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Spotlight on Uganda

Aerial view of Bank of Uganda

Uganda, a landlocked developing country in East Africa, is located along the equator in the heart of Sub-Saharan Africa. The economy is growing in recent years thanks to a combination of economic policies, infrastructure development, innovation initiatives and improving political stability. Multinational companies (MNCs), especially those interested in tapping into the emerging consumer markets of Africa, are increasingly exploring Uganda for business expansion and hiring. 

Why Uganda?

  • The economy has been marked by fast-paced growth in recent years and, according to the World Bank, the rate of economic growth is expected to exceed 6% in upcoming years. 
  • Uganda offers one of the lowest-cost workforces in the world and labor costs are expected to grow more slowly than other EAC countries. English is the country’s official language, along with Swahili. 
  • Many sectors remain untapped and are ripe for investment. For example, while agriculture is the country’s largest industry, only a small amount of the country’s land is being cultivated. Investments in agritech can help to feed economic growth in upcoming years. 
  • Innovation is on the rise in Uganda, with the country being ranked #4 globally among low-income countries according to the Global Innovation Index
  • Uganda ranks as the happiest country in East Africa on the Africa Happiness Index, drawing from metrics like GDP per capita, social support, healthy life expectancy, freedom to make choices and generosity.

What is the main source of labor law in Uganda?

The Employment Act of 2006 sets the minimum standards of employment standards and lays the groundwork for Uganda’s labor law framework. It maintains that no person can be employed under a contract of employment except in accordance with the provisions of the Act. The document also prohibits the employment of children under the age of 12.

Other regulatory frameworks that apply to labor relations include The Constitution of the Republic of Uganda, The Labor Unions Act, The Labor Disputes (Arbitrations and Settlement) Act, The Occupational and Safety and Health Act, The National Social Security Fund Act and others.

Are employment contracts required?

Employment contracts are required, as per the Employment Act, and can be oral or written. However, it is best practice to put a clearly written contract in place, as this document will be presented to the courts in the case of disputes. Moreover, employers must provide a written statement of particulars to employees within 12 weeks of starting employment.

A contract, written in English or Swahili, should outline the terms of the employee’s compensation, benefits and termination requirements. The offer letter and employment contract in Uganda should always clearly describe salary (and any other compensation amounts) in Ugandan Shilling and not in a foreign currency. 

Are probation periods commonplace in Uganda?

Employers are not legally obligated to provide a trial or probationary period. However, it is a common practice in nearly all employment relationships. The following guidelines are provided by the Employment Act:

  • The maximum length of a probationary period is six months.
  • A probationary period may be extended for a further period with the agreement of the employee (not exceeding six months).
  • An employer may not engage an employee on a probationary contract on more than one occasion.

Are supplemental benefits common in Uganda?

As the country’s workforce becomes more advanced and the competition for talent tightens, more companies are offering executive employees supplemental benefits. Some of the customary benefits include stipends for:

  • Private health insurance
  • Private employment insurance
  • Mobile phone
  • Transportation

It should be noted that such fringe benefits will be subject to employee ‘pay as you earn’ (PAYE) tax. Benefits that cannot be converted to cash will not be subject to tax.

What are some guidelines for termination?

There is a strict process in place for dealing with terminations. Irrespective of whether the dismissal is justified or fair, an employer who fails to comply with the below process is liable to compensate the employee a sum equivalent to four weeks’ net pay.

 The employer must explain to the employee the reason for which the employer is considering dismissal. The employee has the right to have another person of his or her choice present during this explanation.

