Brief on Tanzanian Labour Tax & Immigration Laws for companies seeking Human Resource (HR) and Staff Outsourcing Services in Tanzania
Tanzania is one of the five Countries making the East African Community. At 947,303 square kilometers, it is the largest Country with the highest population in East Africa. It borders Kenya to the North, Indian Ocean to the East, Zambia, Malawi and Mozambique to the South and Democratic Republic of Congo, Rwanda and Uganda to the West. It has the second largest economy at $23 billion after Kenya’s $36 billion in GDP.
This article summarizes important provisions on Tanzania Labour Immigration and Tax laws that international companies seeking to enter Tanzania Market need take note off.
Tanzania has some of the stringent Law laws for employers with a lot of regulatory employer obligations. The Country has a set of three main labour laws namely:
The Employment and Labour Relations Act of 2004 lays the standards of employment and labour relations in Tanzania.
The Act provides guidelines on the following principles;
a) Forms of employment
b) Prohibition against forced labour
c) Discrimination in employment
The following are important provisions;
Employment letters are a standard requirement under the law. According to the Tanzanian Employment and Labour Relations Act, it is mandatory that employment relationships lasting more than six (6) hours in a month whether on permanent contract, temporary, or otherwise, be in writing in form of either in a contract or statement of employment. The mandatory provisions of an employment statement or contract within the Tanzanian Labour Law include:
a) Name, age, permanent address and sex of the employee;
b) Place of recruitment;
c) Job description;
d) Date of commencement-
e) Form and duration of the contract;
f) Place of work;
g) Hours of work;
h) Remuneration, the method of its calculation, and details of any
i) Benefits or payments in kind
j) Any other prescribed matter.
Among other things, the contract of employment must expressly state the following;
It is also required that the letter advises the employee the location where they will be expected to render their services.
The total wage of the employee and any benefits must be clearly indicated in the employment letter. Employer is obliged to provide reasonable accommodation to employees near place of work but only for employees who may be required to work for long hours or take shorter daily and weekly breaks than those prescribed in law.
The employment letter must also clearly state the annual leave days. Employee who has served for at least 6 months is entitled to not less than 28 working days of leave with full pay after every twelve consecutive month’s service.
An employee who gets terminated after completion 6 or more consecutive months of service in any twelve month leave earning period is entitled to pro-rata leave. The employer may divide the leave to be taken at different intervals provided that one of the parts is for not less than 2 working weeks uninterrupted
Any outstanding leave must be taken within 18 months from the end of leave earning period. Pro rata leave is calculated at 2.3 days for every month worked
The law allows a probation period of maximum 6 months but can be extended for a maximum three months with a written reason. Should an employer wish to extend probation beyond six months, the reasons for the extension must be documented and the employee made aware of these reasons otherwise if at six months the employer is not comfortable with the performance of the employee, the law allows the employer to relieve the employee off their duties at this point since the probation period is meant to test suitability for both parties.
The notice period allowed is seven days or payment of seven days in lieu of notice from either party if contract terminated within one month and 28 days notice or 28 days pay in lieu of notice after one month.
According to the Employment and Labour Relations Act, the following are the official working hours and days;
a) Six days in any week;
b) 45 hours in any week; and
c) Nine hours in any day.
No employee can work for more than 5 hours without at a 60 minute break.
Hours and days exceeding this requirement are treated as overtime hours but in total no employee should work for more than 12 hours in a day meaning an employee can only wok a maximum of three hours overtime in a day. Overtime arrangements should also be with employee agreement and cannot exceed 50 hours in any four week cycle.
This is the final section of the employment letter that exhibits the declaration that the employee has read and understood the terms and conditions of the contract and employee agrees’ to the terms by signing the same.
No person under the Age of 18 years can be eligible for employment.
Pregnant women should also work at night and for a time exceeding two months to the expected delivery date and should not work at all for two months after delivery unless with their written consent.
This is paid for any time worked in excess of the normal weekly hours at 1.5 times the normal hourly rate for overtime worked in day time and an additional 5% of that rate for overtime worked at night. Should employees work on their rest day or public holiday they are to be compensated at 2 times the normal hourly rate.
Overtime can only be worked with written consent of the employee, and employer should not make an employee exceed 12 working hours a day. Employees who agree to work for 12 hours a day shall not be allowed to exceed 5 working days in a week or work for more than 45 hours a week.
Employees working at night are entitled to extra pay of 5% of hourly rate for number of hours worked at night
After confirmation, an employee shall be entitled to maximum of 126 days of sick leave in each leave cycle with 63 days on full pay and 63 days on half pay.
Employee must produce a medical certificate from a qualified medical practitioner to qualify for sick leave. Employee must notify his employer as soon as possible for such leave of his absence.
Female employees are entitled to 90 days of maternity leave against a medical certificate of pregnancy. Employee must give notice in writing of at least 3 months or a shorter period to employer if recommended by a medical practitioner.
The law gives the employee and employer the right to terminate a contract for various reasons. The major reason for termination of contract by the employer is employee discipline where the employer can demonstrate termination was done fairly and through a proper procedure.
