Papua New Guinea makes for a great choice for foreign employers looking to grow their global footprint. The country offers an incredibly low cost of hiring and a location favorable for communications with parts of Asia and Australia. As the most linguistically diverse place on earth, its adoption of English also enables opportunities for international business development.
The Benefits of Hiring Remote Workers in Papua New Guinea
Lower Hiring Costs
As of 2023, the minimum wage in Papua New Guinea Kina (PGK) is 3.50 per hour. Corporate income tax for most non-resident companies is a flat rate of 48%. Employers must contribute to superannuation funds (retirement scheme) but will often also choose to include optional but common employee benefits. These might be housing and transportation, utilities, and cash allowances, among other benefits.
The country’s cost of living is 17.7% lower than the US’. In terms of overall payroll, the cost of hiring an employee in Papua New Guinea is about 1.2 times the base salary. Papua New Guinea offers an inexpensive cost of living while providing a very affordable cost of global hiring for foreign employers.
Not needing permanent establishment status to hire in Papua New Guinea results in reduced business expenditure. Remittance of taxes, including corporate if any, are handled by an EOR. A foreign employer would typically only be subject to taxes on payments such as service or commission fees. For this reason, among several, EOR is one of the most economical ways of global hiring.
Similar Work Culture
Home to over 850 languages, English is the country’s first official language, followed by Tok Pisin and Hiri Motu. This makes for convenient and seamless communication. Furthermore, the country’s business laws are based on English legal principles. As such, it’s easier for foreign companies to navigate the local work culture in global hiring.
Digital Transformation
Papua New Guinea is transforming its digital infrastructure through a multinational deal among several countries. The strategy aims to create local jobs and upskilling opportunities. These initiatives are globalizing the local workforce and welcoming foreign employers.
Time Zone Proximity
Papua New Guinea is located northeast of Australia and shares similar work hours with some of Asia’s biggest economies. This makes it ideal for breaking into new Asian markets, all the while fostering ease of coordination and collaboration.
Shared Public Holidays
There are 11 public holidays in Papua New Guinea.
- January 1: New Year’s Day
- February 24: National Remembrance Day In Memory of Late Grand Chief Sir Michael Somare
- March/April: Good Friday
- March/April: Holy Saturday
- March/April: Easter Monday
- June 12: King Charles’ Birthday (formerly Queen Elizabeth II’s Birthday)
- July 23: National Remembrance Day
- August 26: National Repentance Day
- September 16: Independence Day
- December 25: Christmas Day
- December 26: Boxing Day
The similarity in public holidays with Europe and North America facilitates shared cultural understanding, work norms, and critically, collaboration.
Why Should You Hire Employees Using an Employer of Record?
A foreign company cannot hire employees in Papua New Guinea without permanent establishment (PE) status. Alternatively, companies can opt to use an Employer of Record (EOR) like Borderless for their global hiring needs.
Doing so through an EOR eliminates the need to set up an entity in Papua New Guinea. Instead, an EOR acts as a foreign company’s legal employer of record in the country of hire. An EOR hires, pays, structures compensation and benefits, and manages employees. On behalf of a foreign employer, it handles the majority of global hiring in adherence with local employment laws.
Manage Employees through a Global Employer of Record
There are several areas of legal compliance that a foreign employer must meet when hiring employees in Papua New Guinea.
Employment Contracts
Under the Employment Act of Papua New Guinea, a verbal or written agreement are both valid contracts. Usually, employment contracts in Papua New Guinea are indefinite. A verbal contract and its labor provisions must be put into written record at the time the engagement of employment begins. This requirement is to ensure that employees clearly understand the statutory conditions of their employment.
For this reason, foreign employers are strongly encouraged to put an employment relationship in a written contract from day one. This will ensure compliance and establish expectations.
Guidance on benefits from an EOR like Borderless assists in creating packages that comply with evolving labor regulations.
Paid Leaves
Upon one year of employment, an employee is entitled to 14 consecutive days of paid time off known as recreation leave. Agreed between an employer and employee, unused leave can accrue to four years’ worth for any period of continuous service. Upon six months of employment, an employee is also entitled to fully paid sick leave for six days. Likewise, unused sick leave may be accumulated to a maximum of 18 days.
Fully paid maternity leave includes the period necessary for hospitalization prior to delivery and the six weeks that follow. An additional four weeks may be granted if the employee is sick and unable to work. An employee may convert their recreation or sick leave credits into paid maternity leave; otherwise, additional maternity leave is unpaid.
An EOR like Borderless can ensure clarity pertaining to each type of leave entitlement, helping you fulfill your employer responsibility in global hiring.
Contributions to Employee Superannuation
Papua New Guinea does not have a social security system. Instead, employers and staff make compulsory contributions to superannuation funds, the country’s main form of retirement savings for employees. Calculated as a percentage of base salary, an after-tax contribution of 6% by employees is employer-withheld. The employer contributes another 8.4%.
An EOR like Borderless will provide the most up-to-date information on mandatory employer payments specific to the country.
Overtime
Standard working hours are eight hours per day and 40 hours per week from Monday to Friday. Shift workers work at any time during any day to a maximum of 44 hours per week. Any hours in excess of these regular hours are considered overtime. 12 hours per day is the total limit of work hours including overtime.
An employer may require a reasonable amount of overtime for employers of both types. Overtime carried out from Monday to Saturday is compensated at 1.5 times the base salary. On Sundays or public holidays, overtime is compensated at double the base wage. In addition to twice the pay, employees get equivalent time off for working on Good Friday and Christmas Day.
Other Employer Responsibilities
In Papua New Guinea, there are no laws regarding probationary periods. When it comes to separation, either party can terminate the relationship at any time, with or without notice. In either case, severance pay, detailed under individual employment contracts, may be required.
An EOR like Borderless can ensure that you meet your employer obligations in the event of separation in employment.
Choosing the Right EOR for Your Business
There are several key considerations for employers to make the most informed decisions in choosing the best EOR for global hiring.
- Geographic coverage: Make sure that your EOR of choice can legally operate in Papua New Guinea.
- Employment services: The suite of employment services offered by a competitive EOR should cover hiring, onboarding, payroll, benefits, and HR management.
- Reputation: When selecting an EOR, get a sense of its past work and experience. Make sure that it has a great track record and the local know-how to bring you value add.
- Cost: A high-value EOR’s pricing should be transparent and reasonable.
- Flexibility: An EOR should offer customized employment solutions to meet your specific needs and requirements.
Overall, foreign employers should choose an EOR that can provide cost-effective, reliable, and compliance-first employment solutions. This will enable you to navigate and expand into foreign waters with confidence, ease, and trust.
An EOR Like Borderless Can Help
In over 170 countries, we are ready to help you hire, onboard, manage, and pay remote employees, wherever you are. Our experienced team of legal experts provides guidance on compliance and assists employers all over the world in navigating global hiring. Whichever country you choose to do business in, book a demo today and discover what Borderless can do for you.
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.
