How to Use An Employer of Record in
Madagascar

Hiring in Madagascar requires navigating the Labour Code (Law No. 2003-044), which mandates written employment contracts with specific clauses, sets employer social security contributions at 13% through the Caisse Nationale de Prévoyance Sociale (CNaPS), and requires compliance with collective bargaining agreements that vary by sector and region. An Employer of Record in Madagascar enables you to hire employees immediately without establishing a local subsidiary, taking on all statutory obligations under Madagascar law while you retain full day-to-day management. The EOR removes the administrative burden of registering with CNaPS, the Direction Régionale du Travail, and the Office des Statuts Généraux des Travailleurs (OSIE), ensuring your employment contracts meet the mandatory language and content requirements from day one.

What Is an Employer of Record in Madagascar?

An Employer of Record in Madagascar is a third-party organisation that becomes the legal employer of your staff under Madagascar law, handling all statutory obligations, payroll, and compliance while you retain full operational control. The EOR holds the employment contract, registers employees with government authorities, and assumes responsibility for meeting all requirements under the Labour Code and sector-specific collective agreements. You continue to direct the employee's work, set objectives, manage performance, and make all business decisions.

Under Madagascar's Labour Code (Law No. 2003-044), every employment relationship must be governed by a written contract in French or Malagasy that includes mandatory clauses on job description, remuneration, working hours, and notice periods. Employers must also comply with collective bargaining agreements negotiated at national or regional level, which often set wage floors above the statutory minimum and define additional benefits. The EOR ensures your contracts include all required terms, calculates and withholds the Impôt sur les Revenus Salariaux et Assimilés (IRSA) at progressive rates up to 20%, and remits employer contributions of 13% to CNaPS and 1% to the workers' compensation fund OSIE.

The division of responsibility is clear. You retain day-to-day management, performance reviews, task assignment, and strategic decisions about the role. The EOR owns the employment contract, processes monthly payroll in Malagasy Ariary, files statutory declarations with CNaPS and the Direction Régionale du Travail, manages termination procedures including just cause documentation and severance calculations, and ensures ongoing compliance with all changes to Madagascar employment law.

How Does an Employer of Record Work in Madagascar?

Using an Employer of Record in Madagascar follows a structured process that ensures compliance with the Labour Code, social security regulations, and collective bargaining agreements from the moment you identify a candidate. The EOR handles every statutory step, from drafting compliant employment contracts to registering employees with CNaPS and managing monthly payroll filings. Here's how it works in practice.

Step 1: Define Role and Terms

You identify the candidate and agree on role, salary, start date, and benefits. The EOR reviews the terms against the applicable collective bargaining agreement (convention collective) for the employee's sector and region, which may set minimum wage levels, mandatory bonuses, and additional leave entitlements. If no sector-specific agreement applies, the national minimum wage of MGA 200,000 per month (2026 figure) and the Labour Code's statutory terms form the floor. The EOR confirms that your proposed salary meets or exceeds these minimums and that benefits comply with mandatory standards.

Step 2: EOR Compliance Check

The EOR verifies that the employment terms comply with Madagascar's statutory working time limit of 173.33 hours per month (40 hours per week), the national minimum wage enforced by the Ministère de la Fonction Publique, du Travail et des Lois Sociales, and the correct classification of the role under Madagascar labour law. The EOR also confirms whether the role requires a fixed-term contract (contrat à durée déterminée, CDD) or an indefinite contract (contrat à durée indéterminée, CDI), as fixed-term contracts are restricted to temporary work, seasonal roles, or specific projects and carry strict renewal limits. Misclassifying an employee as fixed-term when the role is ongoing can trigger automatic conversion to indefinite status and penalties from labour inspectors.

Step 3: Employment Contract Drafted

The EOR prepares a written employment contract in French or Malagasy, as required by Article 2 of the Labour Code. The contract must include the employee's full name and address, job title and description, place of work, remuneration and payment frequency, working hours, probation period (maximum 3 months for non-managerial roles, 6 months for managerial and technical staff), notice period, and the applicable collective agreement. The contract must specify whether it is a CDI or CDD, and if fixed-term, the precise duration and the reason justifying temporary employment. The EOR ensures the contract references the correct collective agreement and includes any sector-specific clauses on bonuses, seniority pay, or transport allowances.

