Egypt’s Labour Law No. 12 of 2003 sets out a structured termination framework that distinguishes sharply between lawful and unlawful dismissal, with severance calculations that vary significantly depending on how and why the employment ends. This guide covers everything a foreign employer needs to know: notice periods, valid grounds for termination with cause, severance entitlements across every scenario, final settlement deadlines, prohibited dismissals, and the dispute resolution process.
Probation and early termination
Egyptian law allows employers to set a probationary period of up to three months. To be enforceable, it must be stated explicitly in the employment contract.
During probation, either party can end the employment relationship without notice and without any severance obligation. This is the one window in Egyptian employment law where termination carries no financial exposure beyond the salary owed for days worked. Once the probationary period ends and the employee continues working, normal termination rules apply.
Notice period requirements
For indefinite-term contracts, both the employer and the employee must give 90 days’ notice before termination. This requirement applies equally to employer-initiated dismissals and to voluntary resignations.
Notice cannot be waived unilaterally, but the parties can agree in writing to extend it beyond 90 days. If an employer wants to end employment immediately rather than work through the notice period, the employee is entitled to payment in lieu of notice covering the full 90 days. Skipping notice without making that payment is a compliance exposure, not just an administrative oversight.
Grounds for termination with cause
Egyptian law permits dismissal without severance when the employer has documented cause. Not every performance issue qualifies. The Labour Law sets out specific grounds that justify immediate termination.
Valid grounds for dismissal without severance
The following constitute legally valid cause for termination without severance under Egyptian law:
- Unauthorized absence totalling 20 non-consecutive days in a single year, or 10 consecutive days
- Serious misconduct or repeated violations of documented workplace policy
- Disclosure of trade secrets that causes harm to the company
- Conviction for a felony, or conviction for a misdemeanor involving dishonesty
- Gross negligence that results in significant financial loss to the employer
Documentation requirements
Valid grounds are necessary but not sufficient. The employer must follow a documented disciplinary process before dismissal. In practice, this means issuing written warnings, giving the employee a formal opportunity to respond, and keeping a record of each step. An employer who skips the disciplinary process risks having an otherwise valid termination reclassified as unlawful by a Labour Court, regardless of the underlying conduct.
Keep records of every step: the initial warning, the employee’s response, any further disciplinary action, and the final dismissal letter. Date everything.
Severance and end-of-service calculations
Egypt does not apply a single severance formula to all terminations. The applicable calculation depends on the termination type. Unlawful dismissal triggers the highest exposure. Fair terminations such as redundancy and restructuring carry a lower entitlement. Resignation carries none.
Severance by termination type
| Termination Type | Calculation | Basis |
|---|---|---|
| Unlawful termination | 2 months’ salary per year of service (minimum) | Final basic salary |
| Fair termination (redundancy/restructuring/retirement after age 60): first 5 years | 0.5 months’ salary per year | Final basic salary |
| Fair termination: beyond 5 years | 1 month’s salary per year | Final basic salary |
| Voluntary resignation | No severance | N/A |
| Fixed-term, terminated early by employer | Remaining contract salary (or 1 month per completed year if 5+ years’ service) | Basic salary |
Note: for unlawful termination, 2 months per year is the statutory minimum. Egyptian Labour Courts can and do award more, particularly where the employer’s conduct has been egregious or where the employee had long tenure.
Worked examples
Example 1: Unlawful termination, 4 years’ service, EGP 15,000 basic monthly salary Severance = 2 months x 4 years x EGP 15,000 = EGP 120,000 minimum
Example 2: Redundancy, 8 years’ service, EGP 20,000 basic monthly salary First 5 years: 0.5 x 5 x EGP 20,000 = EGP 50,000 Remaining 3 years: 1 x 3 x EGP 20,000 = EGP 60,000 Total: EGP 110,000
Example 3: Redundancy, 3 years’ service, EGP 12,000 basic monthly salary 0.5 x 3 x EGP 12,000 = EGP 18,000
Voluntary resignation
When an employee chooses to resign, they must give 90 days’ notice, the same period required of the employer. No severance is due on resignation.
