Employer of Record in Micronesia

An Employer of Record (EOR) in Micronesia is a company that legally hires employees on your behalf. This lets you build a team in Micronesia without setting up a local legal entity. The EOR handles all the local HR tasks like payroll, taxes, benefits, and compliance with Micronesian labor laws. You manage your employees' day-to-day work, while the EOR takes care of the administrative side. For companies looking to expand, an EOR provider like Rivermate can make your global expansion much simpler.

How an Employer of Record (EOR) Works in Micronesia

Using an EOR simplifies the process of hiring in Micronesia. Here is how it typically works:

• You Find the Talent: You are responsible for finding and selecting the candidate you want to hire in Micronesia.
• The EOR Hires Your Candidate: The EOR uses its local company to legally hire the employee for you.
• Compliant Contracts: The EOR drafts an employment contract that follows all of Micronesia's labor laws. The Federated States of Micronesia has a national labor code, Title 51, which you can find on the FSM Law website (https://www.fsmlaw.org/).
• Onboarding and HR: The EOR manages the employee's onboarding process and all HR-related tasks.
• Payroll and Benefits: The EOR handles payroll, taxes, and social security contributions. They also manage benefits like paid time off and health insurance.
• You Manage Your Team: You direct your employee's daily tasks and integrate them into your company's culture.

Why use an Employer of Record in Micronesia

Using an EOR in Micronesia can save you time and money. It allows you to enter the Micronesian market quickly without the need to establish a local company. This is especially helpful because Micronesia is made up of four states: Yap, Chuuk, Pohnpei, and Kosrae, each with its own labor laws. An EOR can help you navigate these complexities.

Here are some of the key benefits of using an EOR in Micronesia:

• Speed: You can hire employees and start operating in Micronesia much faster than if you had to set up your own company.
• Cost Savings: Avoid the high costs associated with establishing and maintaining a legal entity in a new country.
• Compliance: An EOR ensures that you are fully compliant with all local labor laws and regulations. The Department of Resources & Development's Division of Labour (https://rd.gov.fm/) is responsible for enforcing these regulations.
• Local Expertise: You gain access to local HR experts who understand the nuances of the Micronesian market.
• Reduced Risk: The EOR takes on the legal responsibility for your employees, reducing your risk of non-compliance.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Micronesia 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 Micronesia.

Hiring in Micronesia may seem complex at first glance. The Federated States of Micronesia (FSM) is made up of four states: Chuuk, Kosrae, Pohnpei, and Yap. Each state has its own specific employment laws that add to the national labor code. This means you need to pay attention to both national and state-level rules. But don't worry, we're here to help you understand the key things you need to know. With the right information, you can hire in Micronesia with confidence.

Employment contracts & must-have clauses

While not always required to be in writing, it's a good idea to have a written contract for all your employees in Micronesia. A written agreement helps make sure everyone is on the same page about job duties, pay, and other important terms.

There are two main types of employment contracts in Micronesia:

• Indefinite-Term Contracts: These are the most common type of contract for permanent positions.
• Fixed-Term Contracts: These contracts are for a specific period of time or for a particular project.

No matter which type of contract you use, make sure it includes these key clauses:

Probation periods

You can include a probation period at the start of employment to see if a new employee is a good fit for the role. In Micronesia, probation periods are typically three to six months long. During this time, the rules for ending the employment relationship may be less strict. Be sure to clearly state the length of the probation period in the employment contract.

Working hours & overtime

For private sector employees, there are no set limits on working hours in Micronesia. This makes it very important to clearly define working hours in the employment contract. In the public sector, a standard workweek is 40 hours, usually spread over five or six days.

When it comes to overtime, you'll need to agree on the terms with your employees and include them in the contract. If an employee works more than the standard hours, they should be paid extra. The overtime rate is typically 1.5 times the regular rate of pay.

Public & regional holidays

Micronesia has both national and state-specific public holidays. Employees are generally entitled to a day off for these holidays. If they are required to work, they should receive extra pay or a substitute day off.

Here are some of the national public holidays in Micronesia for 2025:

• January 1: New Year's Day
• March 31: Micronesian Culture Day
• May 10: Constitution Day
• October 24: United Nations Day
• November 3: Independence Day
• November 11: Veterans of Foreign Wars Day
• November 23: Presidents Day
• November 27: Thanksgiving
• December 25: Christmas Day

Each of the four states also has its own public holidays. For example, Yap Day is on March 1 and Kosrae Constitution Day is on January 11.

Hiring contractors in Micronesia

Hiring independent contractors can be a flexible way to get specific skills for your business. In Micronesia, contractors are responsible for their own taxes and are not entitled to the same benefits as employees, like paid time off or health insurance. This can lead to cost savings for your business.

However, it's very important to correctly classify your workers. Misclassifying an employee as an independent contractor can lead to serious penalties, including back taxes and fines. The main difference between an employee and a contractor is the level of control you have over their work. An independent contractor has more control over how and when they do their work.

An Employer of Record (EOR) can help you avoid the risks of misclassification. An EOR can hire employees on your behalf, taking care of all the legal and HR details. This allows you to work with talent in Micronesia without having to worry about compliance.

In Micronesia, your compensation is a mix of your base salary and other potential benefits. Factors like your industry, skills, and the cost of living in one of the four states (Yap, Chuuk, Pohnpei, and Kosrae) play a big role in determining your pay. The government and foreign aid are major economic drivers, which tends to keep salary trends stable.

Payroll cycles & wage structure

Most employers in Micronesia pay their employees monthly. However, some businesses may pay every two weeks. You can expect to receive your pay on a specific day each month or every two weeks. The most common payment methods are direct bank transfers, cash, or check.

