New labor law, same pro-business bias

A decade after initiating the process to draft a new labor law, the government announced on November 6 that the bill had finally been completed after incorporating several amendments. The latest round of amendments emerged from discussions in the Supreme Council for Social Dialogue, chaired by the labor minister.

The draft law’s protracted journey began in 2014, with its initial version taking nearly three years before the government could submit it to the House of Representatives in 2017, where the Manpower Committee reviewed and forwarded it for voting in the general session the same year. The committee incorporated amendments as it merged it with another draft law submitted by former MP Khaled Abel Aziz Shaaban. However, Shaaban tells Mada Masr that the general session’s discussions stalled due to pressure from business owners, particularly as the Manpower Committee had pushed the bill through the committee despite their opposition.

A board member of the Egyptian Trade Union Federation (ETUF) tells Mada Masr that the draft law was later sent to the Senate during a subsequent parliamentary term. The Senate approved the bill in 2022 and sent it back to the House of Representatives, where the Manpower Committee passed it once again. However, before the bill could reach the general session in 2023, President Abdel Fattah al-Sisi intervened, requesting that it be referred to the Supreme Council for Social Dialogue — a call he reiterated in May of this year, according to the federation board member. 

“The reason the law was stalled for so long was due to objections from business owners, which they openly declared even outside the Supreme Council for Social Dialogue,” the source said. In Labor Ministry-facilitated dialogue sessions, business owners opposed limits on worker dismissals and indefinite contracts, as well as mandates for periodic bonuses, which they insisted should be left to the National Wages Council (NWC), according to the source. 

In January 2023, the government withdrew the draft law from Parliament to revise certain articles, aiming to “balance the rights of employers and employees, satisfy all parties and serve the public interest as much as possible,” according to former Parliamentary Affairs Minister Alaa Eddin Fouad. By January 2024, the Labor Ministry tasked a committee with addressing feedback and proposals from workers, employers and the Senate. A timeline was set for discussing the bill’s provisions ahead of its submission to the Supreme Council for Social Dialogue in its upcoming session.

Although the supreme council is required by law to convene “at least every three months or as needed,” it only began reviewing the draft law in May, shortly after receiving presidential directives to do so.

A senior official at the Labor Ministry, directly involved in the supreme council’s deliberations regarding the draft law, tells Mada Masr on condition of anonymity that the ministry submitted the council’s conclusions to the Cabinet for approval. The official explains that the council's recommendations reflect the Labor Ministry’s position, not those of the government as a whole, and thus still requires Cabinet approval. The government’s recent announcement of its endorsement of the labor law, the official notes, effectively signals approval of the latest amendments, which are expected to reach Parliament in the coming days.

Several sources involved in drafting the new legislation explain to Mada Masr how the amendments were shaped by discussions among workers, business owners and government representatives.

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The Labor Ministry official says that the Supreme Council for Social Dialogue’s proposals for the draft labor law included several gains for workers. Those include the recognition of new work models, such as platform-based labor (app-based delivery services, for instance), as formal employment relationships, even in the absence of traditional contracts to prove it — provided there is an intermediary, such as an operating contractor. The amendments also prohibit fixed-term contracts for jobs that are not inherently temporary. Additionally, the source notes, “the amendments allow compensation equivalent to one month’s salary for every year worked if an employer terminates a contract that has been renewed multiple times.”

On the other hand, the amendments offer employers a key concession: reducing their contributions to the ministry-affiliated training fund, founded in the early 2000s to provide vocational training to prospective workers. Instead of basing contributions on net profits, as stipulated in the original bill, the calculation would now be a percentage of the total insurance payouts that companies make to all workers. 

These amendments reflect agreements reached between worker and employer representatives during the council’s discussions, the official notes. However, two sources, one representing workers and the other employers, tell Mada Masr that while both groups had submitted lists of demands to the Labor Ministry by the conclusion of the dialogue, they were not informed about the final amendments sent to the Cabinet.

