Are you looking to expand in Africa and hire in Uganda without registering a company in Uganda? Our company is an exceptional provider of custom, flexible, and hands-on employer of record services in Uganda. We handle everything from payroll and taxes to compliance and risk mitigation. With just a click, you can engage talent, onboard employees quickly, process payments, and ensure full legal compliance.
Before diving in, click on the video below to learn everything you need to know about Employer of Record Uganda.
Employment Laws in Uganda
The Employment Law in Uganda is governed by various statutes, including the Employment Act, the Labor Unions Act, and the Occupational Safety and Health Act. These laws dictate the minimum standards for employment, including working hours, leave entitlements, and minimum wage requirements. Failure to comply with these regulations can result in hefty fines and legal repercussions.
1. Minimum Wage in Uganda
The most recent attempt to establish one was the Minimum Wage Bill 2015, which proposed a monthly minimum wage of UGX 130,000.
2. Employment Contract in Uganda
a) Express Term Contracts
These are agreements where the employer and the employee mutually agree on specific terms. Under Uganda’s Employment Act 2006 (Section 25), these contracts can be oral or written but must be attested by a labor officer or magistrate to be valid. As per Section 59, they must include:
• Names and addresses of both parties
• Start date
• Job title and description
• Workplace location
• Salary
• Daily working hours
b) Fixed-Term Contracts
Common in Uganda, these contracts are for a set duration and automatically end upon expiration. They include:
• Job details
• Working hours
• Salary and benefits
• Uniform and disciplinary policies
• Paid leave
• Health and safety provisions
• Start and end dates
c) Indefinite Period Contracts
These are open-ended agreements with no fixed end date. Employment continues until either party ends it. They are typically used for permanent roles.
3. Working Hours in Uganda
Under Uganda’s Employment Act 2006 and current labor laws, employees’ legal maximum working hours are 8 hours per day and 48 hours per week.
4. Overtime in Uganda
According to Uganda’s Employment Act, employees are entitled to overtime pay at 1.5 times their regular hourly rate for extra hours worked on normal days, and double pay for work done on public holidays. While employers may request overtime, total working hours—including overtime—must not exceed 10 hours per day or 56 hours per week, except in specific cases such as shift work.
5. Employee Benefits in Uganda
Workers receive both mandatory and additional benefits from their employers. As Employer of Record Uganda providers, we ensure these benefits fully comply with the law.
Required by Law:
• Annual Leave: At least 21 paid days off yearly, or 7 days every 4 months.
• Sick Leave: Up to 2 months off when sick, with full pay for the first month.
• Maternity Leave: Women get 60 paid working days off for childbirth, with at least 4 weeks taken after the baby is born.
• Paternity Leave: Men get 4 paid days off when their child is born.
• NSSF Contributions: Employers and employees contribute to a national fund that helps with retirement, disability, and other needs.
• Public holidays in Uganda: There are about 14 nationally recognized holidays in Uganda. All employees are entitled to paid public holidays.
- January 1 – New Year’s Day
- January 26 – NRM Liberation Day
- February 16 – Archbishop Janani Luwum Day
- March 8 – International Women’s Day
- March 31 – Eid al-Fitr
- April 18 – Good Friday
- April 20 – Easter Sunday
- April 21 – Easter Monday
- May 1 – Labor Day
- June 3 – Martyrs’ Day
- June 7 – Eid al-Adha
- June 9 – National Heroes Day
- October 9 – Independence Day
- December 25 – Christmas Day
- December 26 – Boxing Day
Extra Benefits from Companies:
• Bonuses: Many workers get extra pay for good performance.
• Health Insurance: Some companies offer health coverage to their employees.
6. Termination of Employment in Uganda
The Employment Act, 2006, governs employment termination in Uganda. It outlines the rights and obligations of employers and employees, including how employment relationships can legally end.
I. Termination with Notice or Payment in Lieu
Employers must provide advance notice or pay in lieu of notice, based on how long the employee has worked:
- No notice if under 6 months,
- 2 weeks (6 months–1 year),
- 1 month (1–5 years),
- 2 months (5–10 years),
- 3 months (10+ years).
Employers must also provide reasons for the termination.
ii. Termination by Employee During Notice Period
An employee can leave before the end of a notice period without being legally required to compensate the employer.
iii. Expiration of Fixed-Term Contracts
Such contracts end automatically at expiry without the need for notice or reasons. However, renewal clauses should be carefully drafted to avoid legal disputes.
iv. Employer Insolvency or Bankruptcy
Employment contracts terminate one month after a bankruptcy or insolvency declaration. Wages due within 26 weeks before the declaration have payment priority.
v. Sickness
Employees are entitled to full benefits for one month of illness. After two months, employers may terminate the contract.
vi. Inability to Pay Wages
Either party can apply to a Labor Officer to declare the contract terminated. Employers must still settle outstanding dues.
vii. Unreasonable Conduct by the Employer
Employees can terminate their contracts with or without notice if their employer engages in unreasonable behaviour, although the Act doesn’t define what constitutes unreasonable conduct.
Income Tax in Uganda
Here’s a simple overview of income tax rates and payroll contributions for both employers and employees in Uganda.
