The Employer of Record Malawi is rapidly becoming a vital solution for companies aiming to expand their operations in Malawi without the complexities of local employment laws. This flexible staffing option allows businesses to hire employees legally and efficiently while outsourcing compliance and administrative responsibilities.
This video explains what an EOR Malawi is, the Malawi Labor Laws, and why an EOR is essential.
What is an Employer of Record Malawi?
An EOR Malawi acts as a third-party organization that hires and manages employees on behalf of foreign companies operating in Malawi. This model is ideal for companies wanting to tap into the Malawian market without establishing a legal presence.
While the company manages their daily tasks, the EOR handles:
1. Hiring and Onboarding
2. Payroll Processing
3. Tax Compliance
4. Benefits Administration
5. Legal Compliance with Malawi labor laws.
Understanding the Employment Act Malawi
Malawi’s employment framework is primarily governed by the Employment Act Malawi 2021, and the broader Labour Act Malawi. These laws define the rights and duties of employers and employees, covering key areas such as employment contracts, wages, working hours, and termination procedures.
Whether hiring directly or through a Malawi employer of record, understanding the Malawi labor law is essential for legal compliance and promoting fair workplace practices.
1. The Malawi Minimum Wage
As of June 1, 2025, the revised minimum salary in Malawi is MWK 4,846.16 per day or MWK 126,000.16 per month for general workers. Domestic workers are entitled to MWK 2,800 per day or MWK 72,800.00 per month.
The government reviews and adjusts minimum wage rates at least once every three years, considering the cost of living, productivity, and economic conditions. Employers paying below the minimum wage may face fines of up to MWK 50,000 and imprisonment of up to 10 years.
2. Mandatory Employment Particulars
To ensure transparency and protect worker rights, every employer is legally required to provide a written statement of employment particulars. This document must be issued within one month of a new employee starting work, or within three months for employees already in service when the law came into effect.
The written statement must include the following details:
Full names of both the employee and the employer
The date the contract begins
Salary details and how it is calculated
Frequency of wage payments (e.g., weekly, monthly)
Description of job duties
Standard working hours
Termination clauses (if any, beyond what the Act stipulates)
Applicable disciplinary procedures
These requirements apply to all employers with five or more employees, as defined by the Act. Not only do they help ensure clarity in the employment relationship, but they also serve as legal protection in cases of disputes or audits.
3. Types of Employment Contracts in Malawi
In the Employment Act, all employment relationships must fall under one of the following contract
types:
Contract for an Unspecified Period:
This is an open-ended agreement, typically used for longterm employment with no predetermined end date.
Contract for a Specified Period:
This type of contract has a clearly defined start and end date, often used for seasonal or temporary roles.
Contract for a Specific Task:
Used when an employee is hired to complete a particular project or assignment, and the contract ends once the task is done.
4. Working Hours & Overtime in Malawi
Regular Hours:
The standard workweek is 48 hours. Employees may not work more than six consecutive days without a 24-hour rest period.
Daily Limits:
Employees working five days a week may work up to 12 hours per day; those working six days are limited to 8 hours per day.
Rest Periods:
At least 24 consecutive hours every six working days.
Overtime Pay:
Overtime is paid at 1.5 times the regular rate for extra hours on a working day, and twice the regular rate for work done on days off or public holidays.
Bonuses:
Usually performance-based and taxable.
5. Employee Leave & Benefits in Malawi
Annual Leave:
Employees are entitled to at least 18 working days of paid annual leave if they work six days a week, or 15 working days if they work five days a week. Leave must be taken within six months after it becomes due unless deferred by agreement.
Sick Leave:
Employees are entitled to a minimum of four weeks of fully paid sick leave and an additional eight weeks at half pay per year, after completing 12 months of continuous service. A valid medical certificate is required.
Maternity Leave:
Female employees are entitled to eight weeks of fully paid maternity leave once every three years. Standard employment benefits and seniority continue during this period.
