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What global businesses need to know about payroll in Morocco
Morocco’s soccer team caused shockwaves around the world when it reached the semi-finals of the 2022 World Cup, becoming the first African team ever to get that far. And it can deliver just as pleasant a surprise from a business perspective, too.
Morocco should be high on any company’s list of candidates for expansion into Africa. Its geographical position in the north-west corner of the continent means it has excellent trade links with Europe: Spain and France are its two biggest export partners by a considerable distance. Its economy is well-balanced too: approximately 56% services, 29% heavy industry, and 15% agriculture thanks to an abundance of olives, citrus fruits, cereals, and fishing.
A first glance at Morocco’s business landscape may be off-putting because of relatively high corporate taxes, but there are many benefits to counteract that: low wages, a skilled workforce, a stable economy by the standards of the region, and a welcoming environment for foreign investment. This guide tells you all you need to know about payroll and employment regulations in Morocco.
Getting Started
Morocco is used to conducting international business, so setting up payroll there is not too complex. Enterprise-level companies may experience a slightly longer setup only because of the transfer of records of people employed in the home and host country (Morocco) simultaneously.
Most foreign businesses setting up in Morocco form as a private limited company (S.A.R.L.); there is no minimum share capital requirement in this case. Key steps include registering the trade name in the commercial register; opening a Moroccan bank account; signing Articles of Association; and submitting the incorporation documents to the regional investment center (CRI). From this, registration with the Tribunal of Commerce, and for tax, social security and patent tax, can be confirmed.
Once this is done, a company seal should be created and employees can be registered with the Social Security Institute (CNSS).
Employment Considerations
Morocco’s labor laws are robust, and the penalties for breaching them are severe. In particular, incoming organizations should note the far-reaching power of the Moroccan Labor Union, the ban on employers hiring substitutes or discriminating against striking workers, and the possibility of criminal sanctions if force is used to stop a strike. Furthermore, foreign workers can only be hired if a particular role cannot be filled by a Moroccan or other residents in Morocco.
The maximum working time is ten hours per day and 44 hours per week. Every employee should also get at least one unbroken 24-hour period of rest each week. Overtime is limited to a maximum of 138 hours over any four-month period, and 250 hours in a year. Overtime pay is 125% of regular salary, increasing to 150% for work at night (between 9pm and 6am). Overtime at weekends or on rest days is defined through contract or collective bargaining, and should be between 150% and 200%.
Probation periods in Morocco start with a one-week trial period, after which a full probation period takes place. This normally runs for 15 days for blue-collar workers, 45 days for white-collar workers, and three months for management.
Notice periods for regular employees start at eight days, increasing to a month after one year of service, and two months after five years. For senior management, these periods increase to one, two, and three months respectively.
Compensation, Bonuses and Severance
Minimum wages in Morocco vary across the private, agricultural and public sectors; in the private sector, there have been several incremental increases in recent years. The most recent increase was in September 2023, bringing the monthly rate up to MAD 3111.39 (approx. £245; $310; €290). Collective bargaining agreements between employers and unions play a major role in deciding employee wage levels.
Certain industries, such as the garment industry, have built a culture of employee bonuses into the framework of the system. These bonuses can include childcare and transport allowances, pensions, training, health insurance, and more.
Although not mandatory, many companies in Morocco voluntarily pay a 13th-month bonus and seniority bonuses. It should also be noted that all companies employing more than 50 people are obliged to provide free medical services to all of their employees, including foreign workers.
Severance pay should be paid if an employee has at least six months’ service, starting at 96 hours’ pay per year of service. This increases to 144 hours’ pay per year after five years of service, 192 hours after ten years, and 240 hours after 15 years. Fractions of years worked count as full years for this calculation.
Tax and Social Security
Income tax in Morocco is levied on a progressive scale, with the first MAD 30,000 per year (approx. £2400; $3000; €2800) exempt. Beyond this, there are five progressively higher bands, starting at 10%. The highest of 38% applies to earnings in excess of MAD 180,000 per year (approx. £14,200; $17,900; €16,700).
Corporation tax is also charged progressively over four bandings, starting at 12.5% for the first MAD 300,000 of profits made each year (approx. £23,700; $29,800; €27,800). After this, a rate of 20% applies, followed by 28.5% for profits over MAD 1 million (approx. £79,000; $99,000; €93,000), and 32% for profits over MAD 10 million (approx. £790,000; $990,000; €930,000). VAT runs at 20%, with rates of 7%, 10% and 14% applicable to certain goods and services. Exported goods and services are zero-rated.
There are five key areas of social security contribution:
- Family allocation: 6.4% employer
- Social allocation: 8.6% employer, 4.26% employee
- Professional training: 1.6% employer
- Medical care: 4.11% employer, 2.26% employee
- Social solidarity: 1.5-5% employer (depending on company profit level), 1.5% employee (if earning more than MAD 120,000 a year)
Holidays and Leave
Employees accrue paid leave at the rate of 1.5 days per month (18 per year), increased to two days per month (24 per year) for under-18s. Employees accrue another 1.5 days per year after each five years of service, up to a maximum of 30 days. Employees are also entitled to time off on the 14 days of public holidays observed each year.
Maternity leave entitlement is 14 weeks – seven weeks either side of the birth – and is paid at full salary by the employer. Mothers can then take up to a year of additional leave, but this is unpaid. Paternity leave entitlement is three days on full pay.
Medically certified sick leave entitlement is four days per year (although half-days can be taken within this). Sick pay for non-work illness or injury is applicable as long as employees have made sufficient social security contributions in the previous six months. This is normally paid by social security at two-thirds of the normal rate from the fourth day of absence onwards.
In Summary
Compared to most other countries in Africa, doing business in Morocco is relatively straightforward. However, a combination of strong labor and union laws, and a strict approach to non-compliance, means it’s absolutely essential you’re up to speed on payroll and employment right from the start. The local expertise of a global payroll partner can be a real help in this area.
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.