New restrictions on the right to strike

The draft labor law significantly increases restrictions on strikes. It retains provisions from the existing 2003 law, which require workers to notify their employer and relevant administrative authorities at least ten days before a strike is meant to start via a letter that requires acknowledgment of receipt. The notice must specify the reasons for the strike, along with its start and end dates. The draft also upholds the current law’s prohibition on strikes intended to amend a collective bargaining agreement while it is still in effect. Additionally, it introduces a new ban on strikes during “all stages of mediation and arbitration,” a process that can extend over several months.

The new draft law also retains the current restriction prohibiting strikes in “strategic or vital establishments where work-halting would undermine national security or essential public services,” the bill reads. A prime ministerial decision is required to define what constitutes a “strategic or vital” establishment.

The decree issued by former Prime Minister Atef Ebeid in 2003 defined such establishments as national security and military production facilities, hospitals, pharmacies, bakeries, public transportation, goods transportation, civil defense establishments, utilities for water, electricity, gas and sewage, as well as telecommunications facilities, ports, lighthouses, airports and educational institutions.

A new, vague restriction in the draft law bans strikes or calls for strike during “exceptional circumstances,” without specifying what qualifies as such circumstances.

Speaking to Mada Masr, former Labor Minister Ahmed Hassan al-Borai, who chaired the drafting committee for Labor Law 12/2003, warns that if this clause is included in the final law, it could enable complete restrictions on the right to strike.

The draft also imposes an additional restriction on the right to strike, noting that workers must have exhausted the “amicable dispute resolution methods” outlined in the law, a process that could take a considerable amount of time.

These amicable methods include collective bargaining, conciliation, mediation and arbitration. Under the draft law, conciliation may only begin if collective bargaining fails to yield an agreement within one month. Either party can then request that the relevant administrative authority initiate conciliation procedures within five days. This process should result in a collective labor agreement, but if no resolution is reached within 21 days, either party may request that the administrative party escalate the dispute to a mediation and arbitration center under the Labor Ministry.

On the other hand, the bill modifies the current requirement for strikes to be approved by two-thirds of a general union’s members. Instead, it allows strikes to be “declared and organized by the relevant labor union or a worker representative.”

A worker representative, as defined by the bill, is an employee chosen by their colleagues through a formal, written agreement to represent them before the employer in the absence of a labor union.

Speaking to Mada Masr on condition of anonymity, a worker representative in the Supreme Council for Social Dialogue says that the council’s worker group submitted a memorandum to the Labor Ministry’s drafting committee, which includes legal experts, State Council representatives and government officials. The memorandum proposed amendments to the provisions related to strikes, including setting criteria for sectors where strikes would be prohibited and defining the "exceptional circumstances" mentioned in the bill, during which strikes would be banned. They also called for removing the requirement to notify employers in advance of the strike’s end date. 

"This provision is clearly illogical,” the worker representative says. “Workers cannot know the end date of a strike beforehand, as it depends on [the employer’s] response to their demands.” 

The representative also argues that if the employer knows when the strike will end in advance, they could delay addressing workers' demands, “waiting for the strike to end and the pressure it brings to dissipate."

Meanwhile, the Labor Ministry official says that "the amendments referred by the Labor Ministry to the prime minister's office included a revised definition of a strike, in line with international labor standards, as well as adjustments to strike regulations," though he did not elaborate on the nature of these changes.

Disagreements over maternity leave

The proposed labor law introduces a four-month maternity leave, provided the employee has worked for at least six months. The employee can take it up to three times during her term of employment. This is an amendment to the current labor law, which grants three months of maternity leave to workers who have been with the employer for at least ten months, with a maximum of two such leaves during their employment.

The new draft law also clears the way for the implementation of the provisions of the 2017 social insurance law, whose language had stood in contrast to the labor legislation on the books regarding who foots the bill for maternity leave. According to the 2003 labor law, an employer is responsible for 100 percent of a woman’s wage while she is on maternity leave. The 2017 social insurance law, however, saw the state come to the aid of employers, extending them a generous offering by paying 75 percent of a woman’s wage from the social insurance fund. But, as this new labor legislation has toiled in the parliamentary committee, employers have long waited for the activation of this provision. The new draft legislation will clear up the matter by matching the labor and social insurance laws. 

