Payroll in Maldives: Comprehensive Guide to Payroll Management

Maldives is a favorable country for foreign investment due to its dynamic private business sector, liberal trade environment, healthy and educated young population, stable and transparent legal system, and current tax system supported with legal protection for foreign investments. The World Bank categorizes Maldives as an upper-middle income economy, making it one of the suitable locations to begin a business.

Companies planning to set up a business in the Maldives should be aware of the local rules and regulations stated by the Maldives government. This helps administer payroll in Maldives and brings in a skilled workforce. Moreover, for efficient company operations, companies must comprehend corporate tax laws, tax systems, salary structure, payroll cycle, entitlement and termination terms, and social security contributions for efficient company operations.

Understanding how to efficiently manage the onboarding process, including the Maldives payroll process, helps you attract, recruit, and retain the best workforce in the country. You should profoundly understand payroll tax in Maldives and labor requirements to create error-free and compliant payroll. The following guide explains all facets you should know about payroll in Maldives.

How Is Payroll Calculated in Maldives?

Payroll refers to the total compensation paid by the employer to employees for their services over a definite duration. Maldives’ payroll policies and procedures work on releasing payment and tracking employees’ total working hours. Maintaining record-keeping is essential to guarantee error-free payroll calculation. Furthermore, you should withdraw social security contributions and other appropriate deductions by conforming to payroll rules and regulations in the Maldives.

You can calculate payroll using the below formula:

Net Salary = Gross Salary – Gross Deductions

here,

Gross Salary = Basic Salary + Bonus + HRA + Reimbursements + All types of Allowances + Arrears

and

Gross Deductions = Income Tax + Professional Tax + Leave adjustments + Public Provident Fund + Loan repayments (if any) + Insurance

Important Elements of Salary Structure in Maldives

The following section explains the elements that form the salary structure in Maldives:

Cost to Company (CTC)

The CTC shows an annual amount payable by a company when hiring an employee. It involves factors like gross remuneration, the employee’s net remuneration, supplementary benefits, and payroll deductions in the Maldives.

Gross salary

Gross salary denotes the amount of salary after computing all benefits. It includes components like social security contributions, health insurance, etc.

Net salary

It signifies the amount left after the employer has calculated all relevant deductions from the gross salary. This amount is credited to the employee’s bank accounts.

Basic salary

It denotes the amount employees receive after all deductions and additions are calculated from the annual package. It also considers the employer’s business undertakings and the employee’s job designation.

Allowances

The allowances include the employment expenses payable by employers to their employees. Irrespective of the industry and the employer, all employees are entitled to allowances.

How to Set Up a Payroll in Maldives

Companies can set up payroll in the Maldives by following the steps below:

• Step 1: Collect all the essential employee information like their personal information (name, postal address, date of birth, passports, bank statements, and evidence of health insurance coverage) to calculate the payment amounts of each employee correctly.
• Step 2: Establish a legal entity to process a payroll in Maldives.
• Step 3: Select a company name for which you require a company name registration form, the approval form of the name search application, the Company’s Articles of Association, a copy of the memorandum, and a letter of acceptance from the company secretary and directors. These documents must be submitted to the Register of Companies.
• Step 4: Under the Company Act 1996, you must register your business with the Ministry of Economic Development and apply for a business ID.
• Step 5: Register for the national tax number, labor and tax registration, severance fund, and Tax Identification Number (TIN).
• Step 6: Register your employees and company with the Maldives Retirement Pension Scheme (MRPS) through the Koshaaru portal for social security registration.
• Step 7: Open a Maldives bank account with a local bank to disburse all payroll-related payments to the authorities and the employees. You will require a business registration certificate, court and registration information, articles of association and/or the certificate of incorporation, proof of health insurance registry, statistical number, etc., before your business bank account receives approval.
• Step 8: Confirm the employee payroll amount.
• Step 9: Approve the payroll cycle and payroll structure for your company.

A Step-by-step Process of Payroll Processing in Maldives

The processing of payroll in Maldives involves different stages, as discussed below.

1. Pre-payroll stage

The mandatory components involved in processing payroll and payments are described in the following section:

Business profile

1. Your business must be registered as a legal entity. The Ministry of Economic Development handles the business registration process, and provides you with a unique business number.

2. You should specify this unique business number on all formal payroll communications.

Statutory components

They denote the existing and newly formulated statutory compensation laws and regulations that benefit employees with salary and leave entitlements.

Attendance policy

It helps you calculate overtime, permissions, standard and special attendance, and more.

Salary components

It considers different factors affecting salary calculation, i.e., allowances, deductions, leave types, and payroll tax in Maldives.

Payment schedule

1. It specifies a fixed payment schedule to release salaries and avoids payment delays.

2. This component keeps employees aware of when they will receive their monthly payments.

Employee details

1. Collecting the personal and professional details of all your employees is important to accurately disburse salaries.

2. You must enter these details within the payroll system to begin the payroll processing.

2. Payroll calculation stage

In this stage, the data collated from the previous stage is entered into the payroll system. You must calculate taxes and deductions and track working hours. Next, calculate employees’ net salaries and print pay slips to guarantee the payroll process is accurate.

You must calculate and maintain payroll records via an automatic or conventional paper-based method. So, you can timely process employees’ payments and simplify the compliance and reporting processes.

