End-of-service gratuity in Egypt: Labour Law 14 of 2025 and insurance

Executive summary

• One month's wage for each year of service in a fixed-term contract "if the termination is by the employer" (article 154 of Labour Law 14 of 2025). The scope of the text can be read in two ways.
• One month's wage for each of the first five years, and one and a half months for each year beyond (article 241). With no express text, our reading is that this covers the cases of termination for economic reasons that the article governs; the point is open to a reading that makes it due on every end of service.
• For work after 60: half a month's wage for each of the first five years and one month's wage for each later year, if the employee has no old-age, disability and death insurance rights for that period, on the last wage (article 172).
• Our reading is that "one month's wage" in the three articles is the wage with both its basic and variable parts as article 1 defines it, not the insurance wage. Articles 154 and 241 do not say which month is used, and none of the three says how part of a year counts; our view on both is a precautionary one.
• Articles 154 and 241 do not tie the gratuity to insurance rights, unlike article 172. Any better gratuity in a contract or regulation continues to apply (article 6).

The two readings of article 154 are set out in Fixed-term and indefinite employment contracts in Egypt, and what the National Organization for Social Insurance (NOSI) pays in Pension settlement and end-of-service insurance benefits in Egypt. The procedure for termination and closure is covered in Ending employment in Egypt.

The Labour Law issued by Law 14 of 2025 has applied since 1 September 2025 (article 13 of the issuing articles). It uses the word «المكافأة» in three senses: an element of the variable wage paid "in return for excellence, distinction or efficiency in performing the work assigned" (article 1, item 4(d), our translation); the pay of an apprentice at each stage of training (article 29); and an amount due to the employee for years of service, which appears in three articles: 154, 241 and 172. On our reading of article 241, therefore, neither a resignation nor the ending of an indefinite contract for a reason unconnected with a closure or downsizing earns any of these gratuities, except the article 172 gratuity for work after 60.

Termination of a fixed-term contract by the employer

"If the termination is by the employer, the employee is entitled to a gratuity equal to one month's wage for each year of service" (article 154, our translation).

We follow the two readings set out in the bulletin on the two types of contract. The first confines the paragraph to the two paragraphs before it: in a contract concluded or renewed for more than five years, the employee who ends it after five years owes no compensation, and if the employer ends it the employee is entitled to the gratuity. The second makes it a rule for every fixed-term contract the employer ends; on that reading it remains open whether a decision not to renew counts as "termination by the employer", since the first paragraph says the contract "ends when its term expires". We cite no court ruling on the point under the new law. In our view, a business should count this gratuity in the cost of any termination on its side before the term expires, until the text is settled.

Termination for economic reasons

Articles 236 to 241 govern the total or partial closure of an establishment, and the reduction of its size or activity, for economic necessity. Where the employer is entitled to end a contract for economic reasons, it may instead amend the contract's terms temporarily; if it does, the employee may end the contract without being bound to give notice, and the termination "is deemed a justified termination by the employer and the employee" (our translation). Article 241 then provides:

"In all cases, the employee is entitled to a gratuity equal to one month's wage for each of the first five years of service and one and a half months' wage for each year beyond" (article 241, our translation).

The words "in all cases" can be read in two ways. The first, which is ours, is that they cover the cases of the article itself: termination by the employer for economic reasons, and termination by the employee after the terms are amended. It is supported by where the paragraph sits, at the end of these provisions, and is consistent with Minister of Labour Decree 301 of 2025 (Al-Waqa'i' Al-Misriya, 24 December 2025). That decree applies where an establishment decides on partial closure or a reduction of its activity or workforce "for any economic, technical or organisational reason whose seriousness is established" (article 1). It does not affect the employer's obligation to pay "the gratuity provided for in article (241) of the said Labour Law as a minimum" (article 5, our translation). The second takes the words in their general sense, detaching the rule from the cases before it, so that the gratuity becomes due on every end of service, including resignation, termination with notice and expiry of a term. We cite no court ruling on this point under the new law either. In our view, as a precaution while the point is unsettled, a business should count this gratuity in any termination connected with a closure, a downsizing or an amendment of terms under article 241, whatever form the termination takes.

Work after 60 and service before 18

"The employee is entitled, for the period of work after the age of sixty, to a gratuity of half a month's wage for each of the first five years of service and one month's wage for each of the following years, if the employee has no rights for that period under the old-age, disability and death insurance provided for in the Social Insurance and Pensions Law" (article 172, our translation).

The same gratuity is due "for the years of service before the age of eighteen, to the apprentice and the employee on reaching that age". It is calculated "on the basis of the last wage the employee, or the apprentice as the case may be, was receiving", and on death it is paid in accordance with the Social Insurance Law (article 172, our translation). The article does not tie entitlement to the reason the relationship ends. Its link with the pension age is covered in Retirement age and early pension in Egypt.

