Understanding Payroll in Tanzania: What Global Companies Need to Know About Tanzania Payroll System
Oct 13, 2017 | Topic: Country Payroll
Tanzania is home to some of the most incredible wildlife in the world. From lions to wildebeests to rhinos, this African nation boasts a lot of advantages for adventure lovers. While 90% of the country’s 55.5 million people live in rural areas, Tanzania is slowly developing into a more industrial society and currently has a GDP of $47.5 billion.
Tanzania is heavily dependent on agriculture for its economy, along with mining, healthcare, and tourism. With more than a third of its people living in poverty, the government is welcoming foreign interests in their country with open arms. Certain industries are given major tax breaks for choosing to set up operations in Tanzania, with several incentives what can make international payroll easier for employers.
Companies are only allowed to register by visiting the major city of Dar es Salaam. Although you do not need a lawyer to visit the Registrar of Companies in the city, it is highly encouraged. Businesses can find information about registering and confirm their business name at the official website of the Business Registration and Licensing Authority. Companies will also need a notarized declaration of compliance and a Tax Identification Number through the Tanzania Revenue Authority (TRA.) Companies do not need to set up in-country bank accounts. However, due to transactional fees, few choose to conduct banking business from outside the country.
Employment Law & Employee Rights
Tanzanians operate on an 8-hour workday with a cap of 48 hours per week. Overtime is compensated at 150% of the salary for anything over 48 hours or 200% for working on a designated holiday or rest day. Rest periods are not required but are generally given based on employer wishes. Written contracts are required and must state basic job information (e.g., description, hours, location, etc.) as well as the duration of work. Temporary work and probationary periods are allowed, but the terms must be outlined before work begins. Any additional specifics may be done as an oral contract with the employee before beginning work.
Some workers in the country may be used to more casual working scenarios with seemingly few rules, but employers should note that there are set legal limits. Collective bargaining is allowed in Tanzania, although it's unclear just how often it's practiced. Employers and employees appear to negotiate terms directly if unions are formed. For the most part, employers should use the contact process to ensure expectations are clear.
Compensation & Severance
Minimum wage varies according to industry sector. For unskilled labor, the minimum wage is approximately €50 ($59, £45) per month, while those in higher positions are paid up to three times as much. Minimum wage rates are expected to change in the near future. For regular full-time employees, a mandatory 28 days of notice should be given for termination, unless they are being fired for criminal activity or negligence. Employee severance is seven days of wages for every year worked at the company. Employees are not entitled to severance if they worked less than one year.
Tax Requirements & Withholding
Tax law in Tanzania is fairly clear-cut, though the right payroll solution may differ from company to company. Residents of the country are taxed on a sliding scale, up to 30% of the total income for individuals. Those at the lower end of the earnings bracket pay 11%. Both employees and employers pay 10% for social security. Non-residents are taxed at a flat rate of 20% of their income. Payroll regulations usually mandate that these taxes are automatically withheld.
Businesses can expect to pay 30% for corporate taxes and must file an estimate of income report with the TRA within the first three months of business. However, Tanzania has altered this rate to accommodate certain businesses. Car, tractor or fishing boat manufacturers, for example, can expect to pay just 10% corporate tax for the first five years of operation.
Time Off & Paid Leave
According to Tanzanian law, employers are responsible for all paid time off for their employees. Once they have worked at a company for six months, employees are entitled to 28 days of paid annual leave and 17 government holidays. Holidays falling on a weekend day are not generally compensated. New mothers can expect up to 84 days of paid maternity leave, and up to 100 days off if they give birth to more than one child. Mothers can receive up to four maternity leave cycles. If they exceed this limit, they are still entitled to time off but it does not have to be paid. Tanzanians are also entitled to sick time and personal leave. As long as a worker can prove that they're no longer able to work, they can receive up to 126 days of sick time in an 18-month period.
|Date||Tanzania's Public Holiday Schedule|
|January 1st||New Year's Day|
|January 12th||Zanzibar Revolution Day|
|April 7th||Karume Day|
|Friday before Easter Sunday||Good Friday|
|Monday after Easter Monday||Easter Monday|
|April 26th||Union Day|
|May 1st||Labor Day|
|Last day of Ramadan||Eid ul-Fitr (End of Ramadan)|
|July 7th||Saba Saba Day|
|August 8th||Nane Nane (Farmer's) Day|
|September 1st||Eid El Haj - Sacrifice Feast|
|October 14th||Mwalimu Nyerere Day|
|December 1st||Maulid Day|
|December 9th||Independence Day|
|December 25th||Christmas Day|
|December 26th||Boxing Day|
A Country of Opportunity
Employers should take note that Tanzania is striving to make its way up as a business leader. By cutting corporate taxes for certain industries, this industrious nation is encouraging big business to adapt their strategies to a new type of economy. The future is likely full of changes for businesses and workers in Tanzania, making now a good time to get an experienced partner on your side. A third-party global payroll provider can be indispensable when employers are faced with navigating new tax or wage laws.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.