The House passes Egypt’s long-awaited Labor Act — finally, and in full. After years of back-and-forth between the government, parliament, business groups, and labor unions, the House has officially passed Egypt’s new Labor Act.

When does it come into effect? There are a few months yet. The 2003 labor law will be in effect for at least 90 days — the new act needs to be published in the Official Gazette and we’ll need to see the executive regulations to it. The country’s specialized labor courts (a key feature of the law) are expected to start operating on 1 October 2025 when the new judicial year kicks off.

Who’s covered? The new law does not apply to public-sector employees, except in certain cases. It also excludes domestic workers, who will instead be governed by a separate, upcoming law designed specifically for labor in private households.

Freezone and investment zone workers will remain under their own systems. The new legislation preserves the autonomy of freezone and investment zone employment regulations. The lawmakers cited “economic considerations these laws represent and the unique nature of the labor relations governed by their regulations.”

KEY FEATURES OF THE LAW-

Annual raises will be calculated differently: The law sets a minimum annual raise of 3% of an employee’s insured wage, replacing the previous 7% of base salary standard. While the percentage is lower, the insured wage calculation could mean a potentially higher raise in absolute terms, according to the House joint committee’s report. Employees are only eligible for a raise after a full year on the job. Employers facing financial hardship may apply to the National Wages Council for a reduction or exemption.

Clarity on contract terms: The law makes open-ended contracts the default, unless otherwise specified in writing. A contract is considered indefinite if it is not written or if it continues after the expiry of a fixed term without renewal. Probation periods remain capped at three months, and an employer may not put a worker on probation more than once. Workers who receive employer-funded training are required to remain with the employer for a set period or repay training costs if they leave early.

Four signed copies — and in Arabic: Employment contracts must be drafted in Arabic and issued in four copies — one each for the employer, the employee, the Social Ins. Office, and the relevant administrative authority. If the worker is a non-Arabic speaker, the contract must also be written in their language, but the Arabic version prevails in case of disputes.

New work formats get legal clarity: The law formally recognizes modern ways of working including remote work, part-time contracts, flexible and split-hour arrangements, and job-sharing roles. Workers may now be employed by more than one employer simultaneously, provided they respect confidentiality obligations and do not freelance while being employed.

On foreign labor: The labor minister will have the authority to set quotas for foreign workers and prohibit non-Egyptians from working in specific sectors. A permit system will be introduced for select foreign investors without official residency. Work permit fees will range from EGP 5k to EGP 150k. Employers must report any foreign worker’s absence for 15 consecutive days without valid excuse.

Work hours + overtime: Employees cannot be required to work more than eight hours a day or 48 hours a week, excluding breaks for meals and rest, which must total at least one hour and prevent more than five hours of continuous work. The law grants a minimum overtime pay of 35% during the day and 70% at night. Workers who are required to work on their weekly day off will be entitled to double pay and another day off in the following week.

Leave entitlements: Employees receive 15 days of paid leave in their first year, 21 days starting year two, and 30 days after a decade of service or turning 50. People with disabilities are entitled to 45 days of annual leave. Non-Muslims are entitled to leave on their religious holidays in addition to national holidays.

New protections for working parents: The new law grants female workers a four-month paid maternity leave covering the period before and after delivery — including at least 45 days post-birth — without requiring a minimum period of service, scrapping the previous condition of 10 months with the employer. Employers are prohibited from terminating employment during maternity leave. Fathers are entitled to one day of paid emergency leave on the day of their child’s birth, up to three times during their employment, without it counting toward their annual leave balance. The law also gives companies employing over 100 women the option to either establish an in-house childcare center or subsidize childcare costs, with conditions to be set by the relevant ministries.

A specialized judiciary for labor disputes: The new law establishes a dedicated judicial system for labor cases, including specialized labor courts and appellate chambers to hear appeals against rulings issued by the labor courts. It also introduces a judge for urgent matters to handle urgent issues, and outlines the procedures for appealing those rulings. For the first time, the Court of Cassation is granted authority to rule on the substance of labor-related cases. Additionally, a new court enforcement division will be created to execute labor judgments. The legislation also allows parties in collective labor disputes to refer their cases to a newly established Mediation and Arbitration Center, as an alternative to formal litigation.

