Supply Chain Innovation

Unpaid overtime violation common in Egypt's free trade zones

Publication date: 
Wednesday, May 4, 2016

Assessors conducting factory visits in Egypt for the FLA and its affiliated brands have recently detected a very common wage-related violation in Egypt’s free trade zones.  Established in 1997, Egypt’s 10 free trade zones – where most large manufacturing facilities are located – provide companies sourcing from Egypt with incentives, like tax exemptions, and also operate under labor regulations that may differ from other areas of the country. 

For example, while competing standards outside the free trade zones differ on whether a regular workweek may comprise 48 or 42 hours per week, factories inside the free trade zone are unambiguously required by law to follow the stricter standard of 42 hours.  Any hours worked over the 42-hour limit must be paid at the local legal overtime premium rate of 135 percent for daytime work and 170 percent for nighttime work.

However, assessors have found that local authorities often will not enforce the overtime regulations in the free trade zones, and consequently factories will often ignore them, planning their production for a 48-hour workweek, without any overtime payments between 42 and 48 hours.  Though a 48-hour regular workweek is in line with the FLA Workplace Code of Conduct, affiliates must always follow local laws when they establish a standard that exceeds the FLA code.

To correct this situation, the FLA urges all affiliated brands sourcing from factories located in Egyptian free trade zones to pay special attention to checking on regular weekly hours of work when conducting internal monitoring visits, and to raise the issue directly with factory management wherever a working-hours violation is found. 

Remediation steps should include not only an adjustment of the rate paid to workers, but also training for workers and management so that everyone in the factory understands the local law, and reasonable efforts to provide back-pay for all workers who lost wages while working in excess of the regular 42-hour workweek without an overtime premium.  Brands should require factories to adjust their regular workweek to 42 hours, and work closely with any supplier found to be in violation of the overtime laws of the free trade zone to ensure that the problem does not recur.