What are Employee Benefits?
Employee benefits are additional perks companies offered to the employees’ apart from basic salary. These benefits can be monetary or non-monetary as decided by the company’s policy.
Companies add employee benefits to the employees’ compensation structure to increase job satisfaction. Tanzania’s compensation and benefits policy also helps employers retain the best talent and cut hiring and onboarding costs. Hence, your company should curate a comprehensive benefits policy that meets the needs of your employees in Tanzania.
There are several benefits provided to employees in Tanzania. The compensation structure in Tanzania includes minimum wages, maternity leaves, overtime pay, etc. Several labor laws define these benefits, and the companies must adhere to the regulations that drive Tanzania’s compensation and benefits policy.
This article will give all details regarding the benefits offered to employees in Tanzania.
Compensation Laws in Tanzania
Tanzanian labor laws play an instrumental role in deciding the compensation and benefits policy in Tanzania. It oversees employee and employer relations, supervises industrial disputes, enforces individual and collective agreements, and determines the minimum employee compensation policy in Tanzania.
The Tanzanian Constitution provides the right of association to all employees. This allows employees to form any union or join existing unions. According to the Employment and Labour Relations Act 2004, trade unions regulate the relations between employees and employers. The act allows freedom of collective bargaining wherein a formal agreement is formed on any labor-related issue by a registered trade union, an employer, or a registered employers’ association.
The laws of Tanzania help in determining the compensation package in Tanzania. However, these federal laws do not interfere with the collective agreements formed by trade unions and companies.
You need to adhere to the following while drafting a compensation structure in Tanzania:
The employees are entitled to a minimum salary based on their industry. The minimum wage ranges from TZS 40,000 to TZS 400,000 per month. No worker in Tanzania must be paid less than the minimum wage set by the government, which is a legal requirement. The Tanzanian government has the power to penalise employers who fail to pay the minimum wage.
The employees of Tanzania have a 45-hour work week where they are required to work 9 hours every day for six days. However, some employers might ask their employees to work a few additional hours based on the agreement. The overtime work hours can not exceed 12 hours a day or 50 hours in 4 weeks.
Employees who work beyond 12 hours a day and 50 hours in 4 weeks are entitled to overtime payments in Tanzania. The employer must compensate the employee 150% of their regular salary.
Additionally, if an employee is asked to work on a designated holiday, the employee must be compensated at 200% of the regular wage rate.
If you are employed in Tanzania, you can avail different types of leaves based on the reason for absence. Leave benefits in Tanzania include annual, sick, and holiday leaves depending on the requirement. You can take annual, sick, or holiday leaves based on your needs. Pregnant employees are entitled to maternity benefits in Tanzania during their pregnancy or after their child’s birth.
The employee compensation policy in Tanzania does not mandate payment of any annual bonus. However, employers might still choose to offer a yearly premium to their employees to keep them motivated.
Workers compensation fund
As per the Workers Compensation Act (revised 2015), there is an established workers’ compensation fund. The main aim of establishing this fund is to provide adequate compensation to employees in case of occupational injuries or cause of death to dependants. The funds in the Workers Compensation Fund consist of six contributions –
- Assessments paid by employers
- Other contributions made by employers under the Workers Compensation Act
- A penalty imposed under the act
- Interest on the investment of the funds
- Subvention by government
- Other legally acquired money
Severance Pay is provided under the Employment and Labour Relations Act of 2004 to any employee who has been terminated. If workers have served the employer for at least a year, they are eligible for severance pay. Severance pay in Tanzania is equal to at least seven days of the basic wage for each year of service that has been completed, up to a maximum of ten years.
However, employers won’t provide these benefits if the employee has been terminated for misconduct.
The Federal Laws of Tanzania also state that all employees must be treated fairly and equally irrespective of their nature of work and their relationship with the company.
How to Design an Employee Benefits Program for Employees in Tanzania?
Employee benefits in Tanzania form a vital part of an employee’s compensation structure. To create an effective benefits program, you must ensure that the benefits serve the employees at large and address any needs they might have.
You must follow the below steps to come up with the perfect compensation package in Tanzania:
Step 1: Establish clear goals and budget
Before designing the employee compensation policy in Tanzania, you must analyze the company’s financial statements. Decide on the budget you can keep aside for creating a benefits package for your company.
Once you have a budget allocated, plan out the perks you want to provide your employees. You must keep the following objectives in mind while finalizing the compensation and benefits in Tanzania:
- Complying with the federal and the local labor laws
- Identifying and onboarding prospective talent
- Working with the allocated budget
- Retaining your present employees
This will give you a direction in chalking out a structure for the compensation package in Tanzania that reflects employee and employer’s needs.
Step 2: Understand the needs of the employees and know the industry standards
Once you establish the objectives of drafting a benefits package, you need to survey your existing employees to understand the needs of your employees. These surveys will help you know the kind of benefits your employees need. If there is an existing plan, assessments will allow employers to understand what benefits employees use and determine the cost-saving design.
Employers can also conduct internal evaluations by getting input from their staff. To learn about the demands of the employees, they can conduct interviews and provide questionnaires. Employers can increase employee engagement and design a benefits package suitable for each employee.
The output of the surveys will help you get a better picture of:
- The kind of supplementary benefits the company must add to their employee compensation and benefits in Tanzania make the compensation package look attractive and better than their competitors.
- The kind of additional benefits that the employees want apart from the help that they are currently getting
Employers can use internal surveys and market research to understand the benefits that will help them draft better employee compensation policy in Tanzania.
