Egypt's private sector remains exempt from minimum wage law

Published November 3rd, 2013 - 09:59 GMT
Setting a minimum and a maximum wage in Egypt has long been a popular demand.
Setting a minimum and a maximum wage in Egypt has long been a popular demand.
Owners of businesses in certain fields or geographic areas might be spared the requirement to pay their employees a minimum wage, Minister of Industry and External Trade Mounir Fakhry Abdel-Nour told Egypt's official news agency MENA on Thursday. 

The exempted sector might include small and medium enterprises, villages, and the tourism and textile sectors. 

According to the minister, nothing has been decided yet. The final decision should be made by the National Council for Wages, which includes the government as well as business and workers representatives. 

Abdel-Nour’s statements come one day after Egypt's finance minister announced the rules for the new minimum wage for public sector workers of LE1200 ($171) per month, starting January 2014. 

Take-home pay will be less than the announced LE1200, as the government says deductions will be made for pensions, insurance and tax.  

However, bonuses granted to employees working in remote areas or handling risky tasks will not be deducted. 

Thus, the government should pay an employee at the base of the bureaucratic system, who takes home LE731 ($104) per month, an extra LE470, according to a statement from the finance ministry.

By removing the pensions allocation, the take-home pay of the employee will decrease to LE1022 ($146), according to calculations made by Ahram Online based on the figures released by the ministry. 

However, the lowest-paid employees will not pay income tax on their wages, as the lowest income bracket for the tax was recently raised from LE5,000 to LE12,000 a year.

The government has said it will synchronise the whole wage structure in such a way that the rise in wages in accordance with the new regulations will decrease with each increase in salary and post.

This means that the monthly extra payment by the government under the new regulations will go down from LE470 per month for the lowest-paid employee to LE150 for a vice minister.

The finance ministry said 4.8 million employees, including 500,000 temporary employees of the public sector, will benefit from the wage reform. 

On Monday, the government also announced a wage rise for healthcare personnel in the public sector including, doctors, nurses, pharmacists and technicians. Around 463,000 employees in the health sector should directly benefit from the decision. 

The government has not set a minimum wage for the sector, which has not been included in the minimum wage regulations. Healthcare and education are two of the most underpaid fields in the public sector.

The government announced that the rises for health care workers will range from 420 and 600 percent of the basic salary rate, around LE250. This basic salary rate currently forms one quarter to half less than half of the effective take-home pay of workers. 

To compensate for low basic salary rates, Egypt's public administration has grafted on a complex system of bonuses -- which includes 55 kinds of “primes” – to increase pay, many of them worth just a few pounds per month.

The system was reportedly designed to reduce the sums paid by the employer, in this case the state, for insurance. 

The wage rise in public administration is expected to cost the treasury LE9 billion, in addition to LE6 billion for the health sector, during the fiscal year 2013/14, to be doubled next year.

Setting a minimum and a maximum wage in Egypt has long been a popular demand. In 2009, a court ruled that the government must set a minimum wage compatible with costs of living after the Egyptian Centre for Economic and Social Rights (ECESR), an NGO, filed a case with the Administrative Court demanding a minimum wage be set at LE1200.

In May 2011, Egyptian doctors staged the first national strike in public hospitals across demanding better pay and conditions.

In July 2012, a minimum wage of LE700 ($100) was set in the public sector for the first time since the eighties. Doctors, professors and other professions were excluded. 

Imposing a minimum wage on the private sector has been met with much resistance from many business owners. Business representatives argue that fixing a high minimum wage might raise unemployment, as small businesses will not be able to handle the burden.

Mohamed Zaki El-Swedy, head of the Federation of Egyptian Industries (FEI), told Ahram Online recently that the organisation had asked the government to amend labour and pensions laws and to work on offering a better health, education and transportation system to alleviate burdens on the workers before imposing a minimum wage on the private sector. 

At least one quarter of Egyptians live in poverty, spending no more than LE3,444 ($500) each year, according to Egyptian state statistics body CAPMAS.

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