Termination is considered fair if employer can demonstrate;
a) That the reason for the termination is valid;
b) That the reason is a fair reason
c) Termination is related to the employee’s conduct, capacity or compatibility;
Tanzania has a very strict definition of termination and employer shall be assumed to have terminated a contract without an express termination action for various reasons for example;
a) A termination by an employee because the employer made continued employment intolerable for the employee;
b) A failure to renew a fixed term contract on the same or similar terms if there was a reasonable expectation of renewal;
The following are not acceptable reasons for termination by employer;
a) Discloser of information that the employee is entitled or required to disclose to another person under this Act or any other law;
b) Failure or refusal to do anything that an employer may not lawfully permit or require the employee to do;
c) Exercise of any right conferred by agreement, this Act or any other law;
d) Belonging, to any trade union;
e) Participating in the lawful activities of a trade union, including a lawful strike;
f) For reasons related to pregnancy, disability, and that constitute discrimination under the Act.
This provides for the creation and management of all institutions dealing with labour including;
a) The Labour, Economics and Social Council
b) Commission for Mediation and Arbitration
c) Wage Boards
d) Office of the Commissioner for Labour
e) Labour Court
The act defines the modalities for appointment/formation and operations of the bodies, the functions, powers and limitations of powers.
The provides for the treatment and compensation of employees injured at the work place
The main provisions are;
a) Creates a worker’s compensation fund from which injured workers shall be treated or compensated from
b) Establishes mechanisms for the administration of the fund
c) Defines rights of workers to treatment and compensation and defines entitlements for treatment and compensation for all forms of injuries and disabilities
d) Defines obligations of employers o workers compensation
e) Sets the rate of contribution by employers at 1% for private sector and 0.5% for public sector employers. The rate is based on total employee compensation for all employees including day hire employees
In Tanzania every employee must pay income tax to Tanzania Revenue Authority (TRA) and contribute to a registered pension scheme. See how to pay tax below. So there are only two mandatory statutory deductions PAYE and pension.
On pension, employers can choose between public pension’s funds like NSSF and PPF LPF or join a privately managed pension scheme
Foreign nationals are allowed to work in Tanzania provided they have a resident permit issued under the Tanzanian Citizenship and Immigration Act the first step is to get a work permit from the Ministry of Labour and thereafter apply for Resident Permit from Department of Immigration. Once they have the resident and work permit they are now held liable to taxation.
Like other employees, expatriates are required to be a member of a registered Pension Scheme and make monthly contributions at 10% of basic pay as employee contribution with no employer obligation to top up. One can choose between public pension’s funds like NSSF and PPF LPF or join a privately managed pension scheme. All statutory deductions are made using the expatriates Passport Number or tax identification number (TIN) where available. It is not mandatory to obtain a TIN if the expatriate will not be involved in any other activities that are associated with any other taxes other than income tax (PAYE). However to pay other taxes like business income tax, VAT etc or pay other fees like driving license fees, annual motor license or own a motor vehicle, TIN is required and can be obtained against a passport with a valid entry permit/VISA.
Income tax is paid on a graduated scale dependent on employee’s level of income with a rate of between 10% and 30% with minimum taxable income being 170,000 Tanzanian Shillings
Expatriates who are on long stays in Tanzania are required to pay both income tax and pension contribution at the same rate like locals.
Income tax is paid on a graduated scale dependent on employee’s level of income with a rate of between 10% and 30%.
Pension contribution is 10% of income
Expatriates who come in as consultants are exempt from statutory deductions and are paid a net salary less taxes which the employer is responsible for deducting and remitting to Tanzania Revenue Authority. The employer bears the tax obligations.
This is chargeable on all services a company offers at the rate of 18% of the gross invoice amount. A business operating in TZ must register for VAT. Companies are required to collect VAT on behalf of the government and remit VAT within 30 days of the end of the month of business.
Failure to register, collect or remit VAT attracts compounded interest at 2.5% from the date it was due.
The law requires all employees to join a social security scheme. The rate of contribution for employed persons in the private sector including expatriates is 10% of their income but expatriates with mandatory social security in their home countries are exempted. The Contribution can be made to any registered pension scheme. Employers contribute 10%.
The National Social Security Fund is (NSSF) is the national social security provider and employers are required to join the national scheme unless they have alternative schemes registered by the Social Security Authority, the regulator for social security schemes in Tanzania.
Besides offering retirement and disability pension, NSSF also offers health care benefits but for minor treatment and procedures and therefore may not be adequate to meet all health care needs of employees.
The Tanzanian Law is silent on health care for employees may be based on the fact that health is a constitutional right in Tanzania and the government endeavors to make the public health care system affordable to all. While Tanzania has some of the best public hospitals in the region, the waiting times are too long for employees to be treated and resume work within a reasonable time.
Most medium to large private sector employers either run own medical scheme funded internally or insured but recently the National Hospital Insurance Fund (NHIF) that initially served public servants only has introduced medical covers for private sector. The contributions are 3% of basic by employee and 3% by employer total 6%
Expatriates coming into the country as employees or consultants are required to apply for a work permit to allow them engage in trade, prospecting, farming, business, professional employment or even reside in Kenya.
Work permits and special passes however are only issued upon an employer confirming to the immigration department that they are not able to get the skill sets required for a particular role with Kenyan candidates. Only then will a foreign national be issued with a work permit.
Work permits are issued by the Ministry of labour upon satisfying itself that the employer cannot get the targeted skills locally. The Work Permit allows the expatriate to work in Tanzania but not to reside in the Country and should be applied for while outside the Country.
Work permits are applied for by the employer by writing a letter of application indicating the duties to be performed, required qualifications and providing evidence the job cannot be filled locally
A nonrefundable fee of $ 100 is payable on application.
This is issued to those with Work or Investor permits allowing them to have long term residence in Tanzania
The General requirements for a Resident Pass include;
The fees payable is an application fee of $50 and a fee of $2000