Hire in Malawi through our Employer of Record (EOR)

An Employer of Record (EOR) is a third-party organization that takes on the legal and administrative responsibilities of employing workers on behalf of another company. This arrangement allows businesses to hire employees in countries where they don't have a legal entity, effectively expanding their global reach without the need to establish a local subsidiary or branch office.

For a country like Malawi, an EOR can play a crucial role in attracting foreign investment and facilitating international business operations. By providing a streamlined solution for companies to hire local talent, EORs can help bridge the gap between Malawi's workforce and global opportunities, potentially contributing to economic growth and development.

How Does EOR Work?

The EOR model operates by creating a tripartite relationship between the EOR, the client company, and the employee. Here's a breakdown of how it typically functions:

1. The client company identifies a candidate they wish to hire in Malawi.

2. The EOR legally employs the worker on behalf of the client company.

3. The EOR handles all employment-related tasks, including:

   • Drafting and signing employment contracts
   • Managing payroll and tax withholdings
   • Ensuring compliance with local labor laws and regulations
   • Providing benefits administration
   • Handling HR-related issues

4. The client company maintains day-to-day management of the employee's work and responsibilities.

5. The EOR bills the client company for the employee's salary plus a service fee.

This arrangement allows companies to quickly and easily hire talent in Malawi without navigating the complexities of local employment laws or setting up a legal entity in the country.

Benefits of Using an EOR

Utilizing an EOR in Malawi offers several advantages for both international companies and the local economy:

1. Simplified market entry: Companies can test the Malawian market without committing to establishing a legal entity, reducing risk and initial investment.

2. Compliance assurance: EORs are well-versed in Malawi's labor laws, ensuring that companies remain compliant with local regulations, reducing legal risks.

3. Cost-effective expansion: By eliminating the need for setting up a local entity, companies can save on incorporation costs and ongoing administrative expenses.

4. Access to local expertise: EORs often have in-depth knowledge of the local business environment, providing valuable insights to foreign companies.

5. Faster hiring process: With an EOR handling the legal and administrative aspects, companies can onboard employees in Malawi more quickly.

6. Flexibility: Companies can easily scale their operations up or down without the complexities of managing a local entity.

7. Focus on core business: By outsourcing employment-related tasks, companies can concentrate on their primary business activities and growth strategies.

8. Risk mitigation: EORs assume much of the employment-related risks, providing a layer of protection for the client company.

9. Enhanced employee experience: Local workers benefit from compliant employment practices and often gain access to international opportunities.

10. Economic growth: By facilitating foreign investment and job creation, EORs can contribute to Malawi's economic development.

In the context of Malawi's developing economy and the government's efforts to attract foreign investment, EORs can play a significant role in connecting the country's workforce with global opportunities while ensuring compliance with local regulations.

Malawi's employment landscape is characterized by a young workforce predominantly engaged in agriculture and the informal sector. The country faces challenges in education and skill development, with a high adult illiteracy rate and a shortage of specialized skills. Despite these obstacles, there's potential for growth in sectors like manufacturing, tourism, and trade. The government is working on initiatives to improve educational outcomes and increase skill development to address these challenges.

Overview of Labor Laws

Malawi's labor laws aim to protect workers' rights and ensure fair employment practices. Key aspects of the labor laws include:

• Minimum wage regulations
• Provisions for working hours and overtime
• Regulations on leave entitlements, including annual, sick, and maternity leave
• Occupational health and safety standards
• Protections against discrimination and unfair dismissal

Employers must comply with these laws to maintain good standing and avoid legal issues. It's important to note that labor laws may be subject to change, so staying updated on current regulations is crucial.

Cultural Considerations

Cultural norms play a significant role in Malawi's work environment:

• Family and community obligations are highly valued, often taking precedence over work commitments
• Indirect communication is preferred over direct criticism or confrontation
• Respect for authority and age is deeply ingrained in the workplace
• Relationship-building is crucial for fostering trust and collaboration
• Hierarchical structures are common, with decisions typically flowing from top management

Employers should be mindful of these cultural nuances and adapt their management styles accordingly to create a harmonious work environment.

Challenges of Direct Hiring

Direct hiring in Malawi can present several challenges for foreign companies:

1. Limited pool of skilled workers due to educational gaps and high illiteracy rates
2. Navigating complex labor laws and regulations
3. Understanding and adapting to local cultural norms and expectations
4. Managing the prevalence of informal employment practices
5. Addressing infrastructure challenges, particularly in rural areas
6. Dealing with potential language barriers, especially in more remote regions
7. Ensuring compliance with local tax and social security requirements

To overcome these challenges, many companies opt to partner with local experts or use services like Employer of Record (EOR) providers to facilitate hiring and ensure compliance with local laws and customs.

Malawi's payroll and tax system is designed to ensure fair contributions from both employers and employees while supporting the country's social welfare programs. The system encompasses various elements, including income tax, social security contributions, and other specific levies. Understanding these components is crucial for businesses operating in Malawi to maintain compliance and effectively manage their workforce.

Employer Contributions

Employers in Malawi have several financial obligations when it comes to payroll and taxes. These contributions play a significant role in supporting the country's social security system and workforce development initiatives.

National Pension Scheme (NPS)

One of the primary responsibilities for employers is contributing to the National Pension Scheme. Under this scheme, employers are required to contribute a minimum of 10% of their employees' pensionable earnings. This contribution serves as a crucial component of the employees' retirement savings.

It's worth noting that these contributions are generally tax-deductible for the employer, up to a maximum of 15% of the employee's pensionable earnings. This tax benefit encourages employers to support their employees' long-term financial security.

Fringe Benefits Tax (FBT)

Employers who provide fringe benefits to their employees are subject to Fringe Benefits Tax. A fringe benefit is any non-cash benefit given to an employee that includes a personal benefit element, such as company cars, housing allowances, or other perks.

The FBT is charged at a rate of 30% of the calculated taxable value of the fringe benefit. It's important to note that cash benefits cannot be treated as fringe benefits for tax purposes, regardless of how they are named or categorized.

Skills Development Levy (SDL)

While not universally applied, some employers may be required to contribute to the Skills Development Levy. This is typically calculated as a percentage of the total payroll and is aimed at promoting workforce skills training and development.

Other Potential Contributions

Depending on the nature of the business and its location, employers might also be responsible for additional contributions:

1. Medical Levy: This may be applicable to employers in specific sectors.
2. Local Taxes: These can include property rates, business licenses, and other location-specific taxes.

Employee Contributions

Employees in Malawi also have tax and contribution responsibilities, primarily through the Pay As You Earn (PAYE) system and social security contributions.

Pay As You Earn (PAYE)

Malawi employs a progressive tax system for PAYE, with rates ranging from 0% to 35% depending on the amount of taxable income. The PAYE is calculated on an employee's taxable income after certain allowable deductions.

National Pension Scheme (NPS)

Employees are required to contribute 5% of their pensionable earnings to the National Pension Scheme. This contribution is deducted from their salary and complements the employer's contribution to support their retirement savings.

Deductions for PAYE Calculation

Several deductions are considered when calculating an employee's PAYE:

1. Pension Contributions: The 5% NPS contribution is deductible from taxable income.
2. Exempt Income: Certain types of income, such as some housing or travel allowances, may be exempt from PAYE.

Other Potential Deductions

Employees may have additional deductions from their salary, including:

1. Union Subscriptions: If an employee is a member of a union, their subscription fees may be deducted from their salary.
2. Medical Levy: This may be applied in certain sectors.

Understanding these employer and employee contributions is essential for businesses operating in Malawi. It ensures compliance with local regulations and helps in maintaining transparent and fair compensation practices. As tax laws can change, it's always advisable to consult with local tax experts or the Malawi Revenue Authority for the most up-to-date information.

Navigating employee benefits in Malawi can be a complex task for businesses, especially those expanding into the country. An Employer of Record (EOR) service like Rivermate can simplify this process by managing both mandatory and optional benefits, ensuring compliance with local labor laws while also helping companies create attractive compensation packages. By leveraging an EOR's expertise, businesses can focus on their core operations while providing their employees with the benefits they need and deserve.

Mandatory Benefits

In Malawi, employers are required to provide several mandatory benefits to their employees:

• Paid time off for all 11 national public holidays
• Annual leave of 15 working days for employees on a five-day week, or 18 days for those on a six-day week
• Sick leave of at least four weeks fully paid and eight weeks half-paid for employees with one year of service
• Maternity leave of eight weeks fully paid every three years for female employees
• Notice period before employment termination, with duration based on length of service
• Overtime pay regulations for ordinary overtime, day off overtime, and holiday overtime

Optional Benefits

To attract and retain top talent, many employers in Malawi offer additional benefits beyond the mandatory requirements:

• Health insurance plans, either fully or partially subsidized by the employer
• Supplementary pension plans to enhance retirement savings
• Housing allowance to help offset living costs in urban areas
• Transport allowance for commuting expenses
• Meal allowance to cover food costs during work hours
• Study leave for employees pursuing further education
• Life insurance for added financial security
• Gym memberships or wellness programs to promote employee health

By offering a combination of mandatory and optional benefits, employers in Malawi can create comprehensive compensation packages that support their employees' well-being and contribute to a positive work environment. An EOR like Rivermate can help businesses navigate these benefits, ensuring compliance and employee satisfaction.

