Feasibility Study for an HR Services Company in Egypt

How an HR services company makes money, and where it loses it

A small HR services company sells its team's time to client companies in three forms: finding candidates and filling vacancies for a fee per hire, running payroll and social insurance for a monthly fee per employee, and consulting projects. Its biggest cost is the recruiters' salaries, paid every month whether you fill a role or someone else does.

So an HR services company feasibility study does not start with the price alone. It starts with four numbers: the fill rate, meaning roles you actually fill ÷ roles clients hand you; time to fill, from receiving the role to the candidate's first day; the replacement guarantee if the candidate leaves during probation; and the client's payment terms. The real risk: a licence that requires a EGP 1 million guarantee before the first hire, and fees collected months after the search begins.

Three revenue streams with three cash timings

• Recruitment and placement fees: set as a percentage of the candidate's annual salary or a number of monthly salaries, due when the candidate starts, and sometimes split between the start date and the end of probation.
• Payroll and social insurance administration: a monthly fee per employee for calculating pay, deductions and insurance. Recurring, and it covers part of the fixed costs.
• Consulting: pay structures, policies and job descriptions at a fixed fee per project (see the consulting firm feasibility study); training courses need a separate licence (see the training centre feasibility study).

Licensing: what needs a private employment agency licence?

Labour Law No. 14 of 2025 defines private employment agencies as companies specialised in selecting workers or employing them with third parties under the conditions the law sets¹². Article 40 limits the placement of Egyptians in work at home or abroad to the competent ministry and specified bodies, among them private employment agencies organised as a joint-stock company, a partnership limited by shares, a limited liability company or a one-person company that are "licensed to do so by the competent ministry"¹³. The main licence conditions in Article 41¹²³:

• Issued or paid-up capital of at least EGP 250,000, "wholly owned by Egyptians", for a company working inside Egypt, and EGP 500,000 for work abroad or both, with an absolute majority of founders and board members being Egyptians who together own at least 51%.
• A guarantee of at least EGP 1 million in cash or as an unconditional, irrevocable bank letter of guarantee in favour of the ministry, valid for the life of the licence, and topped up within 15 days of notice by the value of unpaid fines or compensation awarded against the company, or amounts it took without right.
• A one-year renewable licence for a fee set by the minister "not exceeding ten thousand pounds"; the minister may add conditions or stop issuing new licences.
• No founder, board member or manager responsible for placement may have received a felony sentence, or a custodial sentence for a misdemeanour involving honour, trust or public morals, unless rehabilitated.

Article 43 bars these bodies from taking any money from the worker, directly or indirectly, for placing them, and allows them to charge the employer instead, with one exception for licensed agencies: an amount not exceeding 1% of the worker's wage, for the first year only, as administrative expenses¹²³. Placement without a licence is punishable by imprisonment and a fine of EGP 20,000 to 100,000, or either, and closure is mandatory on conviction (Article 291)¹⁴.

The law gave bodies covered by Article 41 one year from its entry into force to regularise their status, which the Prime Minister may extend by periods not exceeding two years in total¹². On 7 September 2026 the official gazette published Prime Minister's Decree No. 2652 of 2026 extending the regularisation period for private employment agencies by six months⁵. That grace period is for existing bodies; a new company may not carry out placement without the licence.

What may fall outside the licence?

• Article 39 excludes from the employment chapter "casual work and similar work" and "key posts whose holders are the employer's authorised agents", and the minister may extend the chapter to them¹². A search for a general manager may fall outside it, but do not build an executive-search company on it without legal advice.
• The definition covers "selecting workers", not only placement, so screening and assessing candidates for another company is close to agency work.
• Article 45 says establishments may not employ workers through a labour-supply contractor, subject to Article 40¹². A labour-supply model, where you hire the workers and place them at the client, needs legal advice before you incorporate.
• The provisions above do not mention payroll administration or consulting, where the client remains the employer, and that is not a confirmed exemption. Maher Consulting Firm can handle company formation.