Step 4: Government Registrations Completed

Once the contract is signed, the EOR registers the employee with the Caisse Nationale de Prévoyance Sociale (CNaPS) for social security and pension contributions, the Office des Statuts Généraux des Travailleurs (OSIE) for workers' compensation insurance, and the Direction Régionale du Travail for labour inspection oversight. The CNaPS registration must be completed before the employee's first day of work, and the employer must submit a Déclaration d'Embauche (hiring declaration) to the Direction Régionale du Travail within eight days of the start date. Failure to register on time can result in fines, back-payment demands, and disqualification from statutory benefits for the employee, including maternity leave and pension accrual.

Step 5: Payroll Processed in Ariary

The EOR processes monthly payroll in Malagasy Ariary, deducting IRSA (income tax) at progressive rates of 0% on income up to MGA 350,000, then 5%, 10%, 15%, and 20% on incremental bands, and the employee's 1% CNaPS contribution. The EOR calculates and pays the employer's 13% CNaPS contribution covering pension and family allowances, and 1% OSIE contribution for occupational accident and disease insurance. Payroll is typically processed at the end of each month, with salaries paid by the last business day or the first few days of the following month, depending on company policy and the collective agreement.

Step 6: Ongoing Compliance Management

The EOR manages recurring statutory obligations including monthly CNaPS contribution declarations submitted via the CNAPS online portal, quarterly reconciliation of social security payments, annual leave accrual tracking at 2.5 days per month worked (30 days per year under the Labour Code), and mandatory 13th-month salary payment (where required by collective agreement or company policy). The EOR also monitors changes to the national minimum wage, updates to collective agreements published in the Journal Officiel, and amendments to tax withholding tables issued by the Direction Générale des Impôts. Any required updates to employment contracts or payroll calculations are implemented immediately to maintain compliance.

Step 7: Termination and Severance

The Labour Code requires just cause for terminating an indefinite contract, documented through either serious misconduct (faute lourde) justifying immediate dismissal, or economic, technical, or organisational reasons with advance notice. Notice periods range from 8 days for employees with under 6 months' service to 3 months for senior staff, though collective agreements often extend these minimums. Severance pay (indemnité de licenciement) is mandatory for employees with at least one year of continuous service, calculated as 10 days of salary per year of service for the first 5 years and 15 days per year thereafter. The EOR handles the termination procedure, drafts the termination letter citing just cause, serves notice or pays in lieu, calculates and pays severance and accrued leave, issues the Certificat de Travail (employment certificate) and social security clearance documents, and notifies CNaPS and the Direction Régionale du Travail as required.

Employment Laws and Compliance an Employer of Record Handles in Madagascar

When you hire through an Employer of Record in Madagascar, they take on full compliance responsibility across payroll, tax, social security, and labour law, so you don't need to build an in-country HR function or legal team. The EOR stays current with Madagascar's Labour Code, collective agreements, and regulatory updates from the Ministère de la Fonction Publique, ensuring your employment practices meet all statutory standards.

