Navigating the complex labour laws governing employment practices is essential when running Madagascar payroll. However, building an in-house compliance team may not be the most efficient way to manage your remote team’s payroll in Madagascar

Regardless of size, global companies need help to secure in-country expertise for localised payroll service. This is where a partner like Workforce Africa provides significant value in supporting global firms to maintain compliance when handling payroll in Madagascar, addressing every intricate detail, including;

• Salary computation requirements,
• Taxation legislation specifics (social security, employee income tax, corporate tax, VAT and other employee deductions.
• Benefits administration, and more (health insurance, pension, paid leaves, holiday compensation.

Workforce Africa simplifies hiring and payroll compliance for offshore talent management in Madagascar. No need for a subsidiary or entity setup. From contracts and onboarding to taxes, payroll, and admin tasks, partnering with us – a payroll firm in Madagascar will help you focus on growth for greater levels of success.

1. Employment Contract Termination

In Madagascar, either the employer or the employee may terminate a fixed-term employment contract for various reasons, including misconduct, contract expiration, mutual agreement, cancellation, or judicial settlement. If both parties agree to end the contract, the decision must be documented in writing.

While it is legally possible to terminate a contract without prior notice, the Madagascarlese Labour Code requires that, following the probationary period, a notice period be observed or payment provided in lieu of notice. The required notice periods are as follows:

• Five days for hourly-paid worker
• Three months for technical or managerial staff
• One month for employees and regular labourers

2. Country Overview

The Republic of Madagascar is an island nation in the Indian Ocean off the south-eastern coast of Africa. The official languages are Malagasy and French, and the capital and largest city is Antananarivo. Other major urban centres include Toamasina, Antsirabe, Mahajanga, Fianarantsoa and Toliara.

Madagascar has a market-based economy with core sectors that include agriculture, mining, textiles, tourism and services. Agricultural output features export crops such as vanilla and cloves alongside staple production, while the mining industry includes nickel, cobalt and ilmenite projects. Competitive labour costs, a young workforce and significant natural resources support investment opportunities across industrial zones and services linked to trade and logistics.

Although Madagascar possesses a highly skilled workforce, hiring and establishing a team can be time-consuming and challenging. However, partnering with an Employer of Record (EOR) or Professional Employer Organisation (PEO) in Madagascar facilitates swift market entry. It manages all legal complexities associated with operations in the country.

3. Payroll Processing in Madagascar

Local labour laws in Madagascar govern payroll processing, with each employee’s salary potentially calculated differently. Due to compliance concerns, processing payroll at scale can become complex, cumbersome, and risky. Here are the phases of payroll processes global businesses should understand:

• Pre-payroll Phase: Your organisation’s unique approach to payroll compliance shapes its policies and processes, including payroll preparation. Global firms must prioritise essential business elements in the pre-payroll phase, such as accurate business profile documentation and tailored work location policies, which is crucial. Customise leave and work policies to align with local standards in Madagascar to ensure compliance and transparency while collaborating closely with compliance teams or partners to help adhere to statutory requirements throughout the payroll management process for your remote team. In this phase also, standardising compensation packages to conform with local payment norms, such as payment cycles, which enhance compliance and meet employee expectations, is necessary.
• Payroll Calculation Phase: Streamlining input collection and validation processes ensures accurate wage calculations in this phase of payroll processing. This phase involves the actual calculation of wages, with a primary focus on this task. Utilising software automation and digital document submission tools makes payroll calculations efficient and reduces the risk of human error in this process.
• Post-payroll Phase: The post-payroll phase in Madagascar refers to the period after payroll processing, where employers review and settle any outstanding issues related to employee compensation, benefits, and taxes. This phase typically includes: salary payment, compliance reporting, benefit administration, audit and reconciliation. The post-payroll phase is crucial in Madagascar as it ensures that employers comply with regulatory requirements, maintain a good employer-employee relationship, and reduce the risk of penalties or fines associated with non-compliance.

