Tanzania Payroll and Benefits Guide

What global businesses need to know about payroll in Tanzania

Did you know that Tanzania is the most populous country in the world that is entirely in the southern hemisphere? With 67 million people living there, its population is similar in size to the United Kingdom, making it a major economic player in East Africa.

Tanzania has a very varied economy, from agriculture and mining, through cement and oil refining, to exports of gold and tobacco. Its split of agriculture/industry and services is nearly 50/50, meaning there are potential opportunities for almost every type of company.

It has to be remembered that Tanzania is not a wealthy country, and more than a quarter of the population live below the poverty line (although this figure has reduced in the last two decades from more than a third). This means that the Tanzanian authorities are welcoming to foreign investment as a means to support brighter futures for its people. If you’re looking at expanding into Tanzania, then this guide to all things payroll and employment is a great place to start.

Getting Started

Companies are only allowed to register by visiting the major city of Dar es Salaam. Although you do not need a lawyer to visit the Registrar of Companies in the city, it is highly encouraged. 

Businesses can find information about registering and confirm their business name at the official website of the Business Registration and Licensing Authority. They are required to draw up a Memorandum of Association, Articles of Association, and submit a certificate of incorporation and proof of premises (title deeds or lease agreements). Companies will also need a notarized declaration of compliance and a Tax Identification Number through the Tanzania Revenue Authority (TRA). 

Companies do not need to set up in-country bank accounts by law. However, due to transactional fees, the vast majority of foreign enterprises do so anyway.

Employment Considerations

Some workers in the country may be used to more casual working scenarios with seemingly few rules, but employers should note that there are set legal limits. Collective bargaining is allowed in Tanzania, although it’s unclear just how often it’s practiced. Employers and employees appear to negotiate terms directly if unions are formed. For the most part, employers should use the contact process to ensure expectations are clear.

Working hours in Tanzania are generally 45 hours a week, which can be spread over five nine-hour days, or over six shorter shifts each week. Work over and above 45 hours is classed as overtime, which should be paid at 150% the usual employee’s rate, or 200% if working on a public holiday or a designated rest day. Overtime work is capped at a maximum of 50 hours within any four-week period. Rest periods are not required by law but are generally given based on employer wishes. 

However, written contracts are required and must state basic job information (e.g. description, hours, location, etc.) as well as the duration of work. Temporary work and probationary periods are allowed, but the terms must be outlined before work begins. Any additional specifics may be done as an oral contract with the employee before beginning work.

Notice periods in Tanzania are seven days within the first month of employment, rising to 28 days thereafter. Employees hired on a daily or weekly basis have a statutory notice period of four days. There is no set rule for probation periods in Tanzania, but there is a law that unfair dismissal cannot be applied to any employee terminated within the first six months of their employment.

Compensation, Bonuses & Severance

The minimum wage rates in Tanzania vary substantially from one industry to another, and there were significant increases across the board at the start of 2023. The rates vary from TZS 120,000 a month (approx. £37, $47, €43) for domestic servants, to TZS 592,000 a month  (approx. £185, $230, €215) for employees at international energy companies. There is no statutory requirement or cultural custom to award bonuses, or pay a 13th-month salary.

Severance pay is seven day’s salary for each of the first ten years of service, although employees must have worked for the company for at least one year to be eligible.

Tax and Social Security

Income tax in Tanzania is levied progressively across five bands. The first TZS 270,000 (£83, $105, €100) earned each year is exempt, beyond which the first rate of 8% kicks in. Further rates apply at 20% for earnings above TZS 520,000 (approx. ‎£160, $205, €190); 25% at TZS 760,000 (approx. £235, $300, €275), and 30% at TZS 1 million (approx. ‎£310, $395, €360). All these thresholds are around one-third lower for employees in Zanzibar. Non-residents are taxed at a flat rate of 15%. Payroll regulations usually mandate that these taxes are automatically withheld.

Corporation tax in Tanzania is 30%, although newly-listed companies on the Dar es Salaam Stock Exchange may be eligible for a reduced rate of 25% for three years. A number of other reduced rates are available: car, tractor, or fishing boat manufacturers, for example, can expect to pay just 10% corporate tax for the first five years of operation. The VAT rate is currently 18% on the mainland, and 15% in Zanzibar excluding banking, postal services, and telecoms.

There are three main types of social security contribution in Tanzania:

  • National Social Security Fund: 10% employee
  • Workers Compensation Fund: 11% employer
  • Skills Development Levy: 4% employer

Holidays and Leave 

There are 17 days of public holidays in Tanzania each year, for which employees should continue to be paid. Annual entitlement to paid leave is a relatively generous 28 days, although entitlement to this only kicks in once an employee has notched up six months’ service.

Maternity leave entitlement is 84 days, increasing to 100 in the case of a multiple birth, and should be paid for by the employer. Mothers can only take paid maternity leave a maximum of four times; after this, paid time off for a birth is at the discretion of the employer. Paid paternity leave entitlement is three days within the first week after the birth.

Paid sick leave, in cases that are medically certified, is available for a maximum of 126 days within any three-year period. The first 63 days are paid at full salary, and the following 63 are paid at half the usual rate.

In Summary

Tanzania is relatively straightforward when it comes to payroll and employment regulations. But, as an African country where wages are low, and as a nation with significant Muslim influences as well as Christian ones, there are plenty of cultural nuances to understand in order to stay on the right track. A global payroll partner with experience of payroll in Tanzania can therefore be invaluable, helping fill in any gaps in your expertise or compliance needs.

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.

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