Step 3: Curate a flexible compensation package
Once the assessment stage is done, employers should formulate flexible employee compensation and benefits in Tanzania. Different employees can have varied compensation structures. Hence, having flexibility while designing a benefits package is quite essential. Employees should have the option to choose the supplementary benefits they want in their compensation package. You can cut costs here as the employees tend to remove or not opt for benefits they don’t use.
Step 4: Describe the benefits program to prospective and current workers.
Effective communication is crucial to designing a well-planned compensation package in Tanzania. Employers can convey the understanding and wise use of the benefits provided.
Employers can demonstrate how much they value employees’ perspectives by incorporating their suggestions and maintaining open lines of communication throughout the process. It will foster a sense of appreciation and security among the entire workforce, foster productivity at work, and assist businesses in earning the trust of their staff.
Step 5: Assess the effectiveness of the package
Employers must conduct performance audits as a final step to understanding the effectiveness of the benefits package. This will enable them to determine whether the benefits package adequately addresses the relevant employee issues and whether any adjustments are required. To stay compliant and competitive, employers must continuously evaluate the workforce, economics, demography, and legislative landscape.
Types of Guaranteed Benefits in Tanzania
Several guaranteed benefits are offered via the compensation and benefits policy in Tanzania.
Tanzania is an employee-friendly company with no restrictions on forming trade unions and collective bargaining agreements. Some significant benefits that are a part of the workers’ compensation in Tanzania are:
Under the National Social Security Fund Act of 1997, employees can access full and partial pension payments. The employees in Tanzania receive occupational pensions only when they reach 60 years of age. They must have contributed at least 15 years to avail the regular pension amount.
If the employee retires before the prescribed date, the pension amount gets reduced by 3.6%.
Health insurance is a mandatory social security contribution in Tanzania. The employees contribute 3.5% of their basic pay towards health insurance. Even employers contribute the same amount towards the health insurance of all their employees.
Hence, a 7% contribution is made towards health insurance in Tanzania. These benefits include medicines for patients admitted to hospitals, charges of bedding, and outpatient care.
Tanzania has a very lenient sick leaves policy for all employees. An employee can avail of 126 days of paid sick leaves in 36 months. The employees will be paid at their regular wage rate for the first 63 sick leaves and, post that, at half of their regular salary.
However, employees need to provide a medical certificate to the employer to support their illness or injury.
In Tanzania, pregnant women can take a maternity leave of 84 days. However, if the employee is about to give birth to more than one child, they can avail themselves of maternity leave for 100 days.
The employees must inform the employer about their due date at least three months in advance.
Even fathers can take a 3-day paternal leave within the first week of the child’s birth.
Holidays and vacation
Employees in Tanzania are entitled to 28 days of consecutive leave every year. However, they must be employed for at least six months in the company to avail of these leaves.
Also, there are 15 public holidays in Tanzania, and the employees are not required during the public designated holidays.
If the employee has to work beyond the regular hours, there should be a mutual agreement between the employer and the employee.
Additionally, overtime is only permitted for 50 hours during four weeks and is compensated at a rate at least 150% higher than the ordinary wage. The pay rate is 200 percent of the regular pay for work done on holidays.
Employee Benefits for Expatriates
Tanzania is a lucrative business destination for people who are looking for jobs. Health coverage, flexible leaves, etc., can be availed by all employees irrespective of nationality.
Other benefits that are offered to ex-pats as per the compensation package in Tanzania are:
- Relocation benefits
- National Social Security Fund (NSSF)
- Retirement benefits
How are Employee Benefits Taxed in Tanzania?
The employer makes about 15% contribution to the social security accounts in Tanzania. The employees contribute 10% of their income to the National Social Security Fund. The grants cover some mandatory benefits like skill development, workers’ compensation fund, and other benefits that are a part of the employee compensation package in Tanzania.
Foreign employers in Tanzania without private equity must register to pay social security obligations. They may also arrange with their staff the latter pay and submit payments every month.
Also, the benefits are taxed at standard prevailing rates in Tanzania. Tanzania follows a progressive tax system where the tax rate applicable increases with the increase in income. The employee income tax ranges from 0% to 30%, and the benefits are taxed based on income level.
Restrictions for Tanzania Benefits and Compensation
The Government of Tanzania places restrictions on the minimum wages paid by employers. Industry-specific minimum wages range from 40,000 Tanzanian Shillings (TZS) for domestic workers to 400,000 TZS for businesses engaged in financial services, telecommunication, and international trade.
Employers should also stick to the working hours prescribed by the federal laws of Tanzania. However, employees who work beyond the regular hours must be compensated at 150% of the standard wage rate.
However, there are no provisions for paying annual bonuses to the employees in Tanzania. The employers may pay the employees a premium if they have the required budget.
Supplemental Benefits for Employees in Tanzania
The employees are also entitled to some supplemental benefits in Tanzania. These benefits are generally included in the compensation package in Tanzania. Some of these significant perks include:
- Private health insurance
- Dependents and survivor’s benefits
- Invalidity benefits
How Can Multiplier Help with Benefits Management in Tanzania?
Employers frequently encounter difficulties developing compensation and benefits policies in Tanzania because of the country’s strong labor union tradition. This is considerably more difficult for foreign employers unfamiliar with local company laws and regulations.
A global EOR like Multiplier can assist overseas firms in navigating the challenges of hiring and managing employees. In addition to payroll and managing a foreign team, our specialists can assist you in Tanzania in creating compensation and benefit plans that adhere to industry standards. We may even help you hire talent in Tanzania without opening a subsidiary. As a result, you can focus on new markets, establish companies abroad, and hire talent for less money.