Payment of Salaries and the New Law Regulating “Non-cash Payment Methods” in Egypt
State authorities and public sector entities are required – by virtue of Law No. 18/2019 regulating Non-cash Payment Methods (the “Law”) – to execute payments of their employees, board members, service providers, experts and/or consultants through non-cash payment methods. Private sector companies as well are required to pay the entitlements of their employees, executive directors, board members and/or consultants via non-cash payment methods whenever the number of their employees exceeds 25 or their monthly payroll exceeds EGP 100,000.
The Law and its Executive Regulation were issued as part of the legislative reformation supporting Egypt’s transition towards digital economy and e-payment systems. Addressed entities were required to comply with the Law within six months from the date of issuance of the executive regulations on 7th September 2020 (i.e. before 7th March 2021). The Egyptian Cabinet granted another six month grace period, ended on 7th September 2021, for compliance with the Law.
The Law defines “Non-cash Payment Methods” as all means of payment which are carried out by adding credit to beneficiary’s bank account; including orders of deposits, transfers, debit and credit cards and payments by mobile or other means approved by the Central Bank of Egypt. Whoever violates the Law by using cash payments shall be penalized by a fine of not less than 2% and not more than 10% of the cash amount paid in violation to the Law. Same sanction applies in the event of fractionating payments with the intention of evading the application of the Law.
We believe that the application of the Law will have a significant impact on companies and factories in Egypt who use traditional cash payments of employees’ salaries and other entitlements (i.e. overtime payments, annual leave balances, meal and transportation allowances, occasional remunerations…etc).
We further think that it is currently necessary to amend the Egyptian Labor Law which stipulates that employees must sign on an internal “payroll register” as an evidence of receiving their salary. Such requirement should rather be replaced by other electronic means of evidence to align with the application of the Non-cash Payment Law.
For any inquiries, please feel free to contact Dr. Eman Riad or Heba El-Abd