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What global businesses need to know about payroll in Monaco
Since 1929, the tiny Mediterranean principality of Monaco has hosted arguably the most famous motor race in the world: the Monaco Grand Prix. And that’s not the only thing it’s well-known for: the fact that foreign residents don’t have to pay income tax – allied to a glamorous setting and warm year-round climate – means it has been home to many an F1 star, pro sportsperson, wealthy businessperson and celebrity over the years. No surprise, therefore, that Monaco’s GDP per capita is the highest of any country in the world, even though its population is among the smallest at less than 40,000 people.
With a total area of just over two square kilometers – all of it urban – Monaco has no agriculture and very little industry to speak of, meaning services dominate its economy. And while there are many economic advantages to service businesses operating out of Monaco, there are plenty of other costs and challenges to be aware of, too. This guide covers all you need to know.
Getting Started
Starting a business operation in Monaco isn’t as easy or as fast as it can be in some other European countries. It starts with applying for a license at the Monaco Welcome Office, which can take as long as three months to review and approve your business plan (although the average is around five weeks). If your industry is heavily regulated, such as finance, construction or real estate, or your industry is already very well-represented in Monaco, then the criteria for approval will be tighter.
If your business is approved, you will need to register business premises (which will then need to be inspected), and open a Monégasque business bank account. Then you can register with the Trade and Industry Registry, the relevant social security authorities, and gain an NIS number for statistical identification.
If you are setting up a limited liability company (a SARL), then there is a minimum capital requirement of €15,000 (approx. £12,600; $16,300).
Employment Considerations
It’s important to note that priority ranking is used for hiring staff in Monaco. Top priority goes to Monégasque nationals, then their spouses and children, then Monaco residents, and then residents of the surrounding areas who have previously worked in Monaco. All job offers have to go through the Employment Office, which will only open the job up to other candidates if no suitable choices are available among those with priority status.
The standard working week in Monaco is 39 hours, with no more than ten hours in a day, and all work over and above this is considered overtime. Any overtime worked is paid at 125% of salary for the first eight extra hours per week, and 150% for everything beyond that. Overtime is capped at a maximum of 48 hours per week.
Probation periods are limited by law to a maximum of three months, but can be shorter if mutually agreed in employment contracts. Notice periods are one month for employees with at least six months of service, rising to two months after two years. Employers can pay employees in lieu of notice if they so wish.
Compensation, Bonuses and Severance
As of the start of 2024, the national minimum wage in Monaco stood at €11.65 per hour (approx. £9.80; $12.70). Based on a standard working week of 39 hours, that translates to a standard monthly wage of €1968.85 (approx. £1660; $2150). Slightly lower rates apply to 16 and 17-year-old employees, and to apprentices.
The payment of a 13th-month bonus is a legal requirement in Monaco. Known as the “Prince’s Bonus”, it should be 5% of the employee’s annual salary.
Severance pay applies to employees who have served for at least six months. They receive one month’s salary per year of service, rising to 1.5 months per year of service if they have worked with their employer for at least two years. All years worked after ten years’ service or above the age of 50 also qualify for an additional month per year of service, on top of the standard entitlement.
Tax and Social Security
Monaco, famously, does not levy any income tax – but there is one exception. Thanks to a tax treaty established in 1963, French nationals are still required to pay income tax on any earnings they make in Monaco.
The VAT rate in Monaco is 20%, the same as in neighboring France. Monaco’s corporation tax rate is relatively high at 25%, although reduced rates apply to newly created companies: 0% for the first two years, 6.25% for the third year, 12.5% for the fourth year, and 18.75% for the fifth year.
Three types of social security contribution are required in Monaco:
- Sickness and Family Contribution: 15.05% employer
- Basic State Pension: 6.55% employee; 8.03% employer
- Unemployment Contribution: 2.4% employee; 4.05% employer
Holidays and Leave
Monaco has 12 days of public holiday each year. Employees normally accrue 2.5 days of paid leave for each month they work, making for a total of 30 days each year.
If employees are signed off on sick leave, they receive sick pay from the social security authorities at 50% of their usual rate of pay. If they have been with their employer for at least two years, then employers should contribute a further 40% on top of this, making for 90% in total. Sick pay kicks in immediately in the case of a workplace illness or injury; or from the fourth day of absence if the employee has to go to hospital or is off for at least three weeks. In any other case, sick pay starts from the 11th day of absence.
Maternity leave is 16 weeks, and can be taken before and/or after the birth, according to the mother’s preference. Social security covers maternity pay at 80% of normal salary. Maternity leave can be taken part-time over a longer period with employer agreement, and can also be transferred over to the father at the mother’s request. Paternity leave is 12 days (19 days if multiple births) and can be taken at any time in the four months post-birth.
Employees are also entitled to four days’ paid leave if they’re getting married; one day if their son or daughter is getting married; and two days in the event of the death of a close relative.
In Summary
As this guide demonstrates, there’s much to like about operating a business in Monaco, even if the perception of it as a tax haven doesn’t quite match the modern reality. The best way forward for compliance and smooth operations from a payroll perspective is to partner with an expert payroll provider, complete with all the solutions and technology you need for easy international compliance and expansion.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.