What do industry players want from a redrafted Labor Act? Earlier this month, President Abdel Fattah El Sisi said that the Madbouly government will re-examine the controversial Labor Act, which ruffled feathers within the business community, particularly industry players. Representatives of both sides of the equation — workers and employers — will be consulted on the redraft of the bill, El Sisi said in a speech marking Labor Day. Industry players we spoke with broadly want to see more equity enshrined in the revamped bill, saying that striking a balance between all parties would improve business conditions and encourage further investments.

REFRESHER- The bill was pulled from the House of Representatives earlier this year to be redrafted by the government after backlash from the business community, which said the bill was lopsided in favor of workers. Prior to the redraft, the bill would have introduced new labor rights, including legislating mandatory annual raises, caps on working hours, and longer maternity leave and notice periods, among other things.

The labor market, by the numbers: As of 4Q 2022, there are some 30.34 mn individuals in the formal labor market, with less than half of that figure (13.2 mn individuals) employed in urban centers, according to data (pdf) from state census bureau CAPMAS. The labor force participation rate — which counts everyone aged 15-64 either in work or actively looking for work — stood at 42.8% during the quarter, while unemployment dipped 0.2 percentage points q-o-q in 4Q 2022 to 7.2%.

The business community wants to see more balance in the redrafted bill: The Labor Act needs to be rethought to better balance between protecting workers’ rights, while also taking business needs into account, head of the Industrial Investors Syndicate Mohamed Genedy told Enterprise. The bill in its current form is “burdensome” for business owners and employers since it requires them to provide training and financial benefits, while granting several perks to workers — including ensuring their rights when leaving a place of employment, Genedy said.

Workers are considered part of industry’s capital, which makes them highly valuable, but the legislative framework needs to cover the labor market as a whole, without catering entirely to one side at the other’s expense, head of the FEI’s labor committee Nadim Elias told Enterprise.

There are global models to emulate: A redrafted bill should look to other countries’ legislation for inspiration, as there are several well-constructed laws in other countries that govern the relationship between employees and employers, Federation of Egyptian Industries member Mohamed El Bahey told Enterprise. Meeting global standards in our legislative frameworks would be positive for the business environment, particularly in becoming more attractive for foreign investors, El Bahey said.

Do we really need an entirely new law? Probably not — the existing version of the law has the main planks that both employers and employees need, but it does need some tweaks and amendments to make it more balanced on the whole, Elias says. It would be far more productive to focus government efforts on policies that would encourage fresh investments, he told us.

One thing that needs to be axed from the bill: Jail time as punishment, which most jurisdictions have stopped enforcing imprisonment in labor-related disputes, El Bahey noted. It’s impractical to expect employers to constantly maintain the same number of employees, regardless of business conditions, he said. This is also important to consider when thinking about the outsized costs of staffing for industrial employers, which typically pay higher salaries — not to mention ins. and healthcare coverage and other expenses — than employers in other sectors, El Bahey said.

Industry players also have objections to the number of paid days off the law would offer workers — not to mention the fact that the law would, if passed in its current form — allow women employees to take three maternity leaves. This comes despite state efforts to limit population growth and encourage women to have no more than two children.

Meanwhile, business owners want fewer labor costs so that they can raise employment numbers and pour fresh investments for expansions, Egyptian Federation of Investors Associations member Sayed El Barhamtoshy told us. Some of the suggestions on the table: Slashing ins. costs or the employer’s share of social ins. payments, as well as offering tax cuts for the owners of factories that employ 1k workers or more, with the rate of exemption rising in correlation with the employee numbers, El Barhamtoshy suggested.

Long-term + open-ended contracts are another point of contention: Employers should not be legally obliged to retain employees or workers for a long period of time in the event that maintaining the contract would be detrimental to one of the two sides, Elias and El Bahey both agreed. Contracts should be capped at one year each and extended if both parties are willing, Elias suggested. The new law would cut out a practice that some companies have used to avoid having staff with open-ended contracts. Under the current law, an employee’s fixed-term contract (typically lasting one year, but sometimes two years) is converted to an open-ended contract if they continue in their role beyond the contract’s term. The new law would, if passed, decree that any employee contracted to work with the same employer for four years (i.e. under four consecutive one-year contracts or two back-to-back two-year contracts) automatically enters an open-ended contract.

Despite broadly skewing in workers’ favor, the bill still falls short in some regards with workers’ rights, says head of the Private Sector Workers Syndicate Shaaban Khalifa, who suggests that workers should get higher raise increments enshrined in the law. The bill in its current form would set a minimum annual raise requirement equal to 3% of the employee’s wage amount covered by social ins., while Khalifa suggests this figure should be pushed up to 7%.

Your top industrial development stories for the week:

  • Toyota Tsusho could set up a car factory here: Toyota Tsusho, the Africa-focused trading arm of Japanese carmaker Toyota, is looking to build two car factories in Africa and is considering setting up one of them here.
Tags: