Employer of Record in Madagascar

Hiring talent in Madagascar can offer significant strategic advantages for businesses looking to expand into new markets. However, navigating the local labor laws, payroll, and tax regulations can present complex challenges for foreign companies without a local presence. Understanding the available options for engaging employees is crucial for a compliant and efficient expansion.

When considering hiring in Madagascar, companies typically have three primary options:

• Establishing a Local Entity: This involves setting up a subsidiary or branch office, which requires significant time, capital investment, and navigating complex legal and administrative processes.
• Hiring Through an Employer of Record (EOR): An EOR, such as Rivermate, allows you to compliantly hire employees in Madagascar without establishing your own legal entity. The EOR acts as the legal employer, handling all local compliance, payroll, and HR functions, while you manage the day-to-day work of your team.
• Engaging Independent Contractors: While seemingly straightforward, classifying workers as independent contractors requires strict adherence to Madagascar's labor laws to avoid misclassification risks, which can lead to significant penalties.

How an EOR Works in Madagascar

An Employer of Record simplifies global employment by assuming the legal responsibilities of hiring and managing employees in a foreign country. In Madagascar, an EOR handles crucial administrative and legal tasks, ensuring your operations remain compliant with local regulations.

• Payroll Processing: The EOR manages local payroll, including salary disbursement, tax withholdings, and social security contributions in accordance with Madagascar's labor code.
• Compliance Management: They ensure full compliance with Malagasy employment laws, covering contracts, working hours, leave entitlements, and termination procedures.
• Benefits Administration: The EOR administers locally compliant benefits packages, such as health insurance, retirement plans, and other statutory benefits required by Malagasy law.
• HR Support and Guidance: They provide ongoing HR support, offering guidance on local employment practices, dispute resolution, and regulatory changes.
• Tax Filings and Remittances: The EOR is responsible for accurate and timely filing of all employer and employee taxes with Malagasy authorities.

Benefits for Companies Looking to Hire in Madagascar Without Establishing a Local Entity

Utilizing an EOR service offers numerous advantages for companies seeking to tap into Madagascar's talent pool without the overhead of a traditional entity setup.

• Speed to Market: Hire employees rapidly in Madagascar, bypassing the lengthy and complex process of entity formation, allowing for quicker market entry and operational setup.
• Reduced Risk and Liability: The EOR assumes responsibility for compliance with local labor laws, mitigating legal and financial risks associated with international employment.
• Cost Efficiency: Avoid the significant upfront and ongoing costs associated with setting up and maintaining a local legal entity, leading to more predictable operational expenses.
• Access to Top Talent: Engage skilled professionals across Madagascar directly, without geographical limitations or the administrative burden typically associated with international hiring.
• Simplified Global Expansion: Streamline your expansion efforts by centralizing international HR, payroll, and compliance through a single, reliable EOR partner.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Madagascar includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Madagascar.

Employers in Madagascar must fulfill several tax obligations, including contributions to social security funds such as the National Social Security Fund (CNaPS) and occupational health and safety funds, as well as withholding income tax (IRSA) from employees' salaries. IRSA is calculated using a progressive tax system with brackets for 2025, ranging from 0% for incomes up to 3 million Ariary to 20% for incomes exceeding 12 million Ariary.

Employers are required to file monthly and annual tax returns, ensuring timely remittance of social security contributions and income taxes. For foreign entities, additional considerations include adherence to tax treaties, transfer pricing rules, and establishing whether a permanent establishment exists, which could impose further obligations. Employees can reduce taxable income through deductions such as social security contributions, medical expenses, family allowances, and pension contributions. Staying compliant with deadlines and understanding specific rules for foreign workers are critical for smooth operations in Madagascar.

Madagascar's salary landscape varies by industry, experience, and region, with higher wages in sectors like telecommunications, finance, and mining. Typical annual salaries range from USD 3,000 to USD 25,000 depending on role and seniority, with software developers earning up to USD 20,000 at senior levels and operations managers up to USD 30,000. Entry-level positions generally start around USD 3,000–5,000, while senior roles can exceed USD 20,000.

The legal minimum wage as of 2025 is approximately 225,000 Ariary/month for non-agricultural sectors and 215,000 Ariary/month for agricultural sectors. Employers often supplement base pay with bonuses such as end-of-year, housing, transportation, meal, performance, and family allowances, which vary by company and industry. Salaries are paid monthly, mainly via bank transfers, though cash payments are still common in rural areas.

Projected salary increases for 2025 are estimated at 5-8%, reflecting ongoing economic growth and demand for skilled labor.

Employees in Madagascar are entitled to a minimum of 30 paid annual vacation days, which can be split or taken continuously, with salary maintained during leave. Public holidays, such as New Year's Day, Labour Day, and Independence Day, are typically paid days off, with specific dates listed in the law. Sick leave requires medical certification, with paid days varying based on agreements, but unused sick days generally do not carry over.

Parental leave includes 14 weeks of maternity leave, with partial salary during this period, and shorter paternity leave for fathers, usually a few days with full salary. Adoption leave may also be available under certain conditions. Additional leave types like bereavement, study, sabbatical, and special leave are possible depending on employment terms.

Employee benefits in Madagascar are essential for compliance and talent retention. Employers must provide mandatory benefits such as social security contributions to CNAPS, paid leave (around 1.5 days/month), paid public holidays, sick leave with medical certification, maternity leave (typically 14 weeks with partial salary paid by CNAPS), paternity leave, and severance pay upon termination without cause.

In addition to these, many companies offer optional benefits to enhance employee satisfaction, including private health insurance, housing and transportation allowances, meal subsidies, professional development, life insurance, and performance bonuses. Private health insurance is increasingly common, with coverage levels varying from outpatient to comprehensive plans, often sponsored by employers.

Retirement plans typically include the basic CNAPS pension, supplemented by employer-sponsored private plans, which may be defined contribution or benefit schemes. Employers should ensure compliance with regulations and consider vesting periods for these plans. Benefit packages differ by company size and industry; larger firms tend to offer more comprehensive packages, including health, housing, and supplementary pensions, to remain competitive.

Employment agreements in Madagascar are governed by the Labor Code and are essential for defining the employer-employee relationship, ensuring legal compliance and protecting rights. Employers must include specific clauses such as job title, salary, working hours, probation periods, confidentiality, non-compete clauses, and termination procedures to meet legal standards.

Madagascar recognizes two main contract types: fixed-term (CDD) and indefinite-term (CDI). Fixed-term contracts are limited to two renewals; after the second renewal, they automatically convert to indefinite contracts. Indefinite contracts offer greater job security and continue until terminated by either party.

Essential clauses in employment agreements include job title, salary, working hours, probation period, confidentiality, non-compete, and termination conditions, all mandated by law to ensure clarity and legal compliance.

Remote work in Madagascar is gradually expanding, driven by technological progress and employee demand for better work-life balance. While current laws do not explicitly regulate remote work, general labor regulations apply, requiring employers to ensure health, safety, and data protection regardless of work location. Employees can negotiate remote arrangements, which should be formalized in writing, covering work hours, performance, and data security.

Several flexible work options are gaining popularity, including telecommuting, flexible hours, and part-time arrangements. Employers should establish clear policies on equipment, expenses, and technology infrastructure to support remote teams effectively. Data protection and privacy are critical, with laws requiring confidentiality and secure handling of employee information. Reimbursement policies for equipment and expenses vary but should be clearly defined to ensure fairness. Reliable internet connectivity and appropriate remote work technology are essential for maintaining productivity.

Terminating employees in Madagascar requires strict compliance with labor laws to prevent legal disputes. Employers must observe minimum notice periods based on employee tenure, which range from 15 days for less than 6 months of service to 4 months for over 10 years. Severance pay (indemnité de licenciement) is mandatory for dismissals not due to misconduct, calculated as 1 to 2 months' salary per year of service depending on tenure.

Grounds for termination include misconduct or economic reasons, with proper documentation essential for lawful dismissal. Procedural steps involve written notice, employee consultation, opportunity to respond in cases of cause, and settlement of all entitlements, including wages and severance. Employees are protected against wrongful dismissal, with remedies such as reinstatement or damages available if procedures are not followed. Employers must ensure thorough documentation and adherence to legal protocols to avoid liabilities.

Madagascar's economy is witnessing a rise in freelancing and independent contracting, aligning with global trends towards flexible work arrangements. Businesses engaging with Malagasy talent must navigate the local legal framework to avoid misclassification risks between employees and independent contractors. Key criteria for classification include subordination, integration, dependency, exclusivity, provision of tools, and fixed remuneration. A subordinate link is the most critical factor in determining an employment relationship.

Independent contractor agreements in Madagascar should clearly define the scope of work, payment terms, and relationship clauses to avoid legal issues. These contracts must also address confidentiality, intellectual property rights, and termination conditions. Contractors are responsible for their own tax obligations, including income tax, VAT, and social contributions, and must register with the tax authorities. Common industries employing freelancers include IT, creative services, consulting, marketing, education, and engineering, where specialized skills are needed on a project basis.

Understanding these elements is crucial for companies to effectively and compliantly engage with independent contractors in Madagascar.

Madagascar requires foreign nationals to obtain a work permit, typically after securing a work visa (long-stay visa). The application process involves employer submission to the Ministry of Labor, providing documents such as passports, educational certificates, medical and police clearance certificates, and a job offer. Processing usually takes 1-3 months, with fees varying by case. Employers must ensure all foreign employees have valid permits, adhere to labor laws, and report employment changes, while employees must comply with permit conditions and local laws to avoid penalties or deportation.

There are several visa types: Business (short-term, no employment), Tourist (no work), Work Visa (for extended employment), and Investor Visa (for significant investments). Pathways to permanent residency exist after continuous legal residence (e.g., 5 years), requiring proof of employment, residence, and good conduct. Dependents can be sponsored if the primary visa or residency is valid, subject to similar documentation and approval processes.

Non-compliance risks include fines, deportation, and legal penalties, emphasizing the importance of adherence for both employers and employees.