The comprehensive wage system in Egypt is one of the important tools for regulating the relationship between employers and workers, aiming to ensure social justice and increase transparency in calculating wages and financial entitlements for workers.
In this article, we review the concept of comprehensive wage, its objectives, components, and the main challenges facing its implementation, while providing solutions to enhance compliance with it.
What is the Comprehensive Wage System in Egypt?
The comprehensive wage system in Egypt is a system that calculates the total income received by workers for their work, instead of relying only on the basic wage specified in the contract. This system aims to achieve greater transparency in determining salaries and financial entitlements, ensuring workers’ rights, especially regarding social insurance and pensions, and reducing opportunities for wage manipulation by employers.
Components of the Comprehensive Wage in Egypt
The comprehensive wage system in Egypt for workers consists of several main elements that ensure they receive all their financial rights. It is not just the basic wage but includes all entitlements received as a result of their work. Here are more details about the components of the comprehensive wage:
1- Basic Wage
The basic wage is the amount agreed upon in the employment contract that the worker receives for performing their basic duties. It is determined at the time of contracting and may vary based on:
- The experience and job level of the worker
- The minimum wage set by the government
- The nature of the job and the industry in which the worker is employed
2- Incentives and Bonuses
Incentives and bonuses are additional amounts paid to the worker based on performance or achieving certain goals, including:
Periodic Incentives
- Granted at specific periods, such as monthly, quarterly, or annual
- Linked to achieving personal or collective work goals
- May be a percentage of the salary or a fixed amount
Annual Bonuses
- Paid at the end of the year according to company performance and profits
- Considered recognition of the worker’s effort and contribution to the success of the institution
- Some companies provide them in the form of distributed profits to employees
Productivity Bonuses
- Granted to workers in production and industrial sectors when achieving certain productivity rates
- Motivate workers to increase production and improve work quality
3- Allowances
Allowances are financial amounts added to the basic salary to compensate the worker for some additional costs associated with their job, including:
Transportation Allowance
- Paid to cover the costs of employee transportation to and from work
- May be a fixed amount or calculated based on the distance traveled
Housing Allowance
- Granted to expatriate employees or those working away from their place of residence
- Some companies provide housing instead of paying a cash allowance
Work Nature Allowance
- Paid to workers in jobs that require high physical effort or involve significant risks, such as working in factories or construction sites
- Its value varies based on the danger of the job and working conditions
Meal Allowance
- Provided to workers in jobs that require long working hours without time to eat outside work
- Paid in cash or in the form of free daily meals
Delegation and Travel Allowance
- Granted to employees who are required to travel to perform work duties outside the company’s headquarters
- Includes covering accommodation, transportation, and food costs during travel
4- Commissions and Other Additions
The comprehensive wage system in Egypt includes commissions and additional financial entitlements received by the worker, such as:
Commissions
- Received by the employee based on sales or contracts they have concluded
- Calculated as a percentage of the sale value or profit
- Primarily applied to sales and real estate marketing positions
Profits
- Some companies share their annual profits with workers based on their performance and contribution
- Usually granted as part of employee motivation and retention policies
Overtime
- The wage received by the employee for additional working hours after the end of official working hours
- Calculated based on a certain percentage of the basic wage and determined according to labor law
5- Insurance Entitlements and Social Benefits
Insurance entitlements and social benefits are considered part of the comprehensive wage system in Egypt, including:
Social Insurance
- Calculated based on the worker’s comprehensive wage, not just the basic wage
- Ensures the worker receives an appropriate pension after retirement
Health Insurance
- A portion of the salary is deducted to provide comprehensive healthcare for the worker and their family
- Ensures coverage of medical expenses such as examinations and treatment in hospitals
Leave Entitlements
- Includes annual, sick, and official occasion leaves
- Leave entitlements are calculated based on the comprehensive wage, not just the basic wage
End-of-Service Reward
- Granted to the worker upon termination of service in the company, according to the number of years of work
- Calculated based on the comprehensive wage, not just the basic wage
Objectives of the Comprehensive Wage System in Egypt
The comprehensive wage system in Egypt aims to achieve a fair balance between the worker and the employer, and ensure workers’ rights by providing greater transparency in calculating wages and financial entitlements, in addition to many other objectives, which we address in the following lines:
1- Achieving Social Justice
The comprehensive wage system in Egypt aims to ensure that all workers receive their full financial rights and prevent wage manipulation by employers. It prevents unfair practices, such as registering workers with low wages in contracts and paying the rest of the entitlements as unofficial allowances or incentives. It also helps improve the standard of living of workers by providing a wage that reflects the true value of their work.