4. Payroll Components in Madagascar

Here are some aspects comprehensively needed to navigate Madagascar’s payroll compliance:

• Salary / Wages
• Overtime premiums
• Social-security contributions
• Health-insurance cover
• Payroll taxes (corporate & personal)
• Paid leave & public holidays
• Other statutory benefits

5. Navigating Madagascar Payroll Compliance

Employment in Madagascar is governed by the Labour Code and its implementing regulations, together with applicable collective agreements and social security legislation.

A. Salary and Minimum Wage

The statutory minimum wage is set by sector. In the non-agricultural sector the monthly minimum is MGA 262,680 for employees with less than three years of service and MGA 264,200 for employees with three years or more. In the agricultural sector the monthly minimum is MGA 265,700 for employees with less than three years of service and MGA 276,200 for employees with three years or more.

B. Working Hours and Overtime:

The standard working week is 40 hours. Overtime is limited to a maximum of 20 hours per week. The first eight hours of overtime are paid at 130 per cent of the regular hourly rate and any additional overtime is paid at 150 per cent. Work performed on Sundays and public holidays is paid at 150 per cent.

C. Social Security Contributions:

Social security contributions are shared between employer and employee. The employer pays a total of 19% comprising 5% to OSTIE for medical insurance, 13% to CNAPS for pensions and 1% to the FMFP training fund. The employee pays a total of 2% comprising 1% to OSTIE and 1% to CNAPS. Statutory caps apply to each component.

D. Health Insurance Scheme:

Health cover for employees is provided through OSTIE. Employers register and contribute to OSTIE and many also offer supplementary medical insurance to enhance access and benefits where needed.

E. Pension Contributions:

Retirement benefits for private sector employees are administered by CNAPS. Employers must register employees with CNAPS and ensure the correct contributions are calculated and remitted in line with the statutory ceilings.

F. Value Added Tax (VAT):  

The standard rate of value added tax in Madagascar is 20% on most goods and services. The standard corporate income tax rate is 20% for companies with annual turnover above MGA 400 million. Different regimes apply to smaller taxpayers based on turnover.

G. Personal Income Tax on Employment

Employment income is taxed monthly on a progressive scale with a minimum salary income tax of MGA 3,000. The bands are as follows:

• Up to MGA 350,000: 0%
• MGA 350,001 to MGA 400,000: 5%
• MGA 400,001 to MGA 500,000: 10%
• MGA 500,001 to MGA 600,000: 15%
• Above MGA 600,000: 20%

H. Payroll Taxes Summary:

Taxes	Employer	Employee	Details
Social Insurance	19%	2%	Employer: 5% to OSTIE, 13% to CNAPS, 1% to FMFP. Employee: 1% to OSTIE and 1% to CNAPS. Statutory caps apply.
Health Insurance	Included in social contributions	Included in social contributions	Health cover provided via OSTIE.
Income Tax (PAYE)	0%	Variable	Progressive monthly bands from 0% to 20%, with a minimum salary income tax of MGA 3,000.

6. Paid Leaves

• Annual Leave: Employees accrue 2.5 days of paid leave for each month worked, totalling 30 days per year for a full year of service.
• Sick leave: Employees are entitled to up to 26 weeks of paid sick leave in accordance with the legal framework and medical certification.
• Maternity leave: Female employees receive 14 weeks of paid maternity leave. Eight weeks are taken after birth. The National Social Security Fund covers 50 per cent of the leave pay and the employer covers the remaining 50 per cent.
• Paid Public Holidays: Madagascar observes the following paid public holidays each year.
  • New Year’s Day
  • International Women’s Day
  • Martyrs’ Day
  • Labour Day
  • Easter Monday
  • Ascension Day
  • Whit Monday
  • Independence Day
  • Assumption Day
  • All Saints’ Day
  • Christmas Day
  • Eid al Fitr
  • Eid al Adha

7. Payroll Outsourcing in Madagascar

Payroll in Madagascar also encompasses termination and probationary periods law. Employees are not generally eligible for severance pay, except the termination is unjustified, or the employer voluntarily decides to make severance payment.

Collaborate with an Africa employer of record and payroll solutions provider such as Workforce Africa to strategically outsource your payroll operations while ensuring compliance with local labour regulations. Additionally, leverage our flexible service offerings to expand your international teams as needed.