  • The employer must ensure the employee is fully aware of any complaints made, as well as the nature and consequences of any proceedings taken against him or her. The employer must also ensure the employee is fully aware of how the disciplinary proceedings will take place. This includes making them aware of the possibility of appeals and penalties should he or she eventually be found guilty or liable.
  • Before deciding to dismiss the employee, the employer must offer the employee a reasonable opportunity to state his or her case, either directly or through a representative of his or her choice. This will happen in the form of a disciplinary hearing, which is typically an in-person meeting whereby the employee, along with his or her representative, will make a statement. As the business landscape evolves, it has become possible for this meeting to happen online.  
  • The employee must also be given a reasonable length to prepare any statement which he or she may wish to make in answer to the allegations to explain his or her behavior. The law does not specify this time period it is assumed the employee will be suspended from work. Since the law states an employee may not be suspended from work for more than fifteen days in any six-month period, a week would be reasonable for the employee to prepare his or her statements. 
  • Other than in exceptional circumstances, if an employer fails to impose a disciplinary penalty within fifteen days from the time he or she becomes aware of the triggering event, the right to do so has been waived. As such, fifteen days for the whole disciplinary process to be completed is reasonable. 
  • Employers who terminate unfairly must compensate the affected employee with a basic compensation order for four weeks’ salary. 
  • If an employee is served a notice of termination by the employer, he or she may terminate the contract of employment before the end of the notice period without having to compensate the employer for the remainder of the notice period.

Is severance required?

Severance pay is often given to an employee when their employment agreement ends abruptly, following layoffs or upon the employee’s retirement. Receiving this allowance will depend on the individual’s circumstances. 

Employees in the following situations generally have a right to severance if they have continuously worked for the same employer for at least six months:

  • The employee is unlawfully dismissed.
  • The employee dies at work due to a circumstance they did not cause (severance goes to estate). 
  • The employee is terminated because they are unable to physically do their work well (due to circumstances they did not cause).
  • The employee is terminated because their employer died or became bankrupt.
  • The labor officer ended the employment agreement because the employer was not paying them.

However, employees generally cannot claim severance pay in the following situations:

  • The employee is dismissed with justification (e.g. misbehavior or failure to complete work).
  • The employee is first dismissed but is later offered reemployment which he or she refuses unreasonably.
  • The employee abandons his or her employment and does not show up at work for more than three days without giving an explanation to the employer.
  • The worker has been on probation and the agreement is ended by the employer. 

What makes the Employer of Record (EOR) hiring model an attractive option in Uganda?

While MNCs want to capitalize on Uganda’s explosive growth and low-cost workforce, there are some challenges and liabilities associated with operating a business and managing a headcount locally. Uganda’s labor laws and regulations can be complex, which makes it difficult for employers to comply with all the requirements. One wrong move can result in damage to reputation, fines and other sanctions. 

Instead of investing the time and money to establish a legal entity, some companies find the EOR hiring model to be a more agile, cost-effective solution for hiring in Uganda. By engaging an EOR like GoGlobal, the MNC avoids the lengthy process of setting up a company and also relieves the HR team from learning the regulations for administering payroll in-country. The company also mitigates many HR risks and employment pitfalls. 

The EOR arrangement is sometimes just temporary, serving as a bridge solution while the company officially sets up shop and gets settled. Other times, it can be a permanent solution for building a team in Uganda. 

How does the hiring process with GoGlobal work?

As more companies journey into Uganda for business expansion and hiring, GoGlobal can help them localize their employee experience and company culture! 

Before we onboard the new worker, GoGlobal’s team on the ground in Uganda will arrange a meeting with him or her to go over the details of the EOR arrangement. Once the worker is onboarded, this same dedicated team serves as the point of contact. We’re always ready to resolve any issues that come up in payroll, benefits or taxation. 

What makes the GoGlobal experience different?

At GoGlobal, our approach to HR is unique. Other providers may be tech-driven but we’re a people-first international HR and EOR service provider. This means we prioritize human-to-human touch points throughout the entire hiring lifecycle, while complementing the experience with cutting-edge technology solutions. 

With remote teams all around the world, we embrace a global mindset while maintaining a dedicated team of local experts on the ground in every market we serve. Our team members on the ground in Uganda are experts when it comes to the country’s unique regulatory environment. They also deeply understand the cultural customs and can offer workers services in their time zone and in English or Swahili. These features ensure a positive hiring experience for our clients as well as the client-workers we directly employ on your behalf.

GoGlobal has a significant on-the-ground footprint in Africa, maintaining local offices across 18 countries spanning from North Africa to Sub-Saharan Africa. This extensive on-the-ground footprint empowers GoGlobal to offer exceptional assistance to clients in expanding their operations and building successful teams across Africa.

When clients partner with us in Uganda, they free up their teams’ resources so they can focus on core business-growth activities and tap into emerging market opportunities. 

Find additional details on benefits and hiring in Uganda, or contact us to talk with an international HR expert.