2- Increasing Transparency in Wages and Financial Entitlements
The system aims for each worker to know the value of their real salary, what is deducted from or added to it, and to easily track their financial entitlements and know the details of their salary, which reduces labor disputes over wages.
3- Enhancing Compliance with Laws and Social Insurance
The comprehensive wage system in Egypt requires employers to register the actual salaries of employees with the Social Insurance Authority, ensuring that workers benefit from all their rights upon retirement or when work injuries occur.
4- Reducing Labor Disputes and Protecting Workers’ Rights
The system aims to reduce disputes between workers and employers about the value of salaries or deductions because the wage is officially and clearly documented. It also aims to protect workers from exploitation or wage manipulation, as the system ensures that each worker receives their entitlements based on their actual comprehensive salary.
5- Ensuring a Fair Minimum Wage Commensurate with the Cost of Living
The comprehensive wage system in Egypt works in coordination with the decisions of the National Wages Council to ensure the application of the minimum wage in various sectors, which protects workers from exploitation. It also helps achieve a balance between the cost of living and wages, ensuring a decent life for the worker without the need to look for additional jobs to cover their basic expenses.
6- Improving the Level of Pensions and Insurance Benefits
Retirement pensions and social insurance are calculated based on the comprehensive wage, ensuring that the worker receives a pension commensurate with their actual salary, not just a low basic wage. It also helps improve end-of-service bonuses, as they are calculated based on the full salary received by the worker throughout their employment period. It also ensures that the worker receives fair compensation in case of work injuries or total or partial disability.
7- Combating Tax and Insurance Evasion
The comprehensive wage system requires companies to register all wage elements, which reduces opportunities for tax evasion and manipulation of salary values. It increases government revenues from taxes and insurance, supporting public services and social programs that benefit workers and citizens in general.
8- Stimulating the Work Environment and Increasing Productivity
The system helps create a more stable and fair work environment, which motivates employees to perform well and increases their productivity. It also encourages workers to stay in their jobs for longer periods, reducing the rate of labor turnover and increasing company stability.
Mechanisms for Implementing the Comprehensive Wage System in Egypt
The comprehensive wage system in Egypt relies on a set of mechanisms and rules that ensure financial fairness for workers and enhance employers’ compliance with laws regulating wages and social insurance. These mechanisms aim to unify wage calculation standards and ensure the inclusion of all financial entitlements for employees. Here are the most important mechanisms that ensure the effective implementation of the comprehensive wage system in Egypt:
1- Periodic Determination of Minimum Wages
The minimum comprehensive wage is determined through government decisions issued by the National Wages Council. The minimum is updated periodically to keep pace with inflation and living costs, ensuring social justice for workers. Employers are obligated to pay the legally determined minimum to each worker, with the possibility of increasing the wage according to the nature of the work and the sector.
According to the latest decisions of 2024, the minimum wage in the private sector reached 6,000 Egyptian pounds per month, while in the government sector, the minimum wage is determined according to government job grades and annual budgets.
