Effortless Hiring in Tanzania

Employment Laws

The primary legislation governing employment practices in Tanzania is the Employment and Labour Relations Act, 2004. This act covers various aspects of employment, including hiring, working conditions, benefits, and termination procedures. It aims to protect the rights of employees while providing a framework for fair labor practices.

Onboarding Process

Employers typically require the following during the onboarding process:

• A valid identification document: This can be a national ID or passport.
• Taxpayer Identification Number (TIN): Necessary for tax purposes.
• Social Security registration: Employees must be registered with the relevant social security fund.
• Signed employment contract: This document should detail the terms and conditions of employment.

Types of Employment Contracts

1. Indefinite Contracts:

• These are permanent employment contracts with no specified end date. They provide employees with job security and full benefits as mandated by law.

2. Fixed-term Contracts:

• Employment for a specified period or task. These contracts automatically terminate upon completion of the specified duration or project.

3. Probationary Contracts:

• An initial period to assess an employee's suitability for the role, typically not exceeding 12 months. During this time, either party may terminate the contract with shorter notice requirements.

Payroll Frequency

Employees in Tanzania can be paid daily, weekly, bi-monthly, or monthly, depending on the employer's policy. However, it is required that employees receive their salary no later than the end of the month.

Minimum Wage

As of January 1, 2024, the minimum wage in Tanzania is set at TZS 100,000 per month. This rate varies by sector and occupation, with different minimum wages established for various industries.

Payroll Deductions

Employers are responsible for deducting and remitting several statutory contributions from employees' salaries:

1. Income Tax (PAYE):

• Tanzania employs a progressive income tax system with rates ranging from 0% to 30%, depending on income levels. The tax brackets are as follows:
• Up to TZS 1,620,000: 0%
• TZS 1,620,001 – TZS 4,320,000: 14%
• TZS 4,320,001 – TZS 6,480,000: 20%
• TZS 6,480,001 – TZS 8,640,000: 25%
• Above TZS 8,640,001: 30%

2. Social Security Contributions:

• Both employers and employees contribute 10% of the employee's gross salary to the National Social Security Fund (NSSF). This totals 20% when combined.

3. Skills Development Levy (SDL):

• Employers contribute 3.5% of the gross salary for skills development initiatives.

4. Workers Compensation Fund (WCF):

• Employers contribute 0.5% of the gross salary to cover workplace injuries and occupational diseases.

As a trusted Employer of Record (EOR), Cadana eliminates the complexity of payroll administration, saving businesses time and resources while ensuring compliance with Tanzanian labor laws.

Employee Income Tax

Tanzania employs a progressive income tax system for individuals, with the following tax brackets:

• Up to TZS 270,000: 0%
• TZS 270,001 – TZS 520,000: 8%
• TZS 520,001 – TZS 760,000: 20%
• TZS 760,001 – TZS 1,000,000: 25%
• Above TZS 1,000,000: 30%

This structure means that employees are taxed at increasing rates based on their income levels. Employers are responsible for withholding the appropriate tax amount from employees' salaries and remitting it to the Tanzania Revenue Authority (TRA).

Employer Contributions

In addition to employee income tax deductions, employers must make several statutory contributions:

1. National Social Security Fund (NSSF):

• Employers contribute 10% of the employee's gross salary to the NSSF. Employees also contribute an equal amount, resulting in a total contribution of 20%.

2. Skills Development Levy (SDL):

• Employers contribute 3.5% of the gross salary for skills development initiatives aimed at improving workforce skills.

3. Workers Compensation Fund (WCF):

• Employers are required to contribute 0.5% of the gross salary to cover workplace injuries and occupational diseases.

Types of Leave in Tanzania

1. Annual Leave

• Employees are entitled to 28 consecutive days of paid annual leave after every 12 months of continuous service. This leave is calculated based on the employee's basic wage.

2. Parental Leave

• Maternity Leave: Female employees are entitled to 84 days of paid maternity leave for a single birth and 100 days for multiple births. This leave allows mothers to recover and care for their newborns, with compensation provided during this period.

• Paternity Leave: Male employees are entitled to 3 days of paid paternity leave, which must be taken within 7 days of the child's birth. This benefit supports fathers in their initial responsibilities following the birth of their child.

3. Sick Leave

• Employees are entitled to a total of 126 days of sick leave over a 36-month cycle. The sick leave is structured as follows:
• The first 63 days are fully paid.
• The subsequent 63 days are paid at half salary.
• Employees must provide a medical certificate to qualify for sick leave benefits.

4. Public Holidays Tanzania observes a total of 15 public holidays annually, which include:

• New Year’s Day (January 1)
• Zanzibar Revolution Day (January 12)
• Good Friday (date varies)
• Easter Monday (date varies)
• Union Day (April 26)
• Labour Day (May 1)
• Saba Saba Day (July 7)
• Nane Nane Day (August 8)
• Mwalimu Nyerere Day (October 14)
• Independence Day (December 9)
• Christmas Day (December 25)
• Boxing Day (December 26)

Additionally, there are religious holidays that may vary based on lunar sightings, such as Eid al-Fitr and Eid al-Adha. If any public holiday falls on a weekend, it may be observed on the following weekday.

Mandatory Benefits

1. Social Security:

• Employers are required to contribute to the National Social Security Fund (NSSF), which covers pensions and other benefits for employees. Both employers and employees contribute 10% of the employee's gross salary, totaling 20%.

2. Workers Compensation:

• Employers must provide coverage for workplace injuries through the Workers Compensation Fund (WCF). This fund compensates employees who suffer injuries or diseases related to their work.

3. Health Insurance:

• While not mandatory, many employers provide health insurance benefits. However, recent legislation under the Universal Health Insurance Act mandates that all residents, including employees, must have at least a minimum level of health insurance. Employers are encouraged to facilitate this coverage for their employees.

Supplemental Benefits

Employers may offer additional benefits to attract and retain talent, which can include:

• Housing Allowances: Financial assistance for housing costs.
• Transportation Allowances: Support for commuting expenses.
• Performance Bonuses: Incentives based on employee performance.
• Meal Vouchers: Assistance with food costs.
• Company Cell Phones and Data Allowances: Providing employees with communication tools.

Process

Termination of employment in Tanzania must be based on valid reasons, which can include:

• Misconduct: Termination due to employee misconduct requires a proper disciplinary process.
• Incapacity: If an employee is unable to perform their duties due to health issues or other incapacity.
• Operational Requirements: This often includes retrenchment due to economic reasons or organizational restructuring.

Employers are required to provide a written notice stating the reason for termination and the termination date.

Notice Period

The length of the notice period varies depending on the employee's service duration and payment structure:

• First month of service: 7 days' notice.
• Daily or weekly paid employees: 4 days' notice.
• Monthly paid employees: 28 days' notice.

Severance Pay

Employees are eligible for severance pay after completing 12 months of service, calculated at:

• 7 days' pay for each completed year of service, with a maximum entitlement for up to 10 years. For example, if an employee has served for 5 years, their severance pay would be calculated as 5 weeks' worth of salary.

Severance pay is not applicable if the termination is due to misconduct.