Two obligations survive the resignation regardless of severance. First, any unused annual leave balance must be paid out in cash, up to the two-year carryover limit. Second, the employer must include this payout in the final settlement, delivered within 15 days of the termination date.
Accepting a resignation and then withholding the unused leave payout is a compliance failure. The obligation to pay out accrued leave applies to all termination types, including resignation.
Fixed-term contract termination
Fixed-term contracts must state the end date. When the contract reaches its natural end, no notice or severance is required, provided the employer does not renew.
Early termination by the employer
If the employer terminates a fixed-term contract before the agreed end date, the default obligation is to pay the employee the salary that would have been earned through the remainder of the contract term. Where the employee has five or more years of service, the employer pays 1 month’s basic salary per completed year of service instead, if that figure is higher.
Unused annual leave must be paid out regardless of which calculation applies.
Conversion to indefinite contracts
A fixed-term contract that is renewed repeatedly will convert to an indefinite-term contract under Egyptian law. Once that conversion occurs, the full suite of notice and severance rules for indefinite contracts applies.
Mutual termination agreements
Employers and employees can agree in writing to end the employment relationship on mutually agreed terms. A mutual termination agreement (MTA) gives both parties more flexibility than a unilateral dismissal, but it carries strict procedural requirements.
The agreement must be in writing and must be certified or registered with the employment office. An MTA that skips registration is not legally valid. Once the employee signs, they have 10 days to revoke their agreement. Any settlement payment should be held until this revocation window closes.
MTAs are particularly useful when restructuring headcount, as they allow the employer to negotiate a clean exit without the risk of the termination being challenged as unlawful.
Final settlement: what to pay and when
Once employment ends, the employer has 15 days from the termination date to deliver the final settlement. Missing this deadline triggers financial penalties.
What the final settlement includes
- Outstanding salary up to the last day of employment
- Cash payout for all unused annual leave (up to the two-year carryover balance)
- Any end-of-service benefit (EOSB) due based on the applicable severance calculation
- Any other entitlements set out in the employment contract or applicable policy
Employers sometimes delay final settlements pending internal finance approvals or payroll cycles. Under Egyptian law, that delay is not a neutral administrative matter. Calculate the final settlement amount immediately on termination and prioritise payment within the statutory window.
Prohibited dismissals
Egyptian law prohibits termination in specific circumstances. Dismissing an employee in any of these situations exposes the employer to reinstatement orders and compensation claims regardless of any other grounds cited.
Protected categories
- Pregnancy and maternity leave: An employer cannot dismiss an employee during pregnancy or during maternity leave.
- Sick leave: Dismissal during sick leave is prohibited while the employee remains within their statutory sick leave entitlement.
- Complaint retaliation: An employer cannot dismiss an employee for filing a complaint, whether with the Ministry of Manpower, a Labour Court, or an internal grievance channel.
These protections apply even where the employer believes separate grounds for dismissal exist. Attempting to terminate on legitimate grounds during a protected period is likely to be treated as unlawful dismissal.
Work permit cancellation for foreign employees
Employers hiring foreign nationals in Egypt are responsible for the work permit. On termination, the employer must cancel the foreign employee’s work permit within 15 days of the termination date.
Failure to cancel on time creates regulatory exposure for the employing entity. Build work permit cancellation into the termination checklist alongside the final settlement payment so both deadlines are tracked together.
Termination disputes and the labour court process
Egypt operates a mandatory pre-litigation mediation step for employment disputes. Before a dismissed employee can file a claim with the Labour Court, they must first submit the dispute to the Ministry of Manpower for mediation.