2- Requiring Employers to Register the Comprehensive Wage in Contracts
Laws require companies and employers to register the comprehensive wage in official contracts, instead of just the basic wage, to protect workers’ rights and prevent future wage manipulation. All financial entitlements are included in the contract, including:
- Basic wage
- Allowances (such as transportation, housing, risks)
- Incentives and bonuses
- Commissions and profits
3- Calculating Social Insurance and Pensions on the Comprehensive Wage
One of the most important mechanisms for implementing the comprehensive wage system in Egypt is calculating social insurance contributions based on the comprehensive wage, not just the basic wage. This ensures that the worker receives a fair retirement pension and insurance benefits that cover their actual total income.
According to the new Social Insurance Law No. 148 of 2019, the minimum insurance subscription wage was set to reach 1,700 pounds in 2023 and increases annually, while the maximum insurance subscription wage reached 10,900 pounds.
This helps improve the insurance benefits for employees and ensures they receive fair compensation upon retirement or occupational injuries.
4- Linking Leaves and Other Benefits to the Comprehensive Wage
Financial entitlements for annual and sick leaves and official occasion leaves are calculated based on the comprehensive wage, not just the basic wage. This ensures that the worker receives their full wage during the leave period, which enhances the financial stability of employees. Leaves that are calculated based on the comprehensive wage include:
- Paid annual leaves
- Sick leaves
- Official occasion leaves (such as national and religious holidays)
- Maternity leave for working women
5- Imposing Periodic Supervision to Ensure Company Compliance
The Ministry of Manpower and the Social Insurance Authority conduct periodic inspection campaigns on companies to ensure their compliance with the comprehensive wage system. Penalties and financial fines are imposed on violating companies to ensure full compliance with the system. Supervision includes:
- Reviewing payrolls to ensure that all wage elements are correctly registered
- Ensuring that all workers are registered in social insurance according to their actual comprehensive wage
- Verifying companies’ compliance with the minimum wage and work regulations
6- Simplifying Procedures for Registering Labor and Insurance
To facilitate compliance with the comprehensive wage system in Egypt, labor and social insurance registration processes are simplified through digital transformation. This helps facilitate the process of registering informal labor and including them in the social insurance system through:
- Employers registering labor electronically through government platforms
- Digital portals facilitating insurance payment processes and wage data updates
- Reducing paperwork and bureaucracy, which encourages companies to comply
7- Providing Incentives for Companies Complying with the Comprehensive Wage
To encourage small and medium-sized companies to comply with the comprehensive wage system in Egypt without being financially affected, economic incentives can be provided, such as:
- Tax reductions for companies that correctly register the comprehensive wage
- Partial exemptions from insurance fees for a limited period when registering new employees with the comprehensive wage
- Providing financing opportunities and banking facilities for compliant companies, helping them grow and expand
These incentives help encourage small and medium-sized companies to comply with the comprehensive wage system without being financially affected.
8- Raising Awareness and Education about the Comprehensive Wage System
Awareness campaigns are implemented targeting workers to inform them of their rights in the comprehensive wage and insurance, as well as business owners to guide them on how to comply with the system correctly, in addition to accountants and financial officers in companies to ensure that payrolls are prepared according to the new laws.
Challenges of Implementing the Comprehensive Wage System in Egypt
Despite the great benefits provided by the comprehensive wage system in Egypt, there are several challenges facing its full and effective implementation. These challenges relate to economic, legislative, and administrative factors, in addition to the level of awareness of workers and employers about their rights and obligations. Here are the most prominent challenges facing the implementation of the comprehensive wage system in Egypt:
1- Variation in Compliance between Different Sectors
Compliance levels with implementing the comprehensive wage vary between sectors, where the formal sector (government and large companies) complies with the system more than the informal sector and small and medium-sized companies.
Some sectors, especially in the informal sector, still rely on unofficial wages that are paid without registration in social insurance.
Some companies circumvent the implementation of the comprehensive wage by registering a low basic wage in contracts, while the rest of the entitlements are paid as incentives or allowances that do not enter into insurance.
