Managing payroll in Tanzania is a critical function for businesses looking to operate compliantly and efficiently in Tanzania. Whether you are a local startup or a foreign investor expanding into East Africa, understanding payroll laws, taxation, and employment policies is essential.
This guide provides a clear overview of payroll, from understanding the basics to setting up and managing payroll, calculating salaries, and employee benefits. It also highlights how Afrisetup can help simplify and streamline payroll operations.
Understanding Tanzania Payroll
Payroll in Tanzania involves calculating employee wages, deducting statutory taxes, and ensuring compliance with labor and tax laws. Employers must adhere to regulations set by the Tanzania Revenue Authority (TRA) and labor laws governing employment.
Key Components of Payroll in Tanzania:
- CTC (Cost to Company) – Total cost an employer spends on an employee. It includes gross salary plus additional employer costs, such as benefits and statutory contributions.
- Gross salary calculation – Total earnings before deductions, including basic salary, allowances, and bonuses.
- PAYE tax withholding – Income tax deducted from employee salaries under the Pay As You Earn system.
- Statutory deductions (NSSF/PSSSF, WCF, SDL) – Mandatory contributions to social security and employment-related funds.
- Net pay distribution – Final salary paid to employees after all taxes and deductions are applied.
- Allowances and benefits – Employers should clearly outline all allowances and benefits provided to employees, as many are taxable. Common allowances include; medical, meal, housing, transport, retirement benefits and entertainment.
- Bonuses – Bonuses are a regular part of many pay structures. Any annual bonuses should be included in the employee’s total compensation (CTC).
How to Set Up Payroll in Tanzania
Before setting up Tanzania payroll, a company typically needs to establish a local legal entity (subsidiary). This is a standard requirement for foreign businesses entering the market, as it enables compliance with local tax, labor, and statutory obligations.
However, businesses working with Afrisetup can simplify this process. Through Afrisetup’s local setup and employer of record services, companies can onboard employees and manage in Tanzania payroll without immediately going through the full subsidiary registration process. This helps businesses enter the market faster while staying compliant with local regulations.
With Afrisetup, companies can focus on operations while payroll, statutory filings, and employment compliance are handled locally and efficiently.
How to Calculate Payroll in Tanzania
Tanzania payroll must follow strict labour and tax regulations. Employers are required to maintain accurate records on employee details, wages, working hours, benefits, and statutory contributions.
When processing payroll, employers calculate gross salary, apply all required deductions, such as taxes and social contributions, and determine the final net pay. Key deductions must be correctly applied to ensure full compliance with local laws.
Here are a few key deductions employers should keep in mind when processing Tanzania payroll:
1. Tanzania Minimum Salary
As of 2026, the basic salary in Tanzania is TZS 80,000 per month, up from TZS 60,000 in 2025. For payroll purposes, employers must ensure salaries meet or exceed this level. Historically, minimum wages have ranged from about TZS 40,000 to TZS 80,000 per month.
2. Income tax (Tanzania PAYE)
PAYE (Pay As You Earn) is a tax deducted directly from an employee’s salary by the employer and remitted to the Tanzania Revenue Authority (TRA). The Tanzania tax rate for PAYE is progressive, meaning higher earners pay higher percentages:
Tanzania PAYE Rates
| Taxable Income (TZS – Monthly) | Tax on Excess (%) |
| 0 – 270,000 | 0% |
| 270,000 – 520,000 | 8% |
| 520,000 – 760,000 | 20% |
| 760,000 – 1,000,000 | 25% |
| 1,000,000 and above | 30% |
3. Value-added tax (VAT)
Tanzania applies a standard VAT rate of 18%. However, exports of goods and certain services are zero-rated.
4. Social security contributions
Employers contribute 20% of an employee’s basic salary to the National Social Security Fund (NSSF). This amount can be shared in different ways:
- 10% from the employer and 10% from the employee
- 15% from the employer and 5% from the employee
- 20% from the employer and no employee contribution
5. Workers’ compensation fund
Employers must pay a monthly workers’ compensation levy equal to 0.5% of employees’ cash earnings. A monthly return must also be submitted.
6. Skills and Development Levy (SDL)
Paid by employers (not deducted from employees) at 3.5% of total gross payroll, applicable to businesses with 10 or more employees.
Working Hours and Employee Benefits in Tanzania
Working hours in Tanzania
The standard workweek is six days, with up to 45 hours per week. A typical workday is nine hours, including an unpaid lunch break after five hours. Employees must have at least 12 hours of rest between shifts and cannot work more than six consecutive days. After six days, they are entitled to at least 24 hours of rest.