• Employment Contracts and Documentation: Every employment relationship must be governed by a written contract in French or Malagasy under Article 2 of Law No. 2003-044. The contract must specify job title, remuneration, working hours, probation period, notice period, and the applicable collective agreement. Fixed-term contracts are permitted only for temporary, seasonal, or project-based work, with strict limits on duration and renewals. Failure to provide a compliant written contract can result in the employment being automatically classified as indefinite, and labour inspectors can impose fines and order contract rectification.
• Payroll Tax and Income Withholding: The EOR withholds Impôt sur les Revenus Salariaux et Assimilés (IRSA) at progressive rates of 0% on monthly income up to MGA 350,000, then 5%, 10%, 15%, and 20% on higher bands, and remits the tax to the Direction Générale des Impôts by the 15th of the following month. Employers must also file an annual reconciliation (déclaration annuelle) by March 31. Late or incorrect filings trigger interest penalties and can expose the employer to tax audits and personal liability for unpaid withholding.
• Social Security and Pension Contributions: Employers contribute 13% of gross salary to the Caisse Nationale de Prévoyance Sociale (CNaPS), covering old-age pension, invalidity, survivor benefits, and family allowances, while employees contribute 1%. Contributions must be declared and paid monthly via the CNaPS online portal, with payment due by the 15th of the following month. Employers also pay 1% to the Office des Statuts Généraux des Travailleurs (OSIE) for occupational accident and disease insurance. Non-payment or late payment results in penalties of 5% per month, disqualification of employees from benefits, and potential legal action to recover arrears.
• Statutory Annual Leave: Employees accrue 2.5 days of paid annual leave per month worked, totalling 30 working days per year under Article 120 of the Labour Code. Leave must be taken within 12 months of accrual, though employers can schedule leave to suit operational needs. Employees are entitled to full salary during leave, and unused leave must be paid out on termination at the employee's current daily rate. Collective agreements may provide additional leave days, and employers who fail to grant statutory leave face labour inspection sanctions and compensation claims.
• Termination, Notice, and Severance: Termination of an indefinite contract requires just cause, either serious misconduct or economic, technical, or organisational reasons, documented in writing. Notice periods range from 8 days to 3 months depending on length of service and collective agreement terms. Severance pay is mandatory after one year of service, calculated as 10 days of salary per year for the first 5 years and 15 days per year thereafter. Procedural errors, failure to provide written notice, or termination without just cause can result in reinstatement orders, payment of back wages, and damages awarded by the labour tribunal.
• Working Time and Overtime: The standard working week is 40 hours (173.33 hours per month), set by Article 89 of the Labour Code. Overtime is permitted up to 20 hours per week and must be compensated at 30% above the base hourly rate for the first 8 hours and 50% for hours beyond that. Night work (10pm to 5am) attracts a 30% premium. Employers who exceed overtime limits or fail to pay correct premiums face fines from labour inspectors and employee claims for back pay.
• Health and Safety Obligations: Employers must provide a safe working environment under Articles 177-183 of the Labour Code, including risk assessments, protective equipment where necessary, and first aid facilities. Certain industries require workplace health committees and regular inspections by labour inspectors. The EOR ensures compliance with sector-specific health and safety standards, maintains required documentation, and handles any reporting obligations to the Ministère de la Fonction Publique. Failure to meet health and safety standards can result in work stoppage orders, fines, and personal liability for workplace accidents.
• Data Protection and Employee Privacy: While Madagascar does not yet have comprehensive data protection legislation equivalent to GDPR, employers must handle employee personal data responsibly and in line with general principles of confidentiality and good faith. The EOR ensures payroll and HR records are stored securely, access is restricted to authorised personnel, and employee data is not transferred outside Madagascar without appropriate safeguards. Misuse of employee data can lead to civil claims and reputational damage.
• Collective Agreements and Sector Minimums: Many sectors and regions in Madagascar are covered by collective bargaining agreements (conventions collectives) negotiated between employer associations and trade unions. These agreements often set wage floors above the national minimum, define mandatory bonuses (such as 13th-month salary), specify additional leave entitlements, and establish sector-specific working conditions. The EOR identifies the applicable agreement, ensures your employment terms meet or exceed its requirements, and monitors updates published in the Journal Officiel to maintain compliance.
• Foreign Worker Permits and Immigration: Hiring foreign nationals in Madagascar requires a work permit (autorisation de travail) issued by the Ministère de la Fonction Publique, and a residence permit (carte de séjour) from the Ministry of Interior. The EOR coordinates the permit application, ensuring the role meets local labour market tests, the employee holds valid immigration documents, and renewals are filed before expiry. Operating without valid permits can result in fines, deportation of the employee, and criminal liability for the employer.

How Much Does It Cost to Use an Employer of Record in Madagascar?

The cost of using an Employer of Record in Madagascar consists of two components: the employer's statutory on-costs, which are fixed by law and include social security, pension, and insurance contributions, and the EOR service fee, which covers contract preparation, payroll processing, compliance management, and ongoing support. Statutory costs are non-negotiable and apply to all employers in Madagascar, whether you hire through an EOR or establish your own entity. Playroll's EOR service fee starts from $399 per employee per month, billed separately in US dollars, giving you predictable pricing and full transparency.

Let's look at an example that includes a base salary and the EOR service fee.

Playroll's EOR service fee covers preparation and maintenance of compliant employment contracts, monthly payroll processing in Malagasy Ariary, IRSA withholding and remittance, CNaPS and OSIE registration and monthly declarations, statutory leave tracking, termination and severance management, and ongoing monitoring of changes to Madagascar employment law and collective agreements. You gain full compliance without building an in-country HR team or legal function.

Employer of Record vs Setting Up an Entity in Madagascar

Choosing between an Employer of Record and setting up your own legal entity in Madagascar depends on your hiring scale, timeline, and long-term commitment. Foreign companies typically establish a Société à Responsabilité Limitée (SARL) or Société Anonyme (SA), requiring notarised articles of association, registration with the Economic Development Board of Madagascar (EDBM), publication in the Journal Officiel, and tax registration with the Direction Générale des Impôts. The process takes 3 to 6 months and costs between $5,000 and $15,000 in legal, notary, and registration fees, plus ongoing audit, accounting, and compliance costs.