2- Increasing Financial Burdens on Small and Medium-Sized Companies
Small and medium-sized companies are among the most affected by the implementation of the comprehensive wage, as they have to pay higher insurance contributions as a result of calculating insurance on the comprehensive wage instead of just the basic wage, in addition to increased operational costs due to the minimum wage and compliance with worker entitlements such as leaves and bonuses.
3- Lack of Worker Awareness of Their Financial and Insurance Rights
Many workers, especially in the informal sector, do not have full knowledge of their rights according to the comprehensive wage system. They also lack awareness of how to calculate insurance, bonuses, leaves, and end-of-service rewards based on the comprehensive wage. This lack of awareness leads to workers accepting incomplete salaries without claiming their legal rights.
4- Resistance of Some Employers to the System
Some employers refuse to fully implement the comprehensive wage system in Egypt due to their desire to reduce costs associated with social insurance and taxes. Some may try to circumvent the law by:
- Registering only the basic wage and giving incentives in cash outside the payrolls
- Employing labor with temporary or unofficial contracts to avoid insurance costs
5- Bureaucracy and Complexity of Registration and Insurance Procedures
Some administrative procedures for labor registration and social insurance remain complex and time-consuming, which leads to delays in companies complying with the laws.
Some companies need intensive reviews with government agencies, which may pose an additional burden on business owners, especially in the case of frequent updates to the laws.
Compliance with the comprehensive wage system may require updating accounting and financial systems within companies, which may be costly in terms of time and resources.
6- High Rates of Insurance and Tax Evasion
Some companies try to avoid paying taxes and insurance by registering salaries lower than the actual salaries of employees. This phenomenon is particularly prevalent in small companies, where part of the salary is paid in cash or in the form of benefits not officially listed. This evasion leads to depriving workers of their insurance and retirement rights and reducing state revenues from taxes and insurance, which affects social services.
7- Weak Supervision and Inspection of the System’s Implementation
Despite the existence of clear laws for the comprehensive wage system in Egypt, field supervision is not always sufficient to ensure full compliance. Some companies can evade supervision due to weak inspection mechanisms or due to loopholes in implementation.
8- Impact of Economic Conditions and Inflation
With rising inflation rates, companies may find it difficult to raise wages in a way that corresponds to increases in living costs. Economic conditions may lead to some companies’ inability to bear the new minimum wage, which may lead to reducing the number of workers or avoiding formal employment.
9- Difficulty Integrating Informal Labor into the System
The informal sector constitutes a large percentage of the Egyptian labor market, where millions of workers work without formal contracts or registration in insurance. The state faces difficulty in convincing business owners and workers of the necessity of formal registration within the comprehensive wage system.
10- Impact of the System on the Labor Market and Employment
Some business owners may resort to limiting formal employment due to the high cost of labor registered within the comprehensive wage system in Egypt. This may lead to an increase in informal employment rates, exposing more workers to the loss of financial and insurance rights.
Solutions to Enhance Compliance with The Comprehensive Wage System in Egypt
The comprehensive wage system in Egypt can be enhanced through some measures, including the following:
- Improving Supervision and Inspection: Strengthening government inspection campaigns to ensure companies’ compliance with registering actual wages for workers.
- Providing Incentives for Compliant Companies: Such as tax exemptions or loan facilities for companies that correctly apply the comprehensive wage.
- Simplifying Labor and Insurance Registration Procedures: Through digital transformation and reliance on electronic systems in wage registration.
- Launching Awareness Campaigns for Workers and Employers: To introduce them to the benefits of the comprehensive wage system in Egypt and its positive impact on their financial and insurance rights.
- Gradually Integrating Informal Labor: By providing reduced insurance contributions or support programs to incentivize formal registration.
In summary, the comprehensive wage system in Egypt is an essential step towards improving the work environment and enhancing workers’ rights through achieving transparency and social justice. Despite some challenges, implementing the proposed solutions can contribute to improving compliance with this system and fully achieving its benefits. Therefore, awareness, supervision, and providing incentives are the keys to the successful implementation of the comprehensive wage system in Egypt.