Lighter financial burdens for both sides: The legislation simplifies judicial procedures and exempts workers from court fees. It also revises contributions to the Labour Ministry’s Training and Qualification Fund, linking them to insured wages rather than net incomes. Employers of over 30 workers must contribute 0.25% of the minimum insurable wage to the fund — between EGP 10 and EGP 30 per worker annually. Employers who provide in-house training are fully exempt from these contributions.

Streamlined dispute resolution mechanisms: The legislation promotes social dialogue and alternative dispute resolution mechanisms — from collective bargaining to institutional arbitration — to prevent prolonged conflicts. It establishes a Supreme Council for Social Dialogue tasked with proposing solutions for national labor disputes, especially during economic crises that may lead to full or partial suspension of operations.

Strike action now comes with tighter rules: Workers cannot go on strike unilaterally — only their registered trade unions may declare a strike under the new law. The union must notify both the employer and the competent authority at least ten days in advance. Strikes are prohibited in facilities providing essential services, and employers are not obligated to pay wages during a strike.

Labor inspectors get full power: Labor inspectors will have judicial enforcement authority and must carry an official ID card. They are entitled to access and inspect workplaces, review documents, and request any necessary information or records from employers or their representatives to ensure compliance with the law and its executive regulations.

Workers’ rights take priority in liquidation: The new legislation grants workers priority over all of an employer’s assets — even before legal expenses — when settling outstanding dues in the event of liquidation. It also ensures that mergers, acquisitions, and asset sales do not automatically terminate employment contracts.

THE REACTION-

The preliminary approval of the law was met with mixed reactions: Head of the Trade Union Federation Abdel Moneim El Gamal insisted that some articles of the bill come at the expense of workers and their rights, while the Justice Party’s Abdel Moneim Imam argued that the bill is biased against the private sector. Meanwhile, Labor Minister Mohamed Gobran called it “one of the most important pieces of legislation in recent years.

The law moves the needle — but doesn’t go all the way: House Manpower Committee Deputy Chair Ihab Mansour told EnterpriseAM that while the new labor law is “a step forward” in achieving a more balanced relationship between workers and employers, “it does not fulfill all ambitions.” Mansour noted that the law emerged following a series of hearings aimed at creating consensus. He added that he advocated for linking annual raises to inflation rather than setting them at 3% of insured wages — a clause the Federation of Egyptian Industries opposed, instead lobbying for a reduction.

A victory for job security: Fellow committee Deputy Chair Solaf Darwish praised the law for eliminating the long-abused practice of pre-signed resignations — AKA Form #6. The law now requires resignations to be signed by workers and verified by administrative authorities to protect employees from unfair dismissal.

Still out of step with the private sector? Private Sector Workers Syndicate head Shaaban Khalifa criticized the new law for not aligning with the realities of Egypt’s private sector. He told EnterpriseAM that some employers pressure workers to sign promissory notes for equipment or company property, which could still be used to exert pressure on employees.

Khalifa also flagged issues with hiring practices: He warned that the 1% wage deduction from new hires in their first year — paid to recruitment companies — could encourage firms to bypass social insurance obligations and income tax by relying on outsourcing firms. “Some employers deduct as much as 2.5% of wages as commission for these firms to circumvent the burdens of the law,” Khalifa said.

Immediate insurance registration is a burden, some argue: National Wages Council member Alaa El Sakty, who also heads the SME Union, said that requiring companies to insure workers from day one imposes a burden on business owners. He called for a three-month probation period before triggering insurance obligations, giving employers time to evaluate worker capabilities.

Calls to cap foreign labor: Engineering Export Council Chair Sherif El Sayad stressed the need for clear limits on the share of foreign labor allowed at Egyptian businesses to protect local employment and curb joblessness. “Unlike countries in Europe that import skilled labor, Egypt has a skilled workforce across most industries,” he said, warning that some factories might lean on low-wage foreign labor to skirt local regulations and pay less wages.

Some are worrying about the potential impact of foreign labor poses a long-term risk: A member of the Egyptian Businessmen’s Association (EBA) told EnterpriseAM that the lack of clear quotas for foreign workers in the law — or leaving it to ministerial discretion — could be dangerous in the long run. Egypt has taken in large numbers of refugees in recent years, many of whom would work for any wage just to stay in the country, according to the EBA official, who added that without clear controls, this could have serious implications for the local labor market and economy.

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