Income Tax Rates and Payroll Contributions
| Tax Type | Who Pays | Rate | Details |
| National Social Security Fund (NSSF) | Employer | 10% | Paid by the employer based on gross salary. |
| National Social Security Fund (NSSF) | Employee | 5% | Deducted from the employee’s gross salary. |
| Individual Income Tax | Employee | 0% | For monthly income up to 235,000 UGX. |
| Individual Income Tax | Employee | 10% | For monthly income between 235,001 – 335,000 UGX. |
| Individual Income Tax | Employee | 20% | For monthly income between 335,001 – 410,000 UGX. |
| Individual Income Tax | Employee | 30% | For monthly income above 410,000 UGX. |
Services Offered Under Afrisetup Employer of Record Uganda
Our Uganda Employer of Record typically provides the following services:
1. Hiring and Onboarding
We assist with the recruitment and onboarding, ensuring compliance with local labor laws, verifying worker eligibility, and managing all necessary documentation.
2. Payroll Processing
We handle payroll calculations, deductions, and statutory contributions, ensuring that employees are paid accurately and on time while complying with Uganda’s tax regulations.
3. Tax Compliance
We manage all tax-related matters, including filing tax returns, remitting taxes on behalf of your company, and ensuring adherence to local tax laws and regulations.
4. Benefits Administration
We oversee employee benefits, such as health insurance, retirement plans, and other statutory benefits mandated by Ugandan law.
5. Legal Compliance
We ensure all employment-related legal obligations are fulfilled, including compliance with labor laws, immigration support for expatriates, workplace health and safety regulations, and employment contract requirements.
6 Benefits of Choosing Afrisetup as Your Uganda Employer of Record
Cost Comparison: Traditional Employment vs. Employer of Record EOR
The cost of using an employer of record Uganda varies depending on the service provider and the specific services required. However, when compared to traditional employment, choosing us as an employer of record in Uganda offers several cost-saving benefits, including:
1. Reduced Administrative Costs
Clients can reduce administrative costs by outsourcing tasks to Afrisetup, including HR and payroll management in Uganda.
2. Reduced Legal Costs
We help clients reduce their risk of legal issues and penalties, resulting in reduced legal costs.
3. Increased Efficiency
We help increase efficiency and productivity by allowing you to focus on your core business functions and growth.
FAQS on Employer of Record Uganda
In Uganda, an Employer of Record (EOR) is a third-party entity that takes on the legal responsibility of employing your staff, overseeing payroll, legal compliance, onboarding, and statutory obligations. At the same time, you maintain authority over their daily activities and performance.
If dismissed unfairly, employees who have completed at least six months of service may be entitled to severance pay. The specific amount of compensation is typically determined through mutual agreement between the employer and the employee.
Section 87 of Uganda’s Employment Act specifies that severance pay is granted only to employees who have been continuously employed for six months or longer and meet the conditions outlined in the Act.
The length of notice required before terminating employment in Uganda varies based on the employee’s duration of service. If the employee has worked between six months and one year, two weeks’ notice is required. For those with one to five years of service, one month’s notice is required.
If an employee receives a lump sum payment upon termination and has worked for the same employer for at least 10 years, only 75% of the total amount is considered taxable income.
To qualify for gratuity in Uganda, an employee must have completed at least one year of continuous service. The amount paid is typically based on the gross annual salary for each year completed under the contract. In other situations, gratuity is calculated at 15% of the employee’s gross annual earnings.
In Uganda, the standard minimum retirement age is 55. However, individuals may retire as early as 50, provided they have stopped working at least one year before making a retirement claim. Additionally, Ugandan law mandates that every employee be given a formal employment contract.
The law in Uganda sets minimum notice periods for ending employment contracts, which depend on how long the employee has been with the company. These notice periods can be extended if specified in the employment contract. Typically, notice must be provided in writing.
The Court has clarified that the terms “pension” and “gratuity” have distinct meanings and should not be used interchangeably. The Court explained that gratuity refers to a lump sum payment made to an individual not eligible for a pension.
On May 24, 2023, the Parliament of Uganda passed the Employment Amendment Bill No. 2 of 2022. Although the amendment modifies the Employment Act, it also changes related laws, including the Labor Disputes (Arbitration and Settlement) Act, 2006 (Act No. 8 of 2006).
The Workers’ Compensation Act, which came into effect on September 15, 2000, provides a framework for compensating workers who suffer injuries or contract diseases during their employment.
In Uganda, employees must give:
- No notice if employed for less than 6 months
- Two weeks’ notice if employed for 6 months to 1 year
- One month’s notice if employed for 1 to 5 years.
You qualify for NSSF benefits if you are at least 40 years old, have a disability, and have contributed to the fund for at least ten years. You may also be eligible if you are permanently leaving the country or work in sectors exempt from NSSF contributions, such as the police, Ugandan armed forces, and prisons.
In Uganda, there are no specific regulations regarding the duration or renewals of fixed-term contracts. However, the maximum probationary period is six months, which can be extended to one year with the worker’s consent.
Conclusion
Partnering with us simplifies navigating Uganda’s complex employment laws. As your trusted Employer of Record Uganda, we provide expert support, ensure compliance, and streamline operations, reducing risk and administrative costs. Many businesses have seen increased efficiency, productivity, and profitability by working with us. Let us help you focus on growth and success. Contact us today to learn more!