Navigating the complex labour laws governing employment practices is essential when running Malawi payroll. 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 service. This is where a partner like Workforce Africa provides significant value in supporting global firms to maintain compliance when handling payroll in Malawi, 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 Malawi. 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 Malawi will help you focus on growth for greater levels of success.
1. Work Permit required for Expats
Yes, foreign nationals are required to obtain a valid work permit to be employed in Liberia. Two main types are available:
- Temporary Employment Permit (TEP): Valid for 6 months and renewable up to two times.
- Employment Permit: Valid for 2 years and renewable without limitation.
2. Employment Contract Termination
In Malawi, either the employer or the employee may terminate a fixed-term employment contract for reasons such as misconduct, expiration of the contract, mutual agreement, cancellation, or judicial decision. Where termination occurs by mutual agreement, the terms must be documented in writing.
- Notice Period: The required notice period depends on the employee’s pay cycle. For employees paid monthly with five or more years of service, the notice period may be up to one month.
- Severance Pay: Employees are entitled to severance pay ranging from two to four weeks’ salary for each completed year of service beyond the first year.
3. Malawi Country Overview
The Republic of Malawi lies in East Africa. It is predominantly an English-speaking country. Two critical cities in Malawi are Lilongwe, the capital and the economic hub, and Blantyre. These urban centres act as transit points to ecotourism destinations. With a population exceeding 21.5 million people, Malawi offers competitive labour costs but enforces socialsecurity and skillsdevelopment levies rigorously.
In recent years, key industries experiencing growth include renewable energy and agriculture. Malawi boasts a market-based, diversified economy comprising construction, toursim, and services. Considerations such as the low labour cost and abundant natural resources make Malawi attractive for businesses seeking expansion opportunities.
Although Malawi 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 Malawi facilitates swift market entry. It manages all legal complexities associated with operations in the country.
4. Payroll Processing in Malawi
Local labour laws in Malawi 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: Companies must ensure accurate business documentation, define work location policies, and register employees with the National Pension Scheme (NPS) and TEVETA. Employers should confirm the correct wage category; urban, rural, or domestic, and tailor leave and work policies to align with Malawian standards. Compensation packages should also be standardised to reflect local payment cycles and norms.
- Payroll Calculation Phase: Involves gathering and validating input data to accurately calculate wages. During this phase, employers apply PAYE rates, NPS contributions (10% employer and 5% employee), the TEVETA 1% levy, and calculate overtime premiums. Automation and digital tools help reduce errors and improve efficiency.
- Post-payroll Phase: Employers finalise payments and meet all compliance requirements. This includes salary disbursement, submitting PAYE and TEVETA by the 14th of the following month, filing NPS before month-end, and reconciling leave balances. This phase ensures proper reporting and reduces the risk of penalties.
5. Payroll Components in Malawi
Here are some aspects comprehensively needed to navigate Malawi’s payroll compliance:
- Salary / wages
- Overtime premiums
- National Pension Scheme contributions
- TEVETA skillslevy
- PAYE
- Private medical insurance (common practice via MASM / MedHealth)
- Paid leave & public holidays
- Severance & end ofservice benefits
6. Navigating Malawi Payroll Compliance
Employment in Malawi is primarily governed by the Malawi’s Employment Act 2000, along with relevant provisions from other applicable laws and regulations. The Labor Law outlines critical aspects of payroll processing and compliance with crucial employment practices:
A. Salary/ Minimum Wage
The statutory minimum wage in Malawi is MWK 126,000 per month for general workers across the country.
B. Working hours
Standard working hours are 48 hours per week, limited to six consecutive working days. Overtime is compensated at 150% of the regular hourly rate for ordinary overtime and 200% for work done on rest days or public holidays.
C. Social Security Contribution
Employers are required to contribute 10% of the employee’s earnings to the national social security scheme, while employees contribute 5%.
D. Health Insurance Scheme
Employers are required to contribute 10% of the employee’s earnings to the national social security scheme, while employees contribute 5%.
E. Value Added Tax (VAT)
As of 2025, Malawi imposes a standard VAT rate of 16.5% and a corporate income tax rate of 30%.
F. Income Tax (PAYE):
Personal income is taxed progressively, with rates ranging from 0% to 35%, depending on the income level.
Taxable Income (MWK) Rate:
- 0 %: 0 – 150,000
- 25 %: 150,001 – 500,000
- 30 %: 500,001 – 2,550,000
- 35 %: 2,550,001 +
G. Payroll Taxes Summary
| Taxes | Contributions |
|---|---|
| National Pension Scheme Plus 2.24 % insurance & 0.8 % admin fees inside employer’s share. | Employer: 10% Employee: 5% |
| TEVETA Levy On gross payroll, payable monthly to MRA. | Employer: 1% Employee: 0% |
| Income Tax (PAYE) Employee pays income tax based on their earnings, with rates ranging from 0% – 35%. | Employer: 0% Employee: Variable |
H. Paid Leaves:
- Annual Leave: Employees are entitled to a minimum of 18 working days of paid annual leave after 12 months of continuous service.
- Sick Leave: Employees are eligible for up to 4 weeks of sick leave on full pay, followed by 8 weeks on half pay per year.
- Maternity Leave: The statutory minimum is 8 weeks of maternity leave, though many employers offer up to 3 months on full pay.
- Paternity Leave: Male employees are entitled to 10 paid days of paternity leave every three years.
- Study Leave: After one year of service, employees may take up to 10 paid days of study leave annually.
- Bereavement Leave: Employees are entitled to 10 paid days of leave in the event of the death of a close family member.
- Paid Public Holidays: In Malawi, the 12 paid holidays are as follows:
- New Year (1 Jan)
- John Chilembwe Day (15 Jan)
- Martyrs’ Day (3 Mar)
- Good Friday (Varies)
- Easter Monday (Varies)
- Labour Day (May 1)
- Eid Al-Fitr (Varies)
- Kamuzu Day (May 12)
- Independence Day (6 Jul)
- Mother’s Day (15 Oct)
- Christmas Day (25 Dec)
- Boxing Day (26 Dec)
7. Payroll Outsourcing in Malawi
Payroll in Malawi 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