Overtime
There is no fixed statutory overtime rate, but any overtime must be agreed in writing between the employer and employee. Overtime is limited to a maximum of 50 hours within a four-week period.
Leave Days in Tanzania
- Annual leave: Employees are generally entitled to 28 days of paid annual leave, which may include public holidays taken during the leave period.
- Sick leave: With medical certification, employees can receive up to 126 days of paid sick leave within a 36-month cycle.
- Maternity leave: Female employees are entitled to at least 12 weeks (84 days) of paid maternity leave, or 100 days in the case of multiple births, within a 36-month period. If the child does not survive, the employee is still entitled to 84 days of paid leave.
- Paternity leave: Male employees are entitled to at least 3 days of paid paternity leave, to be taken within 7 days of the child’s birth, subject to reasonable proof.
- Public Holidays: If a public holiday falls on a weekend, the employer should provide the next working day as a substitute day off.
Public Holidays in Tanzania
| Holiday | Date |
| New Year’s Day | 12th January |
| Revolution Day | 12th January |
| Revolution Day | 7th February |
| Revolution Day | Varies (April) |
| Easter Monday | Varies (April) |
| Union Day | 26th April |
| Labour Day | 1st May |
| Eid al-Fitr | Varies (Islamic calendar) |
| Saba Saba Day | 7th July |
| Nane Nane Day | 8th August |
| Nyerere Day | 14th October |
| Prophet’s Birthday | Varies (Islamic calendar) |
| Independence Day | 9th December |
| Christmas Day | 25th December |
| Boxing Day | 26th December |
Termination and Severance in Tanzania
Termination in Tanzania
Notice periods vary depending on how long an employee has worked and their pay cycle. Within the first month of employment, one week’s notice is required. After that, weekly-paid employees are entitled to 4 days’ notice, while monthly-paid employees must receive 28 days’ notice before termination.
Severance pay
Employees qualify for severance pay after at least one year of continuous service. The payment is calculated at a minimum of 7 days’ basic wage for each completed year of service, up to a maximum of 10 years.
Visas and Work Permits
To employ a foreign worker in Tanzania, a Class B work permit must be obtained on behalf of the employee. The application is submitted using Form TIF.1 along with the required supporting documents.
The required documents include:
- Five passport-sized photos
- Birth certificate
- CV
- Academic certificates
- Proof of work experience
- Company organizational chart
- Job offer letter
- Draft employment contract
The Labour Department reviews the application and provides a recommendation to the Department of Immigration for final approval.
We provide full support with all work permit applications in Tanzania, assisting with the entire process of hiring and onboarding foreign employees.
Why Choose Afrisetup for Payroll in Tanzania
Managing Tanzania payroll can be challenging. Afrisetup simplifies the process for you. Here are the benefits of choosing us:
- Full compliance with Tanzanian tax laws and employment policies
- Accurate payroll processing, including PAYE and statutory deductions
- Time-saving solutions so you can focus on growing your business
- Expert local knowledge for smooth operations
- End-to-end support from company setup to payroll management
Afrisetup is especially valuable for international companies looking to enter Tanzania without navigating complex regulatory frameworks alone.
FAQs
Who pays PAYE in Tanzania?
PAYE (Pay-As-You-Earn) is a tax on employee income, but it is withheld and remitted by the employer. Employers are legally responsible for deducting the correct income tax from employees’ taxable salaries and paying it to the Tanzania Revenue Authority (TRA) each month on their behalf.
How much tax do you pay in Tanzania?
Tanzania applies a progressive income tax system with rates ranging from about 8% to 30% for individuals, depending on earnings. Companies are generally taxed at 30%, and withholding taxes range between 10% and 15%. Additional contributions, such as social security, also apply.
How much is VAT in Tanzania?
The standard Value Added Tax (VAT) rate in Mainland Tanzania is 18%. Some digital or electronic transactions may qualify for a reduced rate of 16%, while Zanzibar applies a standard rate of 15%, with higher rates for specific services like banking and telecommunications.
What is the tax system in Tanzania?
Tanzania uses a progressive tax system for individuals, with rates from around 8% to 30% depending on income level. Non-residents are typically taxed at a flat rate of 20% on income earned in the country. Employers also manage statutory deductions such as PAYE and social security contributions.
Conclusion
Payroll in Tanzania is more than just salary processing—it involves understanding tax laws, employment policies, and compliance requirements.
By leveraging expert services like Afrisetup, companies can simplify payroll operations, ensure compliance, and confidently expand into the Tanzanian market. Contact us today.