Payroll and social insurance: the numbers you calculate for clients

The private-sector minimum wage is EGP 7,000 from 1 March 2025⁶; the employer pays 18.75% of the insurable wage and the employee 11%⁷; and the insurable wage runs from EGP 2,700 to 16,700 from 1 January 2026⁸. So an employee earning EGP 20,000 pays insurance on 16,700 only: EGP 3,131.25 from the employer and EGP 1,837 from the employee. Any error repeats every month, so set out in the contract who bears differences and fines.

If you pay salaries before the client transfers them, you are financing them: 300 employees on an average wage of EGP 9,000 cost EGP 3,206,250 a month including the employer's share, against a management fee of EGP 45,000 at EGP 150 per employee. Either require the transfer before payday, or budget working capital that covers the payroll cycle until the client pays.

Illustrative example: a small recruitment and payroll agency

An illustrative example; the figures are assumptions, except the wage, social insurance and licence conditions:

• Team and fixed costs: two recruiters on EGP 12,000 and a payroll officer on EGP 10,000, plus the employer's 18.75% share⁷, so EGP 40,375. Founder's drawing 15,000, rent 15,000, job-board subscriptions 5,000, systems 4,000, accountant and utilities 6,000, marketing 5,000. Total EGP 90,375 a month.
• Recruitment: 5 roles a month in the first two months, then 10; a 40% fill rate; the candidate starts two months after the role is received. Average salary EGP 18,000 and a fee of 1.5 monthly salaries, so EGP 27,000 before VAT.
• Collection and guarantee: 50% one month after the start date, and 50% one month after a 3-month probation ends. 15% of candidates leave during probation, so you find a free replacement and the second half arrives two months later.
• Payroll: EGP 150 per employee per month with a variable cost of EGP 25, starting with 50 employees in month 2 and adding 25 a month up to 300, collected after 30 days; the client transfers the salaries themselves before payday.
• Start-up: EGP 240,000 (formation 25,000; the licence fee at its 10,000 cap; fit-out 50,000; computers 75,000; rent deposit 30,000; two months' rent before the licence 30,000; marketing 20,000). We assume the Article 41 guarantee is deposited in cash, or as a letter of guarantee the bank requires fully cash-covered: EGP 1,000,000.

The full cost per hire is EGP 10,690. Each payroll employee leaves EGP 125, so the payroll officer covers their cost at 95 employees. Break-even: with no payroll clients you need 3.86 hires a month, about 9.6 roles received at a 40% fill rate. The method is explained in break-even and working capital.

Cash in the first year

On an accrual basis the agency is profitable from month 5, earning EGP 40,865 in month 12 (26.7% of that month's revenue), yet it ends the first year with an operating loss of EGP 20,215 before start-up costs. Net monthly cash only turns positive in month 9, because half of each fee waits for probation to end. The deepest cash need is EGP 709,305 in month 8, or EGP 1,709,305 with the EGP 1 million guarantee. The difference between profit and cash is explained in cash flow for small businesses.

VAT: services are taxed at the general rate of 14% unless exempt⁹, and registration is mandatory once sales reach EGP 500,000¹⁰, within 30 days of reaching it⁹. The example's sales pass the threshold in month 7; after that a placement invoice becomes EGP 30,780, of which 3,780 is tax, not your revenue.

What if replacements rise or a major client freezes hiring?

One client's freeze removes 12 hires and EGP 324,000 of first-year revenue. Cutting the fee to one salary drops a normal month's profit from EGP 40,865 to 4,865, because the cost of the search does not fall with the price. For pricing, see how to price your product.