Paternity Leave:
While not explicitly defined in the Employment Act, paternity leave may be granted based on employer policy or collective agreement.
Leave on Termination:
Upon termination, employees must be paid for any accrued but unused leave, calculated using their most recent wage.
Public Holidays:
Employees are entitled to paid leave on public holidays in Malawi. If required to work, they are paid at double the normal rate plus the day's wage.
Holiday
| Holiday | Dates |
| New Year's Day | January 1 |
| John Chilembwe Day | January 15 |
| Martyrs' Day | March 3 |
| Good Friday | April 18 |
| Easter Monday | April 21 |
| Labour Day | May 1 |
| President Kamuzu Banda's Birthday | May 14 |
| Eid al-Fitr (tentative) | March 31 |
| Eid al-Adha (tentative) | June 7 |
| Independence Day | July 6 |
| Mother's Day | October 15 |
| Christmas Day | December 25 |
| Boxing Day | December 26 |
6. Termination and Probation Guidelines in Malawi
Severance Pay in Malawi:
Severance is payable in cases of redundancy, economic restructuring, or unfair dismissal. Severance pay calculation in Malawi is based on completed years of service and current wage, with escalating benefits after five and ten years of employment.
Probation Period:
Skilled employees may undergo a probationary period of up to 12 months, during which either party can terminate employment without notice.
Termination of Employment:
Employment may end through notice, contract expiry, or task completion. Unspecified contracts require notice from either party. Fixed-term contracts end on the agreed date, while task-based contracts end when the job is done. Repeated use of fixed or task-based contracts for ongoing roles may be treated as permanent employment.
Notice for Termination:
In Malawi, notice periods vary by pay frequency and length of service. Bi-weekly employees must receive 15 days’ notice if employed for less than five years, or 30 days if over five years. Monthly-paid workers require one week’s notice for under two years, two weeks for two to five years, and one month if over five years. For daily or hourly workers, notice is one day if employed for under six months, one week for six months to two years, 15 days for two to five years, and one month if over five years.
Payment in Lieu of Notice:
Instead of serving a full notice period, either party can pay a sum equivalent to the remaining notice period. If an employee resigns without notice and the employer hasn't waived it, the employee must compensate the employer similarly.
Certificate of Termination:
Upon request, an employer must provide a termination certificate showing job title, duration, pay, and reason for termination.
Transfer of Employment:
An employee's contract cannot be transferred to another employer without their consent, unless the business is sold or merged. In such cases, all employment rights and obligations are automatically transferred to the new employer.
Death or Insolvency:
If an employer dies or becomes insolvent, contracts end one month later unless otherwise lawfully terminated sooner. Employee claims have priority over most other debts.
Disciplinary Actions and Dismissal:
Employers may issue written warnings, suspensions, or demotions; however, fines or wage deductions (except in specific cases like unauthorized absence or property damage) are generally not allowed. Employees have the right to contest unfair discipline through labor officers or courts.
7. Taxes, Payroll & Statutory Deductions in Malawi
Taxation in Malawi
Malawi’s taxation system, governed by the Taxation Act, covers all cash and non-cash income from sources within the country, including wages, services, capital gains, and exchange gains.
Residents are taxed at progressive rates up to 40%, while non-residents pay a flat 15%. Corporate tax ranges from 0% to 30%, depending on the industry and incorporation.
Payroll in Malawi
Setting Up Payroll:
Employers can manage payroll through an in-house payroll team, a local payroll provider, or a global payroll outsourcing service, such as Afrisetup, for simplified hiring, payroll, and compliance.
Payroll Cycle:
Wages must be paid at least once a week or every two weeks for employees paid hourly, daily, weekly, or by project, and at least once a month for employees paid monthly or annually.