For companies hiring fewer than 10 employees in Madagascar, an Employer of Record is almost always the faster and more cost-effective route.

Playroll also supports your long-term growth through its Global Entity Setup product, which handles entity incorporation and local payroll in 120+ countries, so you can transition from EOR to your own compliant entity in Madagascar when the time is right, without switching providers or rebuilding your HR processes.

How Long Does It Take to Hire Someone in Madagascar Through an Employer of Record?

You can hire an employee in Madagascar through an Employer of Record in 7 to 12 business days from the moment you identify the candidate and agree on terms.

• Stage 1: Contract preparation and signing (2 to 3 business days): The EOR drafts a compliant employment contract in French or Malagasy, incorporating all mandatory clauses under the Labour Code, the applicable collective bargaining agreement, and any sector-specific requirements. Timing depends on the complexity of the role, whether fixed-term or indefinite, and how quickly you and the candidate review and sign. Delays typically arise if the candidate requests changes to benefits or if clarification is needed on the applicable collective agreement.
• Stage 2: Government registrations (3 to 5 business days): The EOR registers the employee with the Caisse Nationale de Prévoyance Sociale (CNaPS) for social security and pension, the Office des Statuts Généraux des Travailleurs (OSIE) for workers' compensation, and submits the Déclaration d'Embauche to the Direction Régionale du Travail within the statutory 8-day deadline. CNaPS registration must be completed before the employee's first day of work. Missing this deadline can disqualify the employee from statutory benefits and expose you to fines and back-payment demands during labour inspections.
• Stage 3: Payroll configuration and first cycle (2 to 3 business days): The EOR configures the employee in the payroll system, sets up bank details for monthly salary payments in Malagasy Ariary, and calculates IRSA withholding and CNaPS contributions. Madagascar payroll is processed monthly, typically at the end of the calendar month, with salaries paid by the last business day or the first few days of the following month. The employee receives their first payslip once the initial cycle is complete.
• Stage 4: Madagascar-specific requirements (1 to 2 business days, often parallel): If the role is covered by a sector-specific collective agreement, the EOR may need to confirm compliance with additional clauses on bonuses, transport allowances, or seniority pay, and ensure the contract references the correct agreement. This review typically runs in parallel with contract drafting and does not extend the overall timeline unless the collective agreement requires approval from an industry body or union representative.

Timelines can extend if the candidate does not provide complete identity and bank documents promptly, if the role requires interpretation of a complex collective agreement, or if government systems experience delays during peak registration periods such as year-end. Remote location hires may add 1-2 days if regional labour offices require additional documentation.

By comparison, setting up your own SARL or SA in Madagascar takes 3 to 6 months for entity registration before you can even begin the hiring process, making the EOR the only practical option for companies that need to onboard employees quickly.

How Playroll's Employer of Record Process Works in Madagascar

Playroll enables you to hire employees in Madagascar without establishing a local entity, managing every compliance step from contract preparation to ongoing payroll and statutory filings.

1. You define your hiring needs

You identify the candidate and agree on role, salary, start date, and benefits. Playroll reviews the terms against Madagascar's national minimum wage, the applicable collective bargaining agreement for the employee's sector, and the Labour Code's statutory requirements to ensure full compliance before drafting the contract.

2. Playroll prepares a compliant contract

Playroll drafts a written employment contract in French or Malagasy, including all mandatory clauses on job description, remuneration, working hours, probation period (maximum 3 months for non-managerial roles, 6 months for managerial staff), notice period, and the applicable collective agreement. The contract specifies whether it is indefinite (CDI) or fixed-term (CDD), and references Law No. 2003-044 as the governing legislation.

3. Employee onboarded and payroll goes live

Playroll registers the employee with the Caisse Nationale de Prévoyance Sociale (CNaPS), the Office des Statuts Généraux des Travailleurs (OSIE), and the Direction Régionale du Travail within the statutory deadlines. Onboarding is typically completed within 7 to 12 business days, and the employee is added to Playroll's monthly payroll cycle, with IRSA withholding, CNaPS contributions, and salary payments processed in Malagasy Ariary.

4. Playroll manages ongoing compliance

Playroll handles monthly CNaPS declarations, quarterly social security reconciliations, annual leave accrual tracking, termination procedures including severance calculations, and monitoring of changes to Madagascar employment law and collective agreements. If your hiring in Madagascar grows to where a local entity becomes cost-effective, Playroll can handle that transition through its global entity setup product, managing incorporation, payroll transition, and compliance without switching providers.