Employees Emergency Fund in Egypt and its Expected Role during COVID-19 Outbreak
In the wake of the global COVID-19 outbreak, companies and employers started to consider the various legal alternatives to combat the negative economic impact of the forced closure or the reduction of their businesses. Such alternatives include – for example – collective layoff and redundancies, furloughing employees, granting obligatory annual leaves and reducing salaries.
In Egypt, the Employees Emergency Fund has a pivotal responsibility in supporting struggling companies to survive through economic crisis and meet their obligations towards employees in such difficult times.
This Fund had a previous significant role in supporting struggling companies after the 2011 uprising in Egypt; particularly in the hotel and tourism sector as well as the textile industry. We expect the Fund to play a significant role in helping companies in Egypt to face upcoming economic difficulties.
Riad & Riad herein gives a glimpse of the operation and rules governing the Employee Emergency Fund pursuant to the Egyptian law.
What is the Employees Emergency Fund?
The Employees Emergency Fund (the “Fund”) is established in Egypt by virtue of Law No. 156 of 2002 and its Executive Regulation (the “Law”). The Fund is a public legal body affiliated to the Ministry of Manpower and its financial resources are treated as public funds.
What is the Role of the Fund?
The Fund aims at providing financial aid and subsidies to employees who have not received salaries from companies facing the risk of (total or partial) closure due to economic crisis or decline in production.
Who is Responsible for Managing the Fund?
The Fund is managed by a Board of Directors chaired by the Minister of Manpower. The Board of Directors includes as well members representing Employers and Labor Unions.
What Are the Financial Resources of the Fund?
The Fund gets it money and financial funds from different resources including the following:
- Mandatory monthly contributions paid by public and private sector employers who hire thirty (30) employees or more.
- Voluntary contributions, grants and donations accepted by the Board of Directors of the Fund.
- Monetary fines/sanctions collected from whoever violates the provisions of the Law.
- The revenue resulting from investing the money of the Fund in accordance with the provisions of the Law.
How to Receive Financial Aid From the Fund?
The financial aid of the Fund is granted to employees on the basis of an application request by the struggling company or relevant labor union to the Chairman of the Fund. The application request must be accompanied by a report about the financial situation of the company and the reasons for not being able to pay salaries to employees.
What Sort of Financial Aid is Granted by the Fund?
If the submitted application request is approved by the Board of Directors of the Fund, the employees of the relevant company will receive financial aid equivalent to 100% of their basic insurance salary, with a minimum of EGP 600 per month. Such financial aid will be paid by the Fund for up to six (6) months or until the appropriate re-operation of the company or the employee finds an alternative job (whichever occurs earlier).
The Minister of Manpower has the authority to extend the period of granting the financial aid up to twelve (12) months and/or to increase the amount of the financial aid in light of the economic conditions and circumstances of the applicant company.
Who Can Benefit from the Financial Aid of the Fund?
Employees of the companies which are subject to the application of the provisions of the Law can benefit from the financial aid granted by the Fund, provided that those employees are registered under the Public Social Insurance System in Egypt.
When Does the Financial Aid of the Fund Discontinue?
The Fund will stop paying the Financial Aid in the following situations:
- The appropriate re-operation of the company and starting paying salaries again.
- Benefited employee finds an alternative job.
- Termination of the employment relationship in accordance with the labor law.
- Lapse of the six months entitlement period (or other extended period).
- If it is evidenced that fraudulent methods have been used to receive financial aid from the Fund.
How the Egyptian Government Reacted to Activate the Role of the Fund after Covid-19 Outbreak?
Last week, the Egyptian Prime Minister has issued decree No. 776/2020 to constitute a special committee headed by the Prime Minister and includes among its members the Minister of Manpower, the Minister of Social Solidarity, the Minister of Planning and Economic Development and representatives from the Information and Decision Support Center (IDSC) affiliated with the Cabinet. The committee is constituted with the purpose of:
- Preparing central database of the employees who are negatively affected by the current economic situation resulting from COVID-19.
- Determine the rules of granting financial aid and subsidies from the Fund to the affected employees.
- Set the measures to ensure that the financial aid is efficiently allocated and avoid duplication of payment of subsidies to benefited employees.
How can R&R Help?
R&R can help you with preparing and completing the application form and the other supporting documents, submit the application and liaise with the Fund.
For further information or assistance, please contact Dr.Eman Riad at e.riad@riad-riad.com or Heba El-Abd at h.elabd@riad-riad.com