Setting Gross Salary Based on Minimum Wage and Worker Category

When drafting the employment contract, the company will determine the Socio-Professional Category (CSP) of the worker based on their acquired qualifications and professional experience. There are 5 groups of Socio-Professional Categories (CSP) in Madagascar. Employees with CSP codes M1, M2, OS1, OS2, OS3, OP1, OS1, OS2, OS3 fall into the first three groups, while executives are grouped in the 4th and 5th groups.

At the beginning of each calendar year, minimum hiring salaries are set by decree for each Socio-Professional Category.

Income Tax on Salary and Similar Earnings

Income from employment and similar earnings is subject to Income Tax on Salary and Similar Earnings (IRSA). This tax is withheld at the source, deducted from the gross salary of each employee, and transferred to the state’s account by the employer.

IRSA is not accounted for as part of the company’s expenses.

The IRSA rates are progressive, and apply to different salary brackets with a minimum IRSA withholding of 2,000 Ar:

  • Up to Ar 350,000: 0%;
  • Income bracket from Ar 350,001 to Ar 400,000: 5%;
  • Income bracket from Ar 400,001 to Ar 500,000: 10%;
  • Income bracket from Ar 500,001 to Ar 600,000: 15%;
  • Income bracket exceeding 600,000: 20%.

Explore examples of IRSA calculations based on the main provisions of the 2024 Finance Law.

Employer’s Social Obligations in Madagascar

Employers in Madagascar are subject to social obligations upon hiring an employee, including:

  • Affiliation with the National Social Security Fund (Caisse Nationale de Prévoyance Sociale – CNAPS)
  • Affiliation with an Inter-Company Health Organization (Organisme Sanitaire Inter Entreprise – OSIE). Despite the existence of various Inter-Company Medical Service organizations, the social contribution rates are uniform: 1% of the gross salary for the employee and 5% of the gross salary for the employer.

Regarding the contribution to CNAPS, it amounts to 14% of the employee’s gross salary. The employee covers 1%, and the company covers the remaining 13%.

Handling Bonuses and Other Benefits

Bonuses and other monetary or in-kind benefits are included in the employee’s gross salary. This includes family allowances, which are part of social security for workers who meet the eligibility conditions. Therefore, they are subject to Income Tax on Salary and Similar Earnings (IRSA) and are considered in the calculation of social contributions.

In conclusion, if you are considering hiring, the actual cost of an employee in Madagascar is approximately 119% of their gross salary for a gross salary below the National Social Security Fund (Caisse Nationale de Prévoyance Sociale – CNaPS) ceiling (CNaPS ceiling applicable from May 1, 2022: Ar 2,000,000). In the case of a salary above the CNaPS ceiling, it would be around 113%.

MDG Services supports you in the administrative management of your human resources. For more information on our payroll management services or administrative assistance, you can contact us at +261 20 76 372 47 or request a quote.