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Navigating Labor and Employment Regulations When Establishing a Business in Ghana

Africa stands out as the continent with the most youthful population, with approximately 20% of its inhabitants falling within the age bracket of 15 to 25 years. For any business aiming to thrive, this resource should not be underestimated. Ghana, a country on this vibrant continent, shares a similar demographic, with about one-third of its population comprising young individuals between 15 and 35 years old. Given the rise in graduates from secondary and tertiary institutions, a significant portion of this young population possesses valuable skills, which presents an attractive opportunity for businesses seeking skilled labor. In this article, we explore essential considerations for attracting and keeping the best talent in Ghana, along with an overview of the country's labor and employment laws.

Eligibility to Employ in Ghana

Before delving into the recruitment process, it is crucial for businesses, whether Ghanaian or foreign, to ensure they meet the necessary requirements for operating in Ghana. Foreign investors must secure the required permits and ensure their validity before commencing operations or employing workers in the country. Business registration is also fundamental for any entity. Ensuring compliance with industry standards for working conditions, particularly for brick-and-mortar establishments, is essential to avoid legal complications.

The Legal Landscape - Ghana Labour Act, 2003 (Act 651)

The Ghana Labour Act, 2003, serves as a comprehensive consolidation of all labor-related laws and regulations, encompassing employers, trade unions, and industrial relations. As businesses seek to employ individuals, it is imperative to consult this Act for guidance on labor-related matters.

Contracts of Employment

According to the law, any engagement for a period exceeding six (6) months requires a written contract of employment issued and signed within two (2) months of employment. These contracts must clearly outline the rights and obligations of both parties. Contracts are generally renewable based on agreed terms. Temporary workers, after six months of employment, are entitled to certain benefits similar to permanent employees, including minimum wage, rest periods, paid public holidays, and sick leave.

Anti-Discrimination

The law strictly prohibits any form of discrimination based on gender, race, color, ethnicity, religion, creed, social or economic status, disability, or political affiliation. Equal opportunity must be given to all prospective employees during the recruitment process, and fair treatment should be extended to all employees in terms of remuneration, training, and promotions.

Wages and Salaries

The Daily National Minimum Wage, currently(July 2023) GH₵14.88, serves as the baseline for remuneration. Industry standards should also be considered to attract top talent. Payments should be made in cedis, as stipulated by Act 615, and made on time, usually before the 27th of each month. Prohibited deductions from employee remuneration include discounts, interests, charges on salary advances, and pecuniary penalties.

Pensions and Taxes

Ghana operates a three-tier pension scheme, comprising compulsory contributions for Tiers one and two (tax-exempt) and a voluntary contribution for Tier three. Employers are obliged to register employees under the scheme and make regular contributions. Employers must also deduct PAYE (Pay As You Earn) taxes from employees' remuneration and remit them to the Ghana Revenue Authority.

Unions and Associations

Freedom of Association is a fundamental human right, and employers must not hinder employees from joining or continuing their membership in unions or associations.

Terminations, Dismissals, and Lay Offs

The termination of employment can be initiated by either party, and the length of notice required depends on the type of contract. Employers must settle any remuneration arrears and compensation arising from workplace injuries or accidents in the event of termination.

Working Hours and Rest Periods

The normal working hours should not exceed 40 hours per week, with a maximum of 8 hours per day. Overtime should be compensated accordingly. Employees are entitled to a minimum of 30 minutes of rest during normal work hours, and daily and weekly rest periods are also mandated.

Agencies to Work With

In conducting business in Ghana, employers will often interact with government departments such as the Labour Department, the National Labour Commission, and the Fair Wages and Salaries Commission. Additionally, the Ghana Investment Promotion Centre and Ghana Revenue Authority are vital institutions that businesses should be familiar with to navigate labor-related matters effectively.

Conclusion

Ensuring compliance with labor and employment regulations is paramount when establishing a business in Ghana. By understanding and adhering to these laws, businesses can attract and retain the best talent, cultivate employee loyalty, and contribute to their own success in this vibrant and youthful market. Share your experiences and thoughts on employment and labor issues, and we are eager to engage further on this topic.

Frequently Asked Questions (FAQs)

1. What are the primary requirements for recruiting employees in Ghana as a foreign investor?

As a foreign investor in Ghana, before recruiting employees, you must ensure you have secured the necessary permits, and they are valid for conducting business in the country. Additionally, registering your business appropriately is vital. Failure to fulfill these requirements may lead to legal complications and hinder your ability to employ workers.

2. Are written contracts of employment mandatory for all employees in Ghana?

Yes, the Ghana Labour Act, 2003 (Act 651), stipulates that any engagement exceeding six (6) months requires a written contract of employment. This contract must be issued and signed within two (2) months of employment, clearly outlining the rights and obligations of both the employer and the employee.

3. What is the minimum wage in Ghana, and how are wages and salaries paid?

The Daily National Minimum Wage, currently GH₵14.88, serves as the baseline for remuneration. Wages and salaries must be paid in cedis, as required by Act 615, and punctually before the 27th of each month. Unwarranted and prohibited deductions from employee remuneration are strictly prohibited.

4. Can employees in Ghana join associations or trade unions? Can employers restrict them from doing so?

Yes, employees in Ghana have the right to join associations or trade unions, as it is protected by law. Employers are strictly prohibited from hindering employees from joining or continuing their membership in any association or union of their choice.

5. What are the legal procedures for terminating an employee's contract in Ghana?

The procedures for terminating an employee's contract depend on the type of contract in operation. For instance, a week-by-week contract requires a notice of at least 7 days before termination. Employers are obligated to settle any remuneration arrears and provide compensation for injuries or accidents suffered by the employee during work. The Ghana Labour Law, 2003, provides further details on the termination process.