Formally known as The Hashemite Kingdom of Jordan, this Arab country enjoys a developing economy. Thus, it is making strong efforts to develop its economy into a stronger one by creating a business-enabling environment. However, this in no way means that it is easy starting a business in Jordan.
There are a lot of factors to consider when thinking of starting a business in Jordan. While the country is rich in resources and poses a lot of opportunities for growth, the market here is quite small. In fact, it is the second smallest market in the Middle Eastern Region, not too far behind Bahrain. To enable a business-friendly environment and to encourage trade, Jordan has a lot of Free-Trade Agreements with other countries, including Singapore, Canada, the United States of America, the EU, Turkey, Syria, and many more. To further grow its market and business opportunities, Jordan is planning on many more Free Trade Agreements with other nations in the world.
Before starting a business in Jordan, it is important for new business owners and investors to learn thoroughly about this region. The economic and political landscape of the country is quite unique, posing both opportunities and challenges for investors to overcome and conquer.
Some of the unique features of this nation are how business is conducted. For example, while Arabic is the official language of this country, business dealings are usually done in English for the benefit of all parties. The workweek in Jordan extends from Sunday to Thursday in general. Employers also need to create contracts of employment for all of their employees, which would detail the nature of the job role, the expectations, grounds for dismissal, and much more. The process for starting a business in Jordan can be quite extensive and time-consuming and is detailed in the following sections.
Process of setting up a business in Jordan
The process of starting a business in Jordan is known for being quite complex. Before you can get started with the process, there are a lot of factors and procedures to understand. So before diving into investment in a new country, thorough market research is crucial. This would include understanding the commercial laws and labor laws of the country in detail. Apart from that, understanding the market plays a key role in establishing a business in the Kingdom of Jordan. The market size here is quite small, which can pose a challenge for certain businesses. However, the country has entered into a lot of free trade agreements, so if your products or services are related to the fields included in those, then you may find a bigger market. Here is how you set up a business in Jordan:
- Business idea and plan: Upon conducting deep market research, you will be able to find the product or service for which there is a good market. Alternatively, your research could also reveal whether the service you provide is in demand in the country or not. It may also be helpful if your product is completely new to the region to explain what it is to locals and then try to understand whether it would yield profitable results or not.
Thereafter, you need to create a comprehensive business plan, which not only formulates ideas for expansion but even projects prospective growth based on research and assessment of the competition. The business plan would help in setting goals and may even be helpful when applying for credit.
- Pre-approvals: Does your business need any pre-approval permits before proceeding with the next steps? Certain businesses may require pre-approval before they can register the company. A pre-approval is essentially formalities that need to be completed or permits which need to be granted to a business before they can start the company forming process. It usually applies to foreign investors and may include visa and immigration requirements.
- Company Registration: This step includes registering your company as a formal corporate entity. Only after completing this step can you apply for licenses and permits that would enable you to perform your business smoothly. After completing the registration of the company as a formal entity, you would also need to register for the company trademark. This can be optional but is highly recommended.
- Membership: Once the company is registered, you need to become a member of the Chamber of Commerce or the Chamber of Industry. This is a mandatory requirement in Jordan and quite a unique one at that. You would then need to obtain a valid license specific to your profession.
- Tax Registration: The next step in starting a business in Jordan is to complete tax registration. This step is also mandatory as there are several taxes to be paid. Without getting registered for tax with the tax department, you cannot start functions legally in Jordan.
- Permits: Other permits like electricity connection and water line connection permits may be needed. While these are dependent on the kind of work you do, it is recommended that every business get an electricity connection if they have office space.
- Registering with Social Security: Social Security registration is mandatory in Jordan. Every employer needs to register themselves as an employer and may even need to register their employees. This is important as Jordan provides various social security benefits to all its employees, for which employers are required to make certain contributions depending upon the wages of the employee.
- Hiring Employees: The final step would be to hire employees for your business in compliance with the labor laws of the country. If you are hiring foreign nationals for your company, you would need to obtain the proper visa and work permit for them.
Hiring Employees in Jordan
Hiring Employees in any country is dependent upon the labor laws of that country. For starting a business in Jordan and hiring help, enterprising individuals need to comply with the labor laws of this country. These laws apply to both Jordanian citizens as well as foreign individuals. As every country has its unique features and employer-employee rights, it becomes the primary burden of the employer to ensure that he provides at least the minimum basic standards of employment to all employees.
These laws contain statutory mandates regarding working conditions, terms of employment, grounds of dismissal and procedures to be followed for dismissal of employees, and so on. With the help of expert consultants at Zimyo, you can certainly take care of all your hiring requirements in Jordan efficiently. Some of the most important factors to be considered by employers when hiring employees are:
- Trial Period/Probation Period: While the exact period of probation must be decided between the employer and the employee in writing, it cannot by statute exceed 3 months duration in any case. This time is considered sufficient for gauging the competency of an employee as well as the suitability of the job role.
- Leave and Holidays: Leave and holidays come in various forms in the Kingdom of Jordan. There are 8 public holidays which are paid holidays all employees must be ensured. They are also entitled to at least one week off every Friday, however, some employers give two-day weekends on Friday and Saturday. Vacation time is calculated based on the number of years an employee has worked for an employer. All employees are entitled to 14 days of paid annual leave for the first 5 years of employment with the employer, whereas those who work for more than 5 consecutive years with the same employer are entitled to 21 days of paid annual leave.
