What Severance Pay Rules Must Employers Follow in Egypt?

Which Employees Qualify for Severance Pay?

• Employees on indefinite contracts terminated by the employer without a legally justified cause generally qualify for severance.
• Employees whose fixed-term contracts are ended early by the employer without serious misconduct usually qualify for compensation.
• Employees dismissed due to economic redundancy or restructuring may qualify for severance or redundancy compensation through the Manpower Fund.
• Employees with at least one year of continuous service are more likely to trigger statutory end-of-service and notice-related payments.
• Employees who resign for employer fault (such as non-payment of wages) can, in some cases, be treated as unfairly dismissed and claim compensation.
• Employees dismissed for serious misconduct proven under the Labor Law’s procedures typically do not qualify for severance.

What Are the Legal Timelines for Paying Severance?

In Egypt, the Labor Law requires you to settle all amounts owed to the employee, including severance and unused leave, promptly upon termination. In practice, many employers aim to pay within the last working day or within a few business days after completing exit formalities. Where a labor court or arbitration awards compensation, you must pay within the timeframe set in the judgment or risk enforcement action. To stay compliant, your company should document the calculation, obtain a signed receipt, and avoid delaying payment while internal disputes are resolved. Aligning your internal payroll cut-off dates with likely termination dates helps you avoid late or partial payments.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Egypt, you risk financial, administrative, and reputational consequences. Labor courts can review your termination decision, recalculate what is owed, and order additional compensation if the dismissal is found unfair or the payment is incomplete.

• Courts may order payment of outstanding severance, notice pay, and other end-of-service entitlements with interest.
• Unfair dismissal findings can lead to compensation that may reach several months of salary depending on service and harm suffered.
• You may face fines under the Labor Law for breaching statutory employment protections or ignoring court orders.
• Labor inspectors can increase scrutiny of your wider HR practices, leading to further compliance actions.
• Disputes over severance can damage your employer brand and make future terminations more contentious.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as https://www.playroll.com/employer-of-record does not remove the need to follow Egyptian severance rules, but it can shift day-to-day compliance work to the EOR. In Egypt, the EOR is typically the legal employer on paper and is responsible for calculating and paying statutory severance and end-of-service benefits. However, your company, as the client, usually bears the commercial cost and remains exposed if you instruct an unlawful or discriminatory termination. Courts and authorities may look at the real control over the worker when assessing liability. A well-drafted EOR agreement should clearly allocate who pays what, how severance is calculated, and how disputes are handled.

Be 100 Percent Compliant in Offering Severance with Playroll

Your company can reduce severance risk in Egypt by standardizing contracts, notice clauses, and termination workflows with Playroll. Our team tracks changes to Egyptian Labor Law, typical court practice, and market norms so your severance calculations are grounded in current rules, not guesswork. We help you distinguish between lawful dismissals for cause, redundancy, and mutual separation, and we document each step to support you if a claim arises.

Playroll’s platform centralizes employment data, so you always know tenure, salary history, and accrued entitlements before you initiate a termination. When you decide to end an employment relationship, we model different exit scenarios, estimate likely severance and risk exposure, and coordinate compliant payments through local payroll. That way, your managers can focus on business decisions while we help you stay fully aligned with Egyptian severance requirements.