

 

As of July 1, 2020, Ethiopian banks shall commence to allocate at least 5% of their credit disbursement to businesses that offer movable property as collateral. The National Bank of Ethiopia has launched a collateral registry to operationalize access to credit against movable collateral.

Why Movable Property Security Right ?

Businesses in Ethiopia had always found it difficult to access to credit ,especially if they couldn't provide immovable property as collateral. The country introduced a Movable Property Security Right law (Proclamation No. 1147/2019) to enable creation and enforcement of security rights in movable property. Businesses in Ethiopia can now borrow money from banks and other financial institutions against movable property as collateral.

How does the Collateral Registry Work?

The Collateral Registry is housed in the National Bank of Ethiopia . A secured creditor or its authorized representative shall fill the required application form on the Collateral Registry's website. Once the application is approved by the Registrar, the creditor or its representative shall set the password for its account and authorize individual users of the account . The creditor or its authorized representative can then register initial notices of creation of security rights, amendment of notices to add collateral or grantor, etc.

An initial notice shall contain the following information:

  1. identifier and name of the grantor ( I. e. the person that creates a security right over a movable property or a buyer, lessee, transferee or licensee of the collateral that acquires its right subject to a security right);
  1. identifier or name of the secured creditor;
  1. address of the grantor and the secured creditor;
  1. description of the collateral;
  1. period of effectiveness of the registration;
  1. any other information to be collected for statistical purposes only.

A public search of a record may be made according to the identifier of the grantor or the serial number of the collateral. Services of the Collateral Registry Office are available 24/7.

What can customers expect from Banks and Financial Institutions?

Banks, microfinance institutions and capital goods finance companies have an obligation to formulate and implement clear procedures for secured transactions. They are required to assign a senior officer to oversee the use of the Collateral Registry . They must also assign a senior officer to ensure strict data access procedures.


We have a team of specialists who can provide guidance and advice on credit security structures available to your business and the best options in relation to tax and legal requirements . To speak to a member of our team, simply get in touch with us by using the contact form at the bottom of the page . You can also send your email to This email address is being protected from spambots. You need JavaScript enabled to view it. .

 

Contact Information

Please feel free to send us your queries at the following address

Mobile: +251 911 40 7716 | +251 911 23 9322 / +251 912 06 6962 

Landline : +251 118 68 9349

Email: info@skylegalet.com | skylawet@gmail.com

Physical Address:

Afework Building (opposite Federal Attorney General's Office)


2nd Floor, Room No.201, Jomo Kenyatta Avenue,

Addis Ababa, Ethiopia

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