Ministry of manpower mediation
The Ministry will attempt to broker a resolution between the parties. If mediation fails within the statutory period, the employee receives documentation that allows them to escalate to the Labour Court. Employers should engage seriously at this stage. Many disputes settle during mediation, and the costs of litigation, including potential reinstatement orders and compensation awards above the statutory minimum, can be substantially higher.
Labour court outcomes
Where a Labour Court finds that a dismissal was unlawful, it can order one of two remedies: reinstatement to the same role with full back pay, or compensation. Courts have discretion on compensation amounts and are not bound by the 2-month-per-year minimum. Compensation awards for senior employees or those with long tenure can be significant.
The employer’s documentation is the primary defence in litigation. Contracts, disciplinary records, warning letters, the termination letter itself, and settlement payment records all matter. Gaps in documentation tend to favour the employee.
Terminating employees without an egyptian entity
Foreign companies that employ workers in Egypt without a registered local entity face a structural compliance problem. Egyptian Labour Law requires that employment contracts be in writing, bilingual in Arabic and English (with the Arabic text controlling), and registered with the relevant authorities. Without a local entity, the employer has no legal standing to comply with these requirements directly.
An Employer of Record (EOR) solves this by acting as the legal employer on the ground. The EOR holds the employment contract, runs Egyptian payroll, administers the work permit, and manages termination compliance including notice periods, severance calculations, final settlements, and the 15-day cancellation deadline for foreign employees. The foreign company retains full operational control over the worker’s day-to-day responsibilities.
When a foreign company needs to terminate an Egypt-based employee, the Employer of Record handles the legal process: issuing the correct termination notice, calculating the final settlement, registering the termination with the employment office where required, and cancelling the work permit within the statutory window. This eliminates the risk of a foreign entity unknowingly violating Egyptian labour law through procedural errors.
Handle egypt terminations compliantly with RemotePass
RemotePass employs workers across Egypt and manages every stage of the employment lifecycle, from onboarding to compliant offboarding, including notice periods, severance calculations, final settlements, and work permit cancellations. Whether you are terminating a single employee or restructuring a team, RemotePass ensures every step meets Egyptian Labour Law requirements. Book a RemotePass demo to see how it works.
FAQs
Is 90 days’ notice required in Egypt for all terminations? The 90-day notice requirement applies to indefinite-term contracts, for both the employer and the employee. Fixed-term contracts do not require notice at natural expiry, and either party can terminate during probation without notice.
What is the minimum severance for unlawful termination in Egypt? The statutory minimum is 2 months’ basic salary for each year of service. Labour Courts can award more than this minimum, particularly for long-tenure employees or where the dismissal involved bad faith.
Can an employer in Egypt terminate an employee for poor performance? Poor performance can support a termination with cause, but only where it rises to the level of gross negligence causing significant financial loss, or where it constitutes repeated violations of documented workplace policy. The employer must follow a documented disciplinary process and maintain written records throughout. Informal performance concerns without documentation will not protect the employer in a Labour Court.
What happens if an employer misses the 15-day final settlement deadline? Missing the 15-day deadline triggers financial penalties. The obligation to pay within 15 days is statutory, not contractual, so the employer cannot rely on internal payment cycles as a defence.
Does an employee have to accept a mutual termination agreement? No. A mutual termination agreement requires genuine consent from both parties. Even after signing, the employee has 10 days to revoke. An MTA signed under duress, or one that has not been registered with the employment office, will not be treated as valid.
How does severance differ for redundancy versus unlawful termination? Redundancy and restructuring fall under fair termination: the rate is 0.5 months’ salary per year for the first five years, and 1 month per year thereafter. Unlawful termination carries a minimum of 2 months per year, with courts able to award higher amounts. The distinction matters significantly for financial planning when reducing headcount.
Can a foreign company hire and terminate employees in Egypt without a local entity? Not compliantly. Egyptian Labour Law requires locally registered employment contracts. A foreign company without a registered entity should use an Employer of Record (EOR) to hire and manage employees legally in Egypt, including handling all termination obligations.