Your salary is influenced by several factors, including:

• Education: Higher education levels often lead to higher pay.
• Industry: Government, finance, and healthcare jobs typically offer higher compensation than retail or agriculture.
• Location: The cost of living in each state can affect your salary.

Beyond your base salary, you may receive other allowances for things like annual leave, sick days, and working on public holidays.

Overtime & minimums

For private-sector employees, there are no set limits on working hours; these are usually agreed upon in your employment contract. In the public sector, a standard work week is 40 hours, based on an 8-hour day. If you work beyond the standard hours, you are entitled to overtime pay, which is typically one and a half times your regular hourly rate.

Minimum wage requirements vary between the public and private sectors and across the different states. Pohnpei is the only state with a minimum wage for private sector workers, which is $1.75 per hour. For government employees, the minimum wage differs by state:

• Pohnpei: $2.90 per hour
• Chuuk: $2.00 per hour
• Kosrae: $2.16 per hour
• Yap: $3.24 per hour

Employer taxes and contributions

Employers in Micronesia are responsible for contributing to Social Security on your behalf. This is a mandatory contribution that funds retirement, disability, and survivor benefits.

Employee taxes and deductions

You are also required to contribute to Social Security from your wages. Your employer will withhold this amount from your paycheck. Additionally, your income is taxed at a progressive rate.

In Micronesia, benefits and leave are a mix of legal requirements and company policies. The laws provide a basic structure for time off and social security. However, many employers offer more to attract and keep good employees. Understanding these different parts is key to managing a team in the country.

Statutory Leave

By law, employees in Micronesia have a right to certain types of paid leave. The specifics can vary, especially between the public and private sectors.

• Annual Leave: Employees usually get paid time off each year. A common amount is 12 working days. This is earned at a rate of one day per month of service.
• Sick Leave: Paid leave for illness or injury is also standard. Typically, employees get 12 days of paid sick leave a year.
• Maternity Leave: For government employees, paid maternity leave is provided for eight weeks. In the private sector, maternity leave depends on the employer's policy.

Public Holidays & Regional Holidays

Micronesia celebrates several national holidays. Each of its four states also has its own holidays.

Typical Supplemental Benefits

To stay competitive, many employers offer more than the law requires. Here is a look at both required and extra benefits.

How an EOR Can Help with Setting Up Benefits

Setting up a benefits plan in another country can be complex. An Employer of Record (EOR) simplifies this process for you.

An EOR acts as the legal employer for your team in Micronesia. This means they handle all the details of benefits and leave. They make sure you comply with all national and state laws.

An EOR can:

• Enroll your employees in the social security system.
• Manage paid time off for holidays, vacation, and sickness.
• Help you create a competitive benefits package.
• Offer access to private health insurance and other supplemental benefits.

Using an EOR saves you time and reduces risk. You can be sure your employees are taken care of, and you can focus on your business goals.

When an employment relationship in Micronesia ends, you need to follow a clear process. This ensures you treat your former employee fairly and meet all legal requirements. The process involves giving proper notice, paying final wages, and handling documentation correctly. Both you and the employee have responsibilities during this time.

Notice Periods

You must provide employees with written notice before termination. The amount of notice depends on how long the employee has worked for you.

These are the minimum periods required by law. If your employment contract states a longer notice period, you must follow the contract. In cases of serious misconduct, you might not need to provide notice, but you must still follow a fair process.

Severance Pay

Upon termination, you must pay all outstanding wages and accrued benefits to the employee. While there isn't a specific national severance pay formula, the final payment should include any unused vacation time and other earned compensation. Always check the employment contract for any additional clauses about severance payments.

How Rivermate Handles Compliant Exits

Navigating employee exits can be complex. We make sure every termination is handled correctly and complies with Micronesian labor law.

Here’s how we help:

• Compliance Checks: We review each termination case to ensure it meets all legal requirements, from notice periods to final payments.
• Documentation: We prepare all necessary termination documents, including the formal written notice, to ensure clarity and compliance.
• Final Payroll: We calculate and process the employee’s final wages, including any accrued benefits and leave, to ensure they receive everything they are entitled to.
• Guidance: We provide clear guidance on the proper offboarding procedures to make the process smooth for both you and the departing employee.

Getting the right visa and work permit for Micronesia is essential for anyone looking to work in the country. The process is manageable, but you need to understand the requirements. A local employer must sponsor you to get a work permit. This means you need a job offer before you can start the application process. The Department of Resources and Development handles these applications.

Employment visas & sponsorship realities

When it comes to working in Micronesia, your employer is your sponsor. This is a key point. Without a job offer from a Micronesian employer, you cannot get a work permit. The employer starts the process for you. They have to show that a local candidate could not fill the position.

An Employer of Record (EOR) can make this process easier. An EOR can legally hire you in Micronesia on behalf of another company. This means they can handle the sponsorship and visa application process for you. This is helpful for companies that don't have a legal entity in Micronesia.

Here are some of the practical steps involved:

• Job Offer: You must have a formal job offer from an employer in Micronesia.
• Documentation: You will need to provide several documents, including a valid passport, a completed application form, and proof of your qualifications.
• Employer's Role: Your employer submits the application package to the labor and immigration authorities.

Business travel compliance

For short-term business trips, the rules can be simpler. Depending on your citizenship, you might not need a visa for short stays. For example, citizens of the United States can enter Micronesia for up to 30 days without a visa for business purposes. Australian citizens also have a similar exemption for stays up to 30 days.

However, even for short trips, you'll likely need to show:

• A valid passport with at least four to six months of validity beyond your planned stay.
• Proof of onward or return travel.
• Evidence of sufficient funds for your stay.

It is important to remember that these short-term visits are for business meetings and consultations. You are not permitted to engage in gainful employment on a business visa or visa waiver. If you plan to work, you need a proper work permit.