The process of termination and offboarding in Malawi is governed by specific labor laws that protect both employers and employees. Understanding these regulations is crucial for companies operating in the country to ensure compliance and maintain positive relationships with their workforce.

Grounds for Termination

In Malawi, employers can lawfully terminate an employee's contract based on several grounds. These include:

1. Operational requirements: Economic circumstances, restructuring, or technological changes that reduce the need for certain positions.
2. Incapacity: Prolonged illness or injury that affects an employee's ability to perform their duties.
3. Poor performance: Consistent failure to meet job expectations despite warnings and opportunities for improvement.
4. Misconduct: Including insubordination, dishonesty, theft, gross negligence, intoxication on the job, harassment, or workplace violence.

Notice Requirements

When terminating an employment contract, employers must provide written notice, except in cases of summary dismissal for gross misconduct. The required notice period depends on the employee's payment frequency:

• Monthly payments: One month's notice
• Fortnightly payments:
  • Less than five years of employment: One fortnight's notice
  • Five years or more: One month's notice
• Weekly, daily, or hourly payments: Notice period varies based on length of service

Employers have the option to pay the employee their wages and benefits for the notice period instead of giving notice.

Severance Pay

Employees who have worked for at least one year are entitled to severance pay if:

1. The termination is due to operational requirements (redundancy)
2. The termination is deemed unfair

The amount of severance pay is calculated based on the employee's length of service.

Fair Procedures

Before dismissing an employee, employers must follow fair procedures, which include:

1. Providing a clear explanation of the grounds for dismissal
2. Giving the employee an opportunity to defend themselves
3. Allowing the right to appeal

Summary Dismissal

In cases of gross misconduct, employers may terminate an employee's contract without notice or severance pay. However, it's crucial to have strong evidence and documentation to support such actions.

Offboarding Process

To ensure a smooth transition during termination, employers should:

1. Communicate the decision clearly and professionally
2. Provide all necessary documentation, including termination letters and final pay statements
3. Retrieve company property and revoke access to systems and facilities
4. Conduct an exit interview to gather feedback and insights
5. Ensure all final payments, including severance if applicable, are processed accurately and timely

By following these guidelines and adhering to Malawi's labor laws, companies can navigate the termination and offboarding process effectively while minimizing legal risks and maintaining a positive employer brand.

Malawi, a landlocked country in southeastern Africa, welcomes foreign workers but has specific visa and work permit requirements that must be followed. These regulations ensure that international employees comply with local laws and contribute positively to the country's economy.

Visa Requirements

Foreign nationals planning to work in Malawi typically need to obtain a business visa before entering the country. This visa allows for short-term business activities and is usually valid for up to 30 days. To apply for a business visa, applicants must provide:

• A valid passport with at least six months of remaining validity
• Completed visa application form
• Passport-sized photographs
• Proof of sufficient funds
• Letter of invitation from a Malawian company or organization
• Return ticket or proof of onward travel

Work Permit Process

For long-term employment in Malawi, foreign workers must obtain a Temporary Employment Permit (TEP). The process involves several steps:

1. The employer must first obtain a Business Residence Permit (BRP) from the Department of Immigration.
2. Once the BRP is approved, the employer can apply for a TEP on behalf of the foreign worker.
3. The application should include:
   • Completed TEP application form
   • Copy of the employee's passport
   • Educational certificates and professional qualifications
   • Police clearance certificate from the employee's home country
   • Medical certificate
   • Job offer letter and employment contract
   • Proof of the employer's registration and tax compliance

Important Considerations

• Work permits are typically issued for two years and can be renewed.
• The process can take several weeks to months, so it's advisable to start well in advance of the intended employment start date.
• Malawian authorities may require proof that the position cannot be filled by a local candidate.
• Some professions may have additional requirements or restrictions.

By understanding and adhering to these visa and work permit requirements, foreign workers can ensure a smooth transition into the Malawian workforce. It's always recommended to consult with local immigration authorities or legal experts for the most up-to-date information and guidance throughout the process.