3. Post-payroll stage

Statutory compliance

1. The payroll administrator should strictly follow statutory compliances while processing payroll.

2. Various deductions like ESI (Employees’ State Insurance), TDS (Tax Deducted at Source), EPF (Employees’ Provident Fund), and more should be deducted during this stage.

3. These deductions should be financed by the relevant government bodies/authorities.

Payroll accounting

It tracks payments and payroll-related expenses through which you can meet payroll reporting and compliance requirements.

Payroll reporting and compliance

1. You should prepare all obligatory compliance and reporting forms to send to local regulatory authorities.

2. The component also specifies that you must fill in all compensation, withholdings, contributions, and other information being asked in your reporting and compliance forms.

Payroll Contributions

Based on the salary, employees and employers should contribute to social security in Maldives to meet the Maldives payroll requirements.

Employer contribution

The employer should make 7% of the social security contribution.

Employee contribution

The employee should make 7% of the social security contribution.

Employee Income Tax

Payroll Cycle

The payroll cycle is in the Maldives monthly. The payment can be released daily, weekly, bi-weekly, or monthly for temporary employees based on the employee-employer contract.

Maldives Payroll Options for Companies

According to their requirements and available capital, employers can choose one of the suitable options to process payroll in Maldives. The below section discusses different HR payroll Maldives options.

• Internal payroll: Generally, the already-established large companies can select this HR payroll Maldives option. They dedicate the whole HR staff to operating the company’s payroll procedures. They process the payroll for foreign and local employees. Moreover, they must complete incorporation, register the business, and hire a talented workforce. An experienced HR should oversee payroll in the Maldives and fulfill all withholding, tax, and payroll-related requirements.
• Remote payroll: This HR payroll Maldives option in the Maldives payroll guide indicates that combining a remote payroll and your payroll company can streamline payroll processing in the country. Here, the remote payroll will compensate the employees.
• A Maldives payroll processing company: You should comprehensively study the market if you aim to use this option of the Maldives payroll guide. It states that you need to use a trustworthy and experienced payroll processing company that is  well-versed in setting up payroll and the payroll rules and regulations in Maldives.
• Maldives payroll outsourcing: It presents an easy, flexible, and cost-effective method of managing payroll in Maldives. Companies can collaborate with a global PEO service provider like Multiplier, which administers all the elements of the Maldives payroll process, including and validates the relevant processes to fulfill Maldives payroll requirements.

Entitlement and Termination Terms

Entitlement terms in Maldives

The below section discusses the statutory benefits provided to employees in Maldives.

Paid time off

1. Employees who have completed a year of employment are entitled to paid annual leave of 30 days.

2. It should be taken within 12 months of completing the 1-year mark.

3. It can’t be accumulated and transferred to the next year.

4. An annual leave entitlement for which the employer didn’t pay the employee shall be paid before the employment termination.

Sick leave

1. Employees in the Maldives get up to 30 days of sick leave.

2. The employer may ask employees to present a valid medical certificate from a medical practitioner before approving the sick leave. This is valid upon using the 15 days’ medical leave without presenting a medical certificate.

3. Employees who are ill for two successive days or less can take medical leave without having to offer a medical certificate for 15 out of the 30 days of the medical leave.

Maternity leave

1. All pregnant employees in the Maldives are entitled to maternity leave of 60 days depending on a medical certificate (provided by a licensed medical practitioner) stipulating the estimated date of delivery.

2. All female government employees are entitled to paid maternity leave of 6 months.

3. An employee who submits a medical certificate (about the inability to resume work) from a licensed medical practitioner can get an additional 28 days’ leave. Its employer’s decision is whether to pay during this additional leave period.

Paternity leave

A male employee can get up to three days of paid leave in case of the birth of his child.

Public holidays

The employees in Maldives get 20 public holidays per year. These holidays are listed below:

Termination terms in Maldives

• Factors like the type of contract, the cause for termination, and the Collective Agreement or the Employment Agreement determine the termination procedure in the Maldives.
• The employee, too, can terminate the contract by providing notice to the employer.
• The notice period depends on the mutual agreement between the employee and employer.
• The probation period is up to 3 months. Either party can terminate the employment during this period without giving any notice.
• The notice period for any temporary or permanent employment in the Maldives depends on the employee’s duration of service. It is stated below:

• The termination notice must be written and sent to respective governmental authorities.
• The employment can be terminated without notice if the employee’s wages and other benefits for the stated notice period (from the date of commencement to the date of termination of the notice period) have been paid in place of notice.

Maldives Payroll Processing Company

An in-depth understanding of local tax, reporting, employment, and compensation requirements is essential for foreign investors to oversee timely, accurate, and compliant payroll in the Maldives. They should be familiar with compliance with the Maldives’ Labor and local employment laws before establishing payroll in Maldives. You can use services from a worldwide PEO company like Multiplier to attain the optimum advantages of payroll rules and regulations in Maldives.

How Can Multiplier Help with Global Payroll?

The payroll management system in Maldives supervises various payroll-related factors ranging from payroll calculation to entitlement and termination terms. The businesses may not prefer to autonomously handle the payroll process because it is laborious. You can use the service from a worldwide PEO platform like Multiplier to conveniently complete the Maldives payroll process.

Multiplier is a prestigious EOR solutions platform that manages payroll processing and all other relevant tasks. Besides, we provide one-click payroll for global teams with payments released in local currency.