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Prime Minister Issues Implementing

Prime Minister Issues Implementing Rules for Maximum Wages in the Government and Public Sector
Background In December of last year, the Supreme Council for the Armed Forces (“SCAF”) issued Law No. 242 of 2011 with respect to the application of a maximum ceiling on wages for those working in the Government (commented upon in the February 2011 Issue of Egypt Legal Update). This Law imposed a ceiling on the annual wage obtained by any of the public servants and Government employees, equal to 35 times the minimum wage made by anyone in the same agency, and stated that any sums obtained exceeding that ceiling would be deemed owned by the Public Treasury and must be returned to the place of employment within a month from obtaining it, otherwise a fine would be imposed, not less than 25% and not exceeding 100% of the excess amount. However, in light of the fact that the said Law only stated broad principles and did not clarify key implementation issues, it became difficult to apply it directly. Accordingly, the Prime Minister issued Decree No. 322 of 2012 (Egyptian Gazette, Issue No. 79, April 4th, 2012) clarifying how the Law may be implemented and providing the details needed for its execution. Who is Subject to the Law The new Decree states that those who are subject to the maximum wage imposed by the Law fall into three categories: • The first includes all those who work in the civil service and are subject to Law No. 47 of 1978. • The second includes all those who work in the public sector and are subject to Law No. 48 of 1978. • The third includes all those who work in entities and agencies established by special laws and “cadres”, including: the judiciary, university teaching staff, the police, the Central Audit Agency, the Administrative Regulation (the anti-corruption agency), the Suez Canal, the Central Bank, public sector banks, diplomats, and all public entities established by special law, or by decree from the President or the Prime Minister. The above are subject to the Law whether they are employees, advisors, permanent, temporary, managers or not, or of any other status. But it is important to note that the Decree has introduced a wide scope of application to include certain positions which were previously assumed to be exempt from the Law such as employees of public banks and the Central Bank, thus it has settled the matter and brought under its scope all those working in the Government and the Public Sector (albeit not the Public Business Sector Companies). Defining Annual Income The new Decree defines “annual income” by stating that it shall be determined on the basis of “the public funds obtained by the employee in terms of salary, bonuses for any reason, incentive, additional wages, allowances, attendance fees for Boards of Directors and Committees whether in his/her place of employment or elsewhere”.The Decree does not take into account travel allowances for specific tasks, whether internally or abroad. But it is important to note that the item not covered by the Decree, albeit implicitly, is what the employees obtains by attending Boards of Directors and Committees in other companies and entities provided the money paid is not deemed “public funds”, which includes representations in private sector companies. Method of Application In order to put Law No. 242 into application, the new Decree set the following procedures and conditions: • The competent authority in each public body (chairman, board of directors, minister as the case may be) issues a decree determining the minimum and maximum wages in that body at the start of application of the Law as well as with the start of every fiscal year. • Each employee must submit an annual statement of all sums he/she obtained during the year to a dedicated working group within the accounting unit where he/ she works. • The employee must return any monies obtained in excess of the legal maximum to the place of work which then transfers it to the Public Treasury. • Failure to disclose and return excess payments may result in a fine equal to at least 25% of the excess amounts and no more than100% thereof. • Entities which pay out any monies to employees subject to the new Law must inform the entities in which they are employed. Comment The new Decree has a positive and a negative side to it. On the positive side it is, from a legislative point of view, specific and accurate and it includes all the details needed for its proper application, and this is a major positive aspect. However, on the negative side, it includes – from a substantive point of view – all Government and Public Sector positions including those where some exception should be made in order to allow public service to attract talent in rare and highly qualified jobs. Moreover, the biggest problem is that increasing the minimum wage in any government agency will allow a thirty five time increase in the maximum wage, thus possibly encouraging the inflation of wages in public services in order to provide higher maximum wages, without real need.
Background In December of last year, the Supreme Council for the Armed Forces (“SCAF”) issued Law No. 242 of 2011 with respect to the application of a maximum ceiling on wages for those working in the Government (commented upon in the February 2011 Issue of Egypt Legal Update). This Law imposed a ceiling on the annual wage obtained by any of the public servants and Government employees, equal to 35 times the minimum wage made by anyone in the same agency, and stated that any sums obtained exceeding that ceiling would be deemed owned by the Public Treasury and must be returned to the place of employment within a month from obtaining it, otherwise a fine would be imposed, not less than 25% and not exceeding 100% of the excess amount. However, in light of the fact that the said Law only stated broad principles and did not clarify key implementation issues, it became difficult to apply it directly. Accordingly, the Prime Minister issued Decree No. 322 of 2012 (Egyptian Gazette, Issue No. 79, April 4th, 2012) clarifying how the Law may be implemented and providing the details needed for its execution. Who is Subject to the Law The new Decree states that those who are subject to the maximum wage imposed by the Law fall into three categories: • The first includes all those who work in the civil service and are subject to Law No. 47 of 1978. • The second includes all those who work in the public sector and are subject to Law No. 48 of 1978. • The third includes all those who work in entities and agencies established by special laws and “cadres”, including: the judiciary, university teaching staff, the police, the Central Audit Agency, the Administrative Regulation (the anti-corruption agency), the Suez Canal, the Central Bank, public sector banks, diplomats, and all public entities established by special law, or by decree from the President or the Prime Minister. The above are subject to the Law whether they are employees, advisors, permanent, temporary, managers or not, or of any other status. But it is important to note that the Decree has introduced a wide scope of application to include certain positions which were previously assumed to be exempt from the Law such as employees of public banks and the Central Bank, thus it has settled the matter and brought under its scope all those working in the Government and the Public Sector (albeit not the Public Business Sector Companies). Defining Annual Income The new Decree defines “annual income” by stating that it shall be determined on the basis of “the public funds obtained by the employee in terms of salary, bonuses for any reason, incentive, additional wages, allowances, attendance fees for Boards of Directors and Committees whether in his/her place of employment or elsewhere”.The Decree does not take into account travel allowances for specific tasks, whether internally or abroad. But it is important to note that the item not covered by the Decree, albeit implicitly, is what the employees obtains by attending Boards of Directors and Committees in other companies and entities provided the money paid is not deemed “public funds”, which includes representations in private sector companies. Method of Application In order to put Law No. 242 into application, the new Decree set the following procedures and conditions: • The competent authority in each public body (chairman, board of directors, minister as the case may be) issues a decree determining the minimum and maximum wages in that body at the start of application of the Law as well as with the start of every fiscal year. • Each employee must submit an annual statement of all sums he/she obtained during the year to a dedicated working group within the accounting unit where he/ she works. • The employee must return any monies obtained in excess of the legal maximum to the place of work which then transfers it to the Public Treasury. • Failure to disclose and return excess payments may result in a fine equal to at least 25% of the excess amounts and no more than100% thereof. • Entities which pay out any monies to employees subject to the new Law must inform the entities in which they are employed. Comment The new Decree has a positive and a negative side to it. On the positive side it is, from a legislative point of view, specific and accurate and it includes all the details needed for its proper application, and this is a major positive aspect. However, on the negative side, it includes – from a substantive point of view – all Government and Public Sector positions including those where some exception should be made in order to allow public service to attract talent in rare and highly qualified jobs. Moreover, the biggest problem is that increasing the minimum wage in any government agency will allow a thirty five time increase in the maximum wage, thus possibly encouraging the inflation of wages in public services in order to provide higher maximum wages, without real need.