Additionally, all employees who have worked for an employer for 5 consecutive years are entitled to 14 sick leave days every year. However, they need to provide a valid medical certificate. Those employees that have worked over 5 years for an employer are entitled to 21 days of sick leaves in a year.
If an employee is terminated before they can utilize their annual leave, the employer would have to pay the respective amount for that.
- Maternity Leave: Pregnant employees in Jordan are entitled to receive 10 weeks of paid maternity leave. This usually extends to 4 weeks before the birth of the child and 6 weeks after the birth. All-female employees are also entitled to half-hour off for the first year of childbirth for breastfeeding. They can also take unpaid leaves during the first year of childbirth. During this time, employers cannot terminate or send a notice period to the concerned employees.
- Termination of Services: While, in general, full-time employees are to be served a one-month notice before being terminated, situations like misconduct, failure to do the job, and a few more cases allow the employer to terminate an employee with immediate effect.
- Pension: Pensions are available in three forms in Jordan. Public Pension, which is overlooked by the Social Security System of the country; Private pension system by the employer, which is voluntary in nature and is not subject to any supervision by any governmental agencies; and lastly, a private pension system, which is also voluntary for individuals to enroll in. This is a personal pension system offered by Insurance companies.
- Work Hour Norms: Typically, the workweek consists of 48 working hours for every employee with certain exceptions, including supervisors, managers, and those employees who are traveling for work. Overtime is allowed. However, there is no set limit to the number of working hours. Employers must, however, get the employees’ consent for overtime work and must also pay 125% of their regular wage for as many hours as the employee is working overtime.
If employees are asked to work on a holiday, whether a public holiday, vacation time, or any other holiday, the employer is liable to pay anthem 150% increased wages. The workweek usually goes on from either Saturday to Thursday or from Sunday to Thursday. Fridays are commonly the week off in Jordan.
How easy is it to conduct business in Jordan?
Whether it is easy to conduct business in Jordan or not can be determined with the help of the ease of doing business index. It is a global scale of comparison which compares various aspects of conducting business. Countries around the world are assessed on the same parameters and ranked according to their performance in each. Every year, this report indicates which are the most to least business-enabling countries in the world. Thus, every country gets the opportunity to improve its infrastructure and policies into more business-friendly ones to pull up its rank in this index. In the latest reports, Jordan secured an overall rank of 75 with an overall score of 69.0. Some of the main criteria in which countries are judged include:
- Starting a Business: For any new businessman and investor starting a business in Jordan, the country has a lot of inviting provisions. However, there are still a lot of complexities in this process, and as such, Jordan ranked 120 in this parameter. This is because there are about 7.5 procedures required to start a business in Jordan, and it can take about 12.5 days to complete all formalities.
- Managing Permits: There would be a lot of permits to apply for and manage while starting up a business in Jordan. As such, there needs to be a proper and streamlined process for acquiring them. As far as dealing with construction permits goes, Jordan ranks number 138. This is because there are quite a lot of procedures to undertake. There are 20 processes, and it takes about 66 days to complete all of the formalities.
- Getting Electricity: Electricity is important for all businesses, and as such, investors and entrepreneurs starting a business in Jordan must be aware of the procedures to be followed. In this area, Jordan ranked 69 with an overall score of 80.5. This is because while there are just 5 procedures to complete, it can take about 55 days to complete them, which is quite high.
- Getting Credit: All businesses require credit at some point. While some require a certain amount to get things started, others may need it later to keep operations running smoothly. As such, getting credit easily is important. In this regard, Jordan ranked number 4. It has been able to improve its policies and pull up its rank from the previous report.
- Managing Payroll: Managing payroll can become complicated as the companies grow. While having a dedicated HR team helps, most businesses need help from expert payroll management services like Zimyo.
- Paying Taxes: In terms of paying taxes, too, Jordan has pulled up its rank. It now ranks 62 in a pool of 190 countries. There are 9 types of taxes to be paid every year, and it only takes about 97 hours to complete filing them.
- Enforcing Contracts: In the area of enforcing contracts, Jordan ranked 110. It takes about 642 days to resolve formalities and get things corrected, which is quite a long time. It is because of this duration that the rank has been so low.
- Resolving Insolvency: In terms of resolving insolvency, Jordan has improved its performance and now ranks 112. With a low recovery rate of 27.3 and a long duration of 3 years to resolve insolvency, the country needs to revamp its infrastructure to do even better.
While there is still a long way to go, Jordan is determined to make its policies and infrastructure more business-friendly. This would give its economy the boost that it really needs. Once one of the economically quickest growing countries in the world, Jordan’s economy has seen a sharp downfall over the years. Since the early 2000s, the economic growth has been a steady 2% per year, which is extremely low compared to other nations. However, the government is striving hard to encourage more entrepreneurs and investors to start a business in Jordan on account of the various resources and benefits it provides.
Zimyo is a leading HR and Payroll management services provider in Jordan with multiple years of experience. The company helps businesses hire the best talent and takes care of the financial requirements of employees, such as advances or credit for a hassle-free work experience.