As many companies shift gears towards a remote-first work environment, employers are increasingly hiring international employees. Often, this is because countries like Madagascar offer skilled talent that provides value to your organization at a much lower cost than hiring in the United States or Canada.
Salaries are essential when budgeting for hires in Madagascar, but there are numerous other costs to consider. From overtime and severance, to social security contributions, hiring overseas employees requires more than calculating just your new employee’s wage.
Employers should also keep in mind supplementary benefits like coworking passes or coffee stipends. While this is completely optional, it may help with employee retention and satisfaction.
Overall, it can be challenging to determine total costs. This article will guide you through the costs of hiring employees in Madagascar.
Mandatory Costs
When hiring employees in Madagascar, you’ll need to consider numerous mandatory costs. These include wages, taxes, benefits, overtime pay, and severance pay. Adherence to these costs will ensure you are compliant with local labor laws and regulations.
Salary
The minimum wage in Madagascar for employees working outside the agricultural sector currently stands at MGA 185,654 — which is approximately USD $42.00 — per month. For workers in the tech industry, the wage increases. To recruit top talent, employers should consider offering a higher salary.
For instance, the average salary for IT administrators in Madagascar is approximately MGA 513,000 per month, which comes to around USD 116.00 per month.
That said, salaries remain considerably lower than the average salary in other countries like Canada or the United States.. Hiring employees from Madagascar can provide your company a pool of top talent at much lower costs.
Taxes and Benefits
When hiring employees from Madagascar, it’s essential to be aware of the mandatory taxes and contributions. Employers are required to pay 18% of an employee’s salary in payroll taxes, which goes to medical, retirement gratuity, and human resource contribution.
Paid Leave
Employees in Madagascar are entitled to take numerous types of paid leave. When it comes to annual paid time off, employees are entitled to 30 days, fully paid. Madagascar also has 13 paid public holidays, in which employees are not required to work.
Employers need to consider the cost of parental leave when hiring in Madagascar. New mothers are entitled to 14 weeks of fully paid maternity leave. However, it’s important for employers to be aware that they only need to pay 50% of the maternity leave — the other half is covered by social security.
Regarding sick leave, employers also need to be aware of additional costs they may face. Employees are entitled to five days of sick leave. However, it can be extended due to chronic illness. If this is the case, the employee’s wages are covered by social security.
Overtime Pay
The standard work week in Madagascar consists of eight hour days over a five day span. If an employee works under eight hours of overtime, they are to be paid 130% of their regular hourly wage. If they work over eight hours of overtime, they are entitled to 150% of their regular rate. So, when you hire an employee from Madagascar, keep in mind that your employee working overtime may be costly.
Severance Pay
Severance pay isn’t the norm in Madagascar, and there are very minimal legal requirements for employers to pay severance. Severance is only paid if they are terminated due to economic reasons. If that’s the case, then they are to receive 10 days wages for each year of service.
Supplemental Costs of Hiring Employees in Madagascar
In addition to statutory benefits, employers may also provide supplemental benefits. Offering additional benefits will help attract top talent, motivate staff, and increase retention.
Benefits
Making sure your new employees are happy and healthy is vital. You can support their health by offering a strong benefits package. While many employers choose to offer private health insurance for their employees, doing so comes at an extra cost.
The price will significantly vary depending on the type of private health insurance and coverage.
An EOR like Borderless will typically offer benefits packages. This will usually include medical, dental, vision, and life insurance along with a retirement savings plan.
Bonuses and Extras
Madagascar doesn’t have any mandatory bonuses. While the 13th month bonus is customary, it is not required of employers. Employers may also want to consider signing bonuses or performance-based bonuses to boost employee satisfaction. Additionally, employers may want to consider offering employees a lunch or coffee stipend.
Employers also need to take workspace costs into account when hiring employees in Madagascar. Since new hires will typically be working remotely, they’ll need to set up a home office or access a coworking space.
Providing a home office stipend can be hugely beneficial. It can go towards a company laptop, ergonomic office chairs, or antivirus software.
Coworking offices have become the go-to for many employers. Not only do coworking spaces provide employees with a designated space to work, but they also encourage collaboration and networking. The majority of coworking spaces are in the capital, Antananarivo. Le BOP, a popular coworking space in the city center, starts at MGA 200,000 per month, which is approximately USD 45.00. Similarly, SKIILLZ offers monthly memberships coming in around MGA 250,000 — USD 57.00.
Work With Borderless
Hiring employees in Madagascar may feel overwhelming, especially with so many different costs to be aware of. Working with an Employer of Record (EOR) can help take the stress out of global hiring and budgeting.
An EOR like Borderless will do the heavy lifting, guaranteeing that you compliantly hire and pay employees in Madagascar. To get started, book a demo today.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