Statutory Deductions in Malawi
PAYE (Pay As You Earn):
Employers are required to deduct income tax from employee salaries and remit it to the Malawi Revenue Authority (MRA) on time. For the 2024/2025 tax year in Malawi, PAYE income tax is applied progressively: the first MWK 100,000 is tax-free, income from MWK 100,001 to 300,000 is taxed at 25%, income from MWK 300,001 to 600,000 is taxed at 30%, 600,001 to 1,500,000 at 35%, and income above MWK 1,500,000 is taxed at 40%. Social Security: Employers contribute at least 10% and employees 5% of pensionable earnings to the mandatory national pension scheme. Payments must be made by the 14th of each month.
Fringe Benefits Tax (FBT):
Employers, except the government, must pay a flat 30% tax on the value of any non-cash benefits provided to employees, such as assets or services with personal value.
TEVET Levy:
Employers must contribute 1% of total annual basic pay to fund technical education and training. This is paid yearly, based on the previous year's payroll, along with a completed Employer Data Form.
Medical Scheme Contributions:
For companies using private medical schemes, costs are usually shared—commonly 75% by the employer and 25% by the employee, though this may vary.
Other Deductions:
Other deductions, such as SACCO loan repayments, salary advances, union dues, or welfare contributions, are made monthly based on employee agreements.
Note: Employers must maintain accurate payroll records, issue payslips, and adhere to wage and employment standards to avoid penalties. A Malawi Employer of Record, like Afrisetup, ensures compliance by managing payroll deductions for income tax, social security, and other required
contributions.
Why Choose Afrisetup as Your Employer of Record Malawi
Afrisetup helps businesses stay compliant and operate smoothly in Malawi. Here are the key benefits:
1. Local Expertise
We remain updated on Malawi's labor laws and ensure full legal compliance.
2. HR Support
We manage payroll, taxes, and employee admin so you can focus on your business.
3. Reduced Risk
We help avoid legal issues by handling all compliance requirements.
4. Cost-Effective
Save on building an in-house HR team by using our affordable EOR services.
5. Custom Solutions
Whether hiring one employee or many, we tailor services to fit your business.
6. Staff Training
We support your team with training and compliance education where needed.
FAQs: EOR Malawi
Severance pay in Malawi depends on how long an employee has worked. Employees get 2 weeks’ pay per year for 1–5 years of service, 3 weeks per year for 6–10 years, and 4 weeks per year for 11 or more
years of service.
Section 57(2) states that an employee cannot be dismissed for issues related to conduct or performance
without first being given a fair chance to respond to the allegations, unless it’s unreasonable to expect
the employer to do so.
For fixed-term contracts, the minimum notice period is 14 calendar days. For indefinite contracts, notice
depends on the pay cycle and must be given in writing by either the employer or employee.
If an employee is not receiving a pension, gratuity must be paid by the employer. It is calculated as 5% of
the employee’s monthly salary for each completed month of service.
Yes, gratuity is taxed as part of an employee’s income and is subject to PAYE, unless a government
employer pays it. Payments in lieu of leave are also taxed.
.
Terminal benefits are payments made to employees upon leaving a job. These are based on the
employee’s salary and length of service and may include severance, gratuity, and unused leave pay.
Malawi collects several taxes: PAYE, Provisional Tax, Fringe Benefit Tax, Withholding Tax, VAT, and
domestic excise. These apply to individuals and businesses based on income and transactions.
Employers must provide a written contract within three months of hiring. The contract must include job
details, hours, pay, benefits, and termination terms, as required by the Employment Act.
No, Malawi is not tax-free. All income earned in Malawi is taxable. Local companies pay 30% corporate
tax, while foreign branches are taxed at 35%
Conclusion
Implementing an employer of record Malawi provides a strategic advantage, especially for companies unfamiliar with local employment laws and tax obligations. By partnering with an experienced EOR, businesses can avoid pitfalls, ensure legal compliance, and focus on core activities while expanding their workforce efficiently. An EOR simplifies the process, reduces risks, and accelerates growth.
If you’re ready to explore how Afrisetup can benefit your operations, contact us today to get started.