Calculation and payment

Article 1 defines the "wage", "in applying the provisions of this law", as "everything the employee receives in return for their work, in cash or in kind" (our translation). It includes the basic wage and the variable wage, and the variable wage includes commission, grants, allowances and benefits in kind (item 4). The article defines the "insurance wage" separately, as the contribution wage under the Social Insurance Law (item 5). Our reading of these texts with articles 154, 241 and 172, all of which say "wage" rather than "basic wage", is that the wage they use is the wage with both its parts, not the basic wage alone and not the insurance wage.

Neither article 154 nor article 241 says which month is used, unlike article 172, and none of the three says how part of a year counts. In our view, as a precaution while the point is unsettled, the gratuity should be calculated on the last wage with all its elements or, where the wage was reduced temporarily under article 241, on the wage before the reduction, and part of a year counted pro rata.

An illustration of the rates alone, with a monthly wage of EGP 12,000 including all elements, unchanged throughout, and whole years:

Where the employment relationship ends for any reason, "the employer pays the employee their wage and all amounts due to them within a period not exceeding seven days from the date the employee claims these dues" (article 108, our translation). Our reading is that the three gratuities are among those amounts. A breach of article 108 is punishable by a fine of EGP 2,000 to 20,000 (article 287). A breach of article 172, or of the third paragraph of article 241, is punishable under the second paragraph of article 295 by the penalty set in its first paragraph: a fine of EGP 3,000 to 10,000. In both cases the fine is multiplied by the number of employees affected and doubled for a repeat offence. Article 154 is not among the articles listed in the penalty provisions (articles 280 to 298).

How this differs from social insurance entitlements

NOSI pays what the Social Insurance and Pensions Law 148 of 2019, as corrected, provides, including the balance of the "bonus system": two monthly shares of 1% of the contribution wage, one from the insured person and one from the employer, paid into a personal account (article 36), whose balance is paid when insurance entitlement arises under articles 21 and 26 (article 37). The Arabic word is the same, but the obligations differ. The Labour Law gratuities are paid by the employer on the wage. The bonus system is a balance held by NOSI, built from shares of the contribution wage.

Read together, these texts mean that paying the bonus-system share does not discharge the gratuities in articles 154 and 241, since neither makes entitlement depend on insurance rights, unlike article 172.

Gratuities in contracts and work regulations

"Any better benefits or conditions that are or become established in individual or collective employment contracts, articles of association or other regulations of the establishment, or by custom, continue to apply" (article 6, our translation). Under the same article, any term or agreement contrary to the law is void, even if made before the law took effect, if it reduces the employee's rights under the law or contains "a release from the employee's rights arising from the employment contract during its term, or within three months of the date it ends" (our translation).

For employers of ten or more workers, Minister of Labour Decree 162 of 2026 (Al-Waqa'i' Al-Misriya, 13 August 2026) requires the work regulation to include "all the benefits granted to employees and actually applied in the establishment before it is prepared" (articles 2 and 3, our translation). It must also set the rules for entitlement to benefits and grants "on general and abstract bases" (article 36). The details are in Egypt's work and disciplinary regulation. In our view, the contract or the regulation should say expressly whether a contractual gratuity is paid in addition to the statutory gratuity or includes it, and the employee should in no case receive less than the law provides.

What this requires

• A list of fixed-term contracts, of employees working after 60, and of those who worked for the business before 18.
• The article 154 gratuity counted in the cost of any early termination of a fixed-term contract by the business.
• In a closure, a downsizing or an amendment of terms: the article 241 gratuity calculated for each employee before the application is filed; in a partial closure or downsizing it is a minimum (Decree 301).
• A written method for the monthly wage used: the wage with all its elements, not the contribution wage, including how part of a year counts, applied to everyone.
• Payment of final dues within seven days of the employee's claim, against a settlement listing each amount, not a general release.
• Contracts and regulations that state how any contractual gratuity relates to the statutory ones.

The firm's Social Insurance & Labour Department calculates end-of-service gratuities and final dues when employment ends, and reviews gratuity schemes in contracts and work regulations against the Labour Law, as part of its social insurance and labour compliance services.

Mahmoud Nassef, Founder Partner
Chartered Accountant, Ministry of Finance, Egypt

Member, Egyptian Society of Accountants & Auditors
Member, Egyptian Tax Society
Member, Egyptian Society for Public Finance and Taxation

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Disclaimer: This bulletin is prepared for general information on the legislation in force at the date of its publication. It does not constitute a professional opinion or tax or legal advice on any particular matter, and it should not be relied upon in place of advice based on an examination of the circumstances of each case. Nassef & Partners International accepts no responsibility for any action taken, or refrained from, in reliance on its contents. The positions stated remain subject to subsequent legislation and decisions.