While employers are getting a generous helping hand from the state when it comes to maternity leave payouts, they are still not happy with the increased number of times a woman can take leave, framing the move as being “against women’s empowerment.”

"It is illogical for the state to call for reducing population growth, and at the same time, the legislator encourages it by increasing the number of times workers can take maternity leave," the employer representative tells Mada Masr. "This provision actually undermines women's economic empowerment because, in reality, private sector employers will refrain from hiring women.” 

Despite employers’ contention that they would hire fewer women if the provision went through, the worker representatives in the supreme council "insisted on keeping the provision," one of them tells Mada Masr.

Business owners’ concerns over labor contracts

The current labor law stipulates that "if the term of a fixed-term employment contract expires and both parties continue to execute it, it is considered a renewal of the contract for an indefinite term."

While the new draft law retains this principle, it also includes additional provisions that may move Egypt’s labor market toward more stable employment terms. It stipulates that an employment contract is considered indefinite from the outset if it is: not written, does not specify its duration, or is a fixed-term contract that has been renewed for more than four years in total.

An unwritten contract, as explained by Shaaban, represents an employment relationship where the worker had to perform duties without a written agreement, but was later able to show that a formal labor relationship did exist.

This provision faced criticism from business owners during discussions in the Supreme Council for Social Dialogue, one of their representatives tells Mada Masr. "This provision disregards any potential economic conditions that may force the company to lay off a worker, and it also prevents the employer from letting go of a worker they judge to be inefficient," the representative says. "The law itself recognizes the employer's right, when necessary, to partially or fully shut down operations, which acknowledges the possibility of unforeseen economic conditions for companies. Therefore, there is a clear contradiction [in the law's philosophy] between the provision that transforms a fixed-term contract into a permanent one after four years and the right to shut down partially or fully in certain circumstances." The representative adds that the government itself now relies on temporary contracts for its own workforce. 

On the other hand, in terms of job security, the bill grants labor courts alone the authority to dismiss workers as a disciplinary measure, while allowing employers to take other disciplinary actions.

Employers win the bonus battle

However, business owners appear to have secured a significant gain for themselves in the new draft law, which is the modification of the periodic bonus system. The system is shifting from the current model, based on a percentage of the base wage, to a new one based on a percentage of the insured wage (or the component of a salary that determines national social insurance contributions), according to one of the workers' representatives in the NWC who spoke to Mada Masr on condition of anonymity.

Article 12 of the bill states that "employees subject to this law are entitled to an annual periodic bonus of no less than 3 percent of the insured wage [...] according to the rules regulating this bonus, to be issued by the National Wages Council." 

In contrast, the current labor law, in Article 3, states: "Employees are entitled to [...] an annual periodic bonus of no less than 7 percent of the base wage at the time of entitlement […] until the National Wages Council issues regulations organizing this bonus."

The provisions of Article 12 in the draft law began to be implemented in 2021, after 18 years of adhering to the 2003 law, which mandated a 7-percent calculation. In its July 2021 meeting, the NWC decided to raise the minimum wage for private-sector workers to LE2400 and modify the bonus calculation system to be 3 percent of the insured wage.

"The government's justification [in 2021] was that 3 percent of the insured wage, on average, exceeds the value of 7 percent of the base wage," says the workers' representative in the NWC.

Under the current social insurance law, the base wage is part of the insured wage, or what the law refers to as the "contribution wage.” In principle, this means the insured wage is higher than the base wage.

However, workers' representatives objected to this shift, according to the NWC board member who explains that this change "practically led to a significant reduction in annual increases in many cases" because "the base wage [in practice] is an element that is often nonexistent in the private sector." 

Unlike the government, which uses detailed pay structures that distinguish between base and total wages, private sector pay systems are typically simpler. As a result, many private sector companies, maybe to simplify matters, base their wage increases on 7 percent of the total wage or the insured wage. Many of these companies, however, often only insure employees at the minimum threshold required for insurance. Employees in these cases have seen a significant decline in the growth of their annual wages.

Hassan al-Barbary, a financial advisor to several independent unions, agrees with this viewpoint. "There is no clear relationship with percentages between the base wage and the insured wage in the private sector. Even though it may, in theory, seem that the former is part of the latter, what happens in practice is that private sector norms generally agree that the insured wage is equal to the base wage,” he tells Mada Masr. 

