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 Mozambique, 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 Mozambique. 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 Mozambique will help you focus on growth for greater levels of success.

Employment Contract Termination

In compliance with Mozambican labor laws, employment contracts may be terminated by either party, provided that a minimum notice period of 30 days is observed, as outlined in the employment agreement. Termination may result from various causes, including redundancy, misconduct, or mutual consent. It is crucial that all termination procedures are properly followed to mitigate the risk of legal disputes or penalties.

Mozambique Country Overview

The Republic of Mozambique is located in Southeastern Africa, with Portuguese as its official language. Key urban centers include Maputo, the capital and principal economic hub, and Matola, an important industrial city adjacent to the capital. These cities serve as gateways to Mozambique’s renowned ecotourism sites and coastal resorts. With a population of over 35.6 million, Mozambique has a growing demographic profile; however, it remains primarily rural, with urbanization gradually increasing in recent years.

In recent years, Mozambique has seen notable growth in key sectors such as mining, particularly coal and natural gas, and agriculture. The country has a market-based and increasingly diversified economy, with emerging opportunities in tourism, renewable energy, and services. Competitive advantages such as low labor costs and abundant natural resources make Mozambique an appealing destination for businesses looking to expand in the region.

Although Mozambique 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 Mozambique facilitates swift market entry. It manages all legal complexities associated with operations in the country.

Payroll Processing in Mozambique

Local labour laws in Mozambique 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 Mozambique 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 Mozambique 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 Mozambique 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.

Payroll Components in Mozambique

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

• Salary/Wages
• Overtime benefits
• Social security contribution
• Paid leaves
• Paid holidays
• Payroll taxes
• Other laws

Navigating Mozambique Payroll Compliance

Mozambique’s employment regulations are primarily governed by Law No. 13/2023, which sets out key requirements for payroll processing and compliance:

Salary/Minimum Wage:

Mozambique operates a sector-based minimum wage system, meaning that minimum wage levels vary according to the economic sector of employment. For example:

• Agriculture, Livestock, and Forestry: MZN 5,800
• Industrial Fishing: MZN 6,220.75
• Extractive Industry – Large Mining Companies: Minimum wages may be higher, subject to specific agreements.

Working Hours:

Mozambican labor law sets the standard workweek at 48 hours.

• Overtime Limits: Employees are subject to restrictions on the number of overtime hours they can work:
  • Up to 8 hours per week
  • Up to 96 hours per quarter
  • Up to 200 hours per year
• Overtime Pay Rates: Overtime compensation varies based on when the extra hours are worked:
  • 150% of the regular hourly rate for overtime worked until 8:00 PM.
  • 200% of the regular hourly rate for overtime between 8:00 PM and the start of the next regular shift.
  • 200% of the regular hourly rate for overtime on Sundays, public holidays, or designated rest days.
• Social Security Contribution: Mozambique operates a mandatory social security system managed by the National Institute of Social Security (INSS).
  • Employers are required to contribute 4% of their employees’ monthly declared earnings.
  • Employees contribute 3% of their own monthly declared earnings.

Health Insurance

In Mozambique, employee health benefits are supported by a state-funded universal healthcare system. However, many employers opt to provide private medical insurance to ensure more comprehensive coverage for their employees.

• Corporate Tax Rate: 32%
• VAT Rate: 16%

Personal Income Tax

• 0 – MZN 42,000: 10%
• MZN 42,001 – 168,000: 15%
• MZN 168,001 – 504,000: 20%
• MZN 504,001 – 1,512,000: 25%
• Above MZN 1,512,001: 32%

Paid Leaves

• Annual Leave: Employees in Mozambique are entitled to paid annual leave, with the entitlement increasing based on their length of service:
  • First Year of Employment: Minimum of 12 days
  • Second Year and Beyond: Minimum of 30 days
• Sick Leave: Employees are entitled to 15 consecutive days of medical leave, as well as up to 5 additional non-consecutive days per quarter. These benefits are available under Mozambique’s social security system.
• Maternity Leave: Female employees are entitled to 90 calendar days of maternity leave. Of these, 60 days are covered by pay replacement from the National Social Security Institute (INSS), while the remaining 30 days may be taken for personal reasons, such as when a child is hospitalized.
• Paternity Leave: Male employees are generally entitled to 7 days of unpaid paternity leave. Additionally, some may be eligible for one day of paid paternity leave, typically taken immediately after the birth of the child.
• Paid Public Holidays: In Mozambique, the paid holidays are as follows:
  • New Year’s Day: January 01
  • Mozambique Heroes’ Day: February 3
  • Public Sector Holiday: April 2
  • Mozambique’s Women’s Day: Date varies
  • Workers’ Day: May 1
  • Independence Day: June 25
  • Lusaka Peace Agreement Day: September 7
  • Armed Forces Day: September 25
  • Peace and National Reconciliation Day: October 4
  • Maputo Day: November 10
  • Family Day / Christmas Day: December 25

Payroll Outsourcing in Mozambique

Payroll in Mozambique 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.