Employer of record in Malawi

PAID TIME OFF

Annual Leave: Employees working six days per week are eligible for 18 days of paid annual leave after completing one year of service. Those on a five-day schedule are entitled to 15 days. This leave does not include weekends or public holidays. If an employee has been employed for less than a year, their leave is calculated on a pro-rata basis. Annual leave can be carried over or deferred through mutual agreement, and collective agreements may extend leave entitlements up to 30 days annually.

Sick Leave: After 12 months of continuous employment, workers qualify for 12 weeks of sick leave per year, provided a valid medical certificate is submitted. The first four weeks are fully paid, while the remaining eight weeks are paid at half the usual salary.

Maternity Leave: Female employees are entitled to eight weeks of fully paid maternity leave for every three years of employment. This leave may be extended in cases of pregnancy-related complications.

Paternity & Parental Leave: Malawian labor laws do not mandate paternity or parental leave.

Public Holidays: Employees are entitled to 13 paid public holidays each year.

Other Paid Leave: There is no statutory provision for additional types of paid leave in Malawi.

MANDATORY EMPLOYEE BENEFITS

Unemployment Insurance: There is no legal requirement for unemployment insurance or benefits.

Workers’ Compensation: Under Malawi’s Workers’ Compensation Act (Cap 55:03), employees are eligible for compensation if they suffer a work-related injury or illness, or if death results from such incidents. A Workers’ Compensation Fund ensures periodic payments during the compensation period, replacing the previous system of lump-sum employer liability.

Pension Contributions (National Pension Scheme): Employers are required to contribute at least 10% of employees’ pensionable income, while employees contribute a minimum of 5%. These contributions go to the National Pension Scheme, which mandates participation for all eligible employees.

Retirement: The minimum retirement age is 50, and the maximum is 70. To be eligible for an old-age pension, an employee must have at least 20 years of service. The pension amount has no cap, and eligibility applies equally to men and women.

Healthcare: Public healthcare services are available at no cost. Medical coverage through private providers is optional and may be offered by employers as a benefit.

PRIVATE EMPLOYEE BENEFITS

Private Compensation & Insurance
In addition to statutory coverage, private workers’ compensation, pension schemes, health insurance, and life insurance are available in Malawi and may be offered by employers to enhance employee benefits.

TAXATION

Tax Year: The fiscal year in Malawi runs from April 1 to March 31.

Tax Rates for Residents

Non-residents are taxed at a flat rate of 15%.

Taxation System: Malawi uses a progressive tax system based on income earned during the fiscal year. Taxes are calculated on actual earnings, and irregular income is assessed accordingly.

Double Taxation: Malawi has treaties in place to avoid double taxation with several countries.

Tax Residency: An individual is considered a tax resident if they stay in Malawi for 183 days or more within a year or hold a valid residence/employment permit.

Filing & Payment: PAYE deductions are submitted monthly by the employer. Business income tax returns must be filed within six months of the fiscal year-end. Quarterly provisional tax payments are also required for businesses.

PAYROLL

Payroll Frequency: There is no mandated payroll frequency in Malawi. Employers may choose weekly, biweekly, fortnightly, or monthly payroll cycles.

Components of Payroll

Payroll may include:

• Base salary
• Bonuses
• Overtime
• Allowances
• Taxable benefits
• Gratuities

Bonuses & Gratuities: Bonuses are included in taxable income. Gratuities from termination or settlements are taxed per revenue authority directives.

Allowances & Benefits: Allowable capital allowances include:

• Industrial buildings, staff housing, and equipment
• Motor vehicles and office furniture
• Computers and IT infrastructure

Fringe Benefits
These include employer-provided housing, vehicles, utilities, school fees, and domestic services. Fringe Benefits Tax (FBT) is paid by employers at 30% of the taxable value.

INVESTMENT & OTHER INCOME

Capital Gains: Gains are adjusted for inflation and taxed accordingly. Gains from personal assets or shares held on the Malawi Stock Exchange for over a year are exempt.

Dividends: Local dividends are subject to a 10% final withholding tax and must be declared to authorities within 30 days.

Interest & Royalties: Interest is taxed under the individual’s income bracket. Royalties are also taxed unless they are from mining projects paid to non-residents, which are taxed at 20%.

RETIREMENT & HEALTHCARE SYSTEM

Retirement Funding: The National Pension Scheme mandates contributions from both employees (5%) and employers (10%). Eligibility requires 20 years of service.

Healthcare System: Malawi’s healthcare system operates across four tiers:

• Community Level: Services by Health Surveillance Assistants (HSAs) in rural areas.
• Primary Level: Health centers serving approximately 10,000 residents.
• Secondary Level: District hospitals and church-run hospitals offering broader services.
• Tertiary Level: Central hospitals providing specialist and referral care, though many also offer basic services due to limited gatekeeping.