The levers specific to this business

• Fill rate before price: at 25%, ad cost per hire rises from EGP 2,500 to 4,000 and hires fall from 4 to 2.5 a month. Take what you can fill, and ask for a clear job description and salary before you start.
• Payment terms: collecting the whole fee 30 days after the start date instead of splitting it cuts the deepest cash need by EGP 104,700 and makes net cash positive from month 6 instead of 9. Payment after 60 days raises it by EGP 110,260.
• The guarantee: replacements rising to 35% cost only EGP 22,320 of first-year profit, but the real cost is recruiters' time: 0.8 extra searches a month, about EGP 5,700. Set the guarantee period, the number of replacements and the exclusions.
• Payroll as a fixed base: 300 employees cut break-even hires from 3.86 to 2.26 a month, which is what protects the agency when hiring stops. For full process outsourcing, see the outsourcing company feasibility study.

Common mistakes in an HR services company feasibility study

1. Leaving out the EGP 1 million guarantee, which in the example is more than four times the other start-up costs.
2. Counting revenue on every role received instead of a measured fill rate.
3. Booking the fee as cash when the offer is accepted, while half of it arrives 4 months after the candidate starts in the example.
4. A foreign partner in an agency working inside Egypt, when its capital must be wholly owned by Egyptians.
5. Paying clients' salaries before collecting them without counting them in working capital; in the example they are more than 71 times the management fee.

Frequently asked questions about an HR services company feasibility study

Sources

1. Alberonsy (law text from the Official Gazette, issue 18 cont.). قانون رقم 14 لسنة 2025 بإصدار قانون العمل (المواد 1 و39 و40 و41 و43 و45 و47 و291، والمادة السادسة من مواد الإصدار) (in Arabic) (2025-05-03) — secondary source; Manshurat. قانون العمل الجديد 2025 (القانون رقم 14 لسنة 2025، المواد 1 و39 و40 و41 و43 و45 و47، والمادة السادسة من مواد الإصدار) (in Arabic) (2025-05-03) — secondary source. Checked 22 October 2026.
2. Sadany & Partners. قانون رقم 14 لسنة 2025 بإصدار قانون العمل (in Arabic) (2025-05-26) — secondary source. Checked 22 October 2026.
3. Parlmany (Youm7). القانون يحدد شروط مزاولة عمليات إلحاق المصريين للعمل بالداخل أو الخارج.. التفاصيل (in Arabic) (2025-12-12) — secondary source. Checked 22 October 2026.
4. El Watan News. حبس وغرامة 100 ألف جنيه.. تحذير لشركات إلحاق العمالة بالخارج من العمل دون ترخيص (in Arabic) (2026-01-13) — secondary source. Checked 22 October 2026.
5. El Watan News. الجريدة الرسمية تنشر قرار مد فترة توفيق أوضاع وكالات التشغيل الخاصة (قرار رئيس مجلس الوزراء 2652 لسنة 2026) (in Arabic) (2026-09-09) — secondary source; Youm7. رئيس الوزراء يمد فترة توفيق أوضاع وكالات التشغيل الخاصة 6 أشهر (in Arabic) (2026-09-09) — secondary source. Checked 22 October 2026.
6. Ministry of Planning and Economic Development. الاجتماع الأول للمجلس القومي للأجور: رفع الحد الأدنى لأجور القطاع الخاص إلى 7000 جنيه (in Arabic) (2025-02-09). Checked 22 October 2026.
7. Andersen Egypt. Social insurance in Egypt (contribution rates under Law 148/2019) (2026-06-30) — secondary source. Checked 22 October 2026.
8. National Organization for Social Insurance (NOSI). التأمينات: رفع الحدين الأدنى والأقصى لأجر الاشتراك التأميني بدءًا من أول يناير 2026 (in Arabic) (2025-11-30). Checked 22 October 2026.
9. Financial Regulatory Authority. قانون الضريبة على القيمة المضافة رقم 67 لسنة 2016 وفقًا لآخر تعديل (in Arabic). Checked 22 October 2026.
10. Egyptian Tax Authority. ما هو حد التسجيل الإلزامي لضريبة القيمة المضافة، وما هي الأنشطة المعفاة منها؟ (in Arabic). Checked 22 October 2026.