Navigating the labour laws governing employment practices is essential when running payroll in Malawi. However, building an in house compliance team may not be the most efficient way to manage your remote team’s payroll in Malawi.
Regardless of size, global companies need help to secure in country expertise for localised payroll services. This is where a partner like Workforce Africa adds value by helping global firms stay compliant when running payroll in Malawi, covering details such as:
- Salary computation requirements
- Tax and statutory deductions, including pension, PAYE, and employer levies
- Benefits administration such as medical cover, pensions, paid leave, and holiday pay
Workforce Africa simplifies hiring and payroll compliance for offshore talent management in Malawi. There is no need for a subsidiary or entity setup. From contracts and onboarding to taxes, payroll, and admin tasks, partnering with us as your payroll partner in Malawi helps you focus on growth.
Employment Contract Termination
In Malawi, employers can end a fixed term contract for business reasons, personal reasons, or worker misconduct reasons. Where misconduct is alleged, a warning should precede termination and the employee should be allowed to explain their actions. Other recognised reasons include disciplinary issues, breach of contract, poor performance, and incompetence.
Notice period
The notice period depends on pay frequency and length of service:
- For bi weekly payments: 30 days for employees with over five years of service, and 15 days for those under five years.
- For monthly payments: one month for employees of five or more years, two weeks for two to five years, and one week for less than two years.
- For daily or hourly payments: one month for five or more years, one week for six months to two years, 15 days for two to five years, and one day for less than six months.
Severance pay
- Less than one year of service: no severance pay.
- 1 to 5 years: two weeks’ pay per year.
- 6 to 10 years: three weeks’ pay per year.
- 11 years onwards: four weeks’ pay per year.
Malawi Country Overview
Payroll compliance in Malawi typically requires careful attention to working time rules, overtime premiums, statutory deductions (pension contributions, PAYE, and employer levies), leave entitlements, and documented termination processes aligned with notice and severance requirements.
Payroll Processing in Malawi
Local rules govern payroll processing, and each employee’s salary may be calculated differently. Due to compliance risk, payroll can become complex at scale. The typical phases include:
Pre payroll phase: Set compliant policies for employee set up, working time, leave, and documentation. Ensure contracts and HR policies align with Malawi requirements on working hours, leave, termination, and deductions.
Payroll calculation phase: Collect and validate inputs to compute base pay, allowances, overtime, and statutory deductions accurately, including pension and PAYE. Apply overtime premiums based on when overtime is worked.
Post payroll phase: Pay net salaries, remit statutory deductions and employer levies on time, administer benefits (including medical cover where provided), and maintain payroll records for audit readiness.
Payroll Components in Malawi
- Salary and minimum wage
- Overtime benefits
- Pension contributions
- PAYE and employer levies
- Paid leave entitlements
- Paid public holidays
- Termination, notice, and severance rules
Navigating Malawi Payroll Compliance
Salary and minimum wage:
Urban and rural general minimum wage is MWK 90,004 per month. Domestic workers minimum wage is MWK 52,000 per month.
Working hours:
The standard working hours mandated by law are 48 hours per week. An employer may only require or permit an employee to work up to six consecutive days without a rest period of at least 24 straight hours, taken on a customary rest day or a day agreed between the parties.
Overtime:
- Ordinary overtime: at least one and a half times the regular hourly wage.
- Overtime on a day off: at least twice the regular hourly wage.
- Overtime on a public holiday: at least twice the normal hourly rate.
National Pension Scheme (NPS):
- Employee contribution: minimum 5 percent of pensionable emoluments.
- Employer contribution: minimum 10 percent.
- Additional employer side charges may apply, including insurance (2.24 percent), administration (0.8 percent), and VAT (16.5 percent) included in the employer’s contribution.
Technical Entrepreneurial and Vocational Education and Training levy:
Employer levy of 1 percent of the employee’s gross salary, paid to the revenue authority.
PAYE (employment income tax):
Tax bands presented as:
- First MWK 100,000: 0 percent (exempt)
- Next MWK 350,000: 25 percent
- Next MWK 2,050,000: 30 percent
- Excess over MWK 2,500,000: 35 percent
Medical cover (common employer provided schemes):
Employers may provide medical insurance through schemes such as MASM and MedHealth, with scheme options covering different benefit levels.
Payroll Taxes:
| Taxes | Employer | Employee | Details |
|---|---|---|---|
| National Pension Scheme (NPS) | Minimum 10% plus stated charges | Minimum 5% | Statutory pension contributions based on pensionable emoluments. Employer side charges may apply as stated. |
| PAYE (Income Tax) | 0% | Variable | Progressive tax withheld at source using the stated MWK bands and rates. |
| TEVET levy | 1% of gross salary | 0% | Employer levy paid to the revenue authority on behalf of employees. |
Paid Leaves:
Annual leave: In many industries, standard practice for annual leave entitlement for middle management and below is typically 18 days, with variations possible based on length of service and management discretion.
Sick leave: After twelve months of continuous service, employees are entitled to at least four weeks of sick leave on full pay and an additional eight weeks on half pay annually.
Maternity leave: The minimum maternity leave entitlement is 8 weeks, and many companies provide a more generous practice of 3 months on full pay.
Paternity leave: 10 working days of paid paternity leave every 3 years.
Study leave: Standard practice allows eligible employees (minimum one year of continuous service) 10 days of paid study leave, with extensions subject to management discretion or company policy.
Bereavement or compassionate leave: Typically 10 days of paid leave per year where a close family member dies, with additional time often handled through annual leave or employer discretion.
Paid Public Holidays:
Observed holidays include:
- New Year’s Day: January 01
- John Chilembwe Day: January 15
- Martyr’s Day: March 3
- Good Friday: Friday before Easter
- Easter Monday: Monday after Easter
- Labour Day: May 1
- Kamuzu Day: May 12
- Eid al Fitr: date varies
- Independence Day: July 6
- Mother’s Day: October 15
- Christmas Day: December 25
- Boxing Day: December 26
Payroll Outsourcing in Malawi
Payroll in Malawi also encompasses probation rules, notice/severance entitlements, and multiple employer social charges. Employers should align contracts and policies with the Labour Code (e.g., probation, notice, severance, working time, leave) to avoid disputes and penalties.
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.