Your guide to payroll in Malawi

Malawi’s employment law sets detailed rules around wages, severance, and benefits, making it essential to correctly structure payroll components, including allowances and in-kind benefits. 

Employers must keep up with frequent minimum wage adjustments issued through government gazettes, while also complying with statutory contributions such as the National Pension Scheme (10% employer and 5% employee) and PAYE tax requirements, which demand careful calculation and timely filings. Non-adherence to any of these requirements may lead to complications.

In such a scenario, partnering with an Employer of Record (EOR) like Payoneer Workforce Management can be beneficial, as it helps businesses navigate local regulations, manage payroll accurately, and handle statutory contributions and compliance requirements efficiently. Read on to know how an EOR can facilitate easy payroll management in Malawi. 

Malawi payroll: Wages and other payments

Partnering with an EOR can help you comply with Malawi’s laws regarding wages and other payments that employees are entitled to. 

Payroll cycle in Malawi

As in South Africa, employees in Malawi are paid on a monthly basis in MWK (Malawian Kwacha), usually on the last working day of a month. 

Minimum wages

According to the local legislation, there is no minimum wage in Malawi. 

Overtime pay

In Malawi, employees must not work more than 8 hours per day or 48 hours in a week. If an employee’s working hours exceed this threshold, it is considered overtime.

If your employee works overtime on a normal day, you must pay at least 1.5 times the employee’s regular hourly wage. If employees have to work overtime on holidays or other days off, they must be paid twice their regular hourly wage.

Sick pay

According to the employment laws in Malawi, permanent employees shall be given sick leave for a maximum of 90 days, during which they shall be entitled to receive half their salary. 

Maternity pay

A female employee in Malawi shall receive 2 months of paid maternity leave. During this period, the employee’s normal employment benefits and entitlements typically continue uninterrupted, and her period of employment is not considered to have been broken. 

Paternity pay

Your employees are entitled to paternity leave of at least 2 weeks, or 10 working days, once every 3 years. 

Severance pay

If you dissolve an employment contract on account of redundancy, incapacity, or lawfully terminate an employee without cause, you must pay severance. The severance amount depends on an employee’s period of service in the following ways: 

Payroll in Malawi: Contributions and deductions

You should have a clear idea of Malawi’s tax structure for the most accurate payroll processing of employees. 

Salary tax in Malawi 

You must withhold income tax in Malawi on a Pay As You Earn (PAYE) basis. The tax rates range progressively between 0% to 30%. 

Social security 

Malawi has a social security system for employees, with the National Pension Scheme operating as a contributory plan that safeguards their well-being. You have to contribute 10% of the employee’s pensionable earnings to this fund, and the employee contributes 5%.

Malawi payroll compliance best practices

When hiring talent, it is important to pay close attention to local payment regulations for accurate payroll management in Malawi.

Here are some key practices to keep in mind while managing employee payroll:

• Stay updated about Malawi’s current labor and payroll regulations.
• Maintain correct classification of employees, as misclassification can result in penalties.
• Comply with payslip requirements by providing employees with a detailed written salary statement that clearly outlines basic pay, deductions, and social security contributions in Malawi. 

Consider using Employer of Record solutions like Payoneer Workforce Management to simplify payroll processing while staying aligned with local laws, along with employee onboarding, benefits, time-off management, and more.

Your options for payroll services in Malawi

There are three ways in which you can engage, manage and pay talent in Malawi:

• By setting up a local entity: For companies looking forward to expanding into new countries, setting up a local entity helps strengthen their operations. This also makes it easy for businesses to communicate with the government services better, thereby helping them stay compliant.
  
  However, setting up a business in a new market is highly time-consuming, requires heavy administrative overhead and costs, making it unsuitable for quick market entry.
• By hiring freelancers or independent contractors: You may engage freelancers or independent contractors for short-term tasks, as they manage their own tax obligations, reducing your administrative responsibilities.
• Partnering with an EOR: Hiring in Malawi through an Employer of Record can help you streamline the process of hiring. An EOR makes it easy for you to navigate payroll compliance in Malawi, as it takes into consideration all the local laws regarding taxes, payments, deductions, and all other contributions that are required for accurate payment processing. 

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