The National Wages Council (NWC) has raised the minimum wage for private sector employees from LE3,000 to LE3,500 starting on 1 January 2024, the Planning Ministry announced on Friday.
The move is an attempt to support the labour force amid rising inflation.
Bahaa Dimitri, head of the Electrical Appliances Manufacturing Division at the Federation of Egyptian Industries, said the majority of leading companies could afford to meet this salary threshold.
Most of them already pay salaries that surpass this limit, he said. The majority of labourers in garbage collection and construction companies attain this minimum monthly wage already, he added.
However, despite the increase in the minimum wage, its real value has decreased from $120 to $100 or even less owing to the depreciation of the exchange rate of the Egyptian pound against the dollar, now standing at around LE31, he said.
The NWC decision is an attempt to alleviate the repercussions of the economic crisis that has been hitting Egyptian workers. In September, inflation reached unprecedented highs, exacerbated by the shortage of foreign currency and a series of local currency devaluations.
Urban inflation surged to a record-breaking 38 per cent year-on-year in September, with price hikes in the food and beverage sector reaching 73.6 per cent year-on-year.
The NWC decision is the third such announcement in less than a year, raising the overall monthly salary of private-sector workers by 46 per cent from LE2,400 to LE3,500.
It was decided that starting from 1 January 2024, the minimum annual salary raise will increase twofold, reaching LE200.
The moves are the latest in a series to increase the incomes of private sector employees. In January, private sector companies were asked to pay an annual bonus equivalent to a minimum of three per cent of the insurance subscription outlined in the Social Insurance and Pensions Law.
Despite this raise, the minimum wage for private-sector employees remains less than that of public sector workers, however, which reached LE4,000 earlier this month. In September, the government announced a set of measures to alleviate the economic strain experienced by low-income households amid soaring inflation rates.
Motassem Rashid, head of the Private Free Zone Investors Associations, said the NWC should follow up on private sector companies to ensure they apply the new decision. Private sector employees should file a complaint to the labour office they are affiliated to if their companies fail to apply the new regulations, he added.
Rashid noted that in previous instances some companies had petitioned the Federation of Egyptian Industries to request exemptions, substantiating their claims with three consecutive financial statements that attested to their financial losses and rendering them incapable of adhering to the stipulated minimum.
However, this time around, no company will be able to seek such exemptions, given the mandatory nature of the decision.
The last adjustment to the minimum wage, which was set at LE3,000, was declared in November 2022. In 2021, the minimum wage was established at LE2,400, effective from July that year.
Not all private sector companies adhere to the minimum wage regulations, said Khaled Abdel-Azim, head of the Federation of Egyptian Industries.
In a prior instance when the minimum wage was announced, companies operating in the ready-made clothing industry, for example, petitioned to be excluded from the decree.
They argued that they were bound by export contracts at pre-determined prices. Abdel-Azim said that this industry relies on low labour costs, and any alterations to these might increase expenses, potentially leading to higher prices and the possible cancellation of export contracts.
Such circumstances could prompt export markets to explore alternatives, such as sourcing from competitors like Bangladesh.
The concept of a minimum wage in the private sector is relatively recent one in Egypt. It was introduced at the beginning of the 2021-22 financial year at LE2,400 per month. The decision was met with resistance from some companies that contended that they were financially incapable of accommodating higher wage costs.
* A version of this article appears in print in the 2 November, 2023 edition of Al-Ahram Weekly
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