 This approach, Barbary says, is more compatible with private sector contracts that do not include detailed wage breakdowns, only listing the total wage, which is clearly linked to the insured wage as the minimum insurable wage represents 70 percent of the total wage. 

Barbary believes that the private sector "in reality, tends not to include significant portions of the total wage in the insured wage, meaning that relying on the insured wage as a standard for the periodic bonus does not seem fair for workers.”

The other side of the issue is the annual increase rate of 3 percent, which is far from keeping pace with inflation levels, Barbary adds. “We must not forget that the current labor law was enacted during a time of [lower] inflation levels," he says.

The government and workers in the National Wages Council

The bill introduces changes to the composition of the NWC to further reinforce the governmental nature of the appointed party from the executive authorities. The current law stipulates that the NWC is headed by the planning minister and comprises three parties: one appointed by the government, another representing employers and selected by them, and a third representing workers and appointed by them. It also stipulates that the government-appointed party must comprise members equal in number to the combined total of the other two parties. 

The draft law retains the same tripartite structure. However, it modifies the composition of the government-appointed party to ensure all its members are exclusively from executive authorities or their affiliates.

The current labor law defines the first party as "members by virtue of their positions or expertise," which allows the inclusion of independent experts alongside executive officials. For instance, the current council includes 12 members appointed by the government, four of whom are independent experts: Hanin Hussein, an assistant professor of economics and political sciences at Cairo University; Mona Abdel Salam, a professor of economics at the American University in Cairo; Mona Abdel Hamid, an economic expert; and Abdel Hamid Kotb, former head of the legislative committee at the Labor Ministry.

The new draft law limits the first party’s membership to ten ministers and government officials, including the ministers of labor, social solidarity, finance, trade and industry, public business sector, supply and internal trade, along with the following positions: heads of the National Council for Women and the Central Agency for Public Mobilization and Statistics, CEO of the General Authority for Investment and Free Zones, and chair of the National Authority for Social Insurance.

Meanwhile, the bill clearly specifies the employers' side, with five members to be chosen from business organizations. However, the selection process for workers' representatives remains ambiguous, with the draft stating that representatives would be chosen by the "relevant trade union organization."

The Senate added the phrase "relevant trade union organization" to the text of the draft law submitted by the government, which originally specified that the entity responsible for selecting workers' representatives would be the ETUF, as is stipulated in the current law.

The federation’s head, Abdel Moneim al-Gamal, who is also a member of the Supreme Council for Social Dialogue, tells Mada Masr that the term "relevant" was discussed in the supreme council’s meetings. The government clarified that it refers to the most representative trade union organization. "As such, the situation remains the same because the ETUF is the most representative, especially since it is the only union federation. The removal of the name in some parts of the law and the adoption of the term 'relevant trade union' relates to obligations under the labor unions law [213/2017]," Gamal explains, which effectively makes way for trade union pluralism, even if, in practice, the state-affiliated ETUF is guaranteed to dominate.  

Rasha al-Gebali, the head of the Alexandria branch of the independent Real Estate Taxes Union, believes that the ETUF remains the only legal trade union federation. Speaking to Mada Masr, she points out that the formation of other federations is limited due to restrictions imposed by the Labor Ministry, which makes it difficult, in reality, even for existing unions to regularize their status. 

"For example, our independent real estate taxes union still faces difficulties in meeting legal requirements due to claims of dual membership of some members, as Labor Ministry officials argue that some members of our union are still affiliated with the trade union federation, and there’s no way to prove otherwise. Moreover, reaching the minimum number of members required for unions, which the law stipulates should be no less than 200,000, remains a challenge," she says.

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As of the time of writing, the proposed government amendments have not yet reached the Manpower Committee of the House of Representatives, though the committee has already completed discussions and approved 60 articles of the bill without incorporating the amendments. These will be added later, the committee's deputy chair, Ehab Mansour, tells Mada Masr. Committee member MP Ahmed Ashour expects the discussions to conclude by the end of December, with the draft to be presented in a general session of Parliament at the beginning of the new year.