Understanding Payroll in Morocco: What Global Companies Need to Know
The fifth-biggest economy in Africa, and one of the most stable countries on the continent, Morocco is always high on the list of targets for international businesses pursuing an African expansion program. Morocco’s proximity to Europe means it has plenty of fertile farmland to support a strong agricultural economy, while fishing, textiles and tourism are also major areas of trade. As of 2019, its annual GDP was around $118billion, around three times its level in 2000, underpinned by steady, consistent growth.
Corporate taxes in Morocco are relatively high, but wages are low compared to most Western economies and the business environment is welcoming towards incoming investment from abroad. Its payroll and business set-up requirements are fairly straightforward, too. This guide sets out the most important facts around all things payroll in Morocco.
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 either a private limited company (S.A.R.L.) or as a public limited company (S.A.). Minimum share capital is 10,000 Moroccan dirhams (approximately £810; $1100; €940) for an S.A.R.L, increasing to MAD 300,000 (approx. £24,000; $33,000; €28,000) for an S.A., or MAD 3 million (approx. £240,000; $330,000; €280,000) for a listed S.A.
Once it’s been established that the chosen company name is available (this can be done online), companies should file documents with the Regional Investment Center (CRI) to register with the Tribunal of Commerce, and for tax, social security and patent tax.
This process takes around a week and the fees involved are nominal. Once this is done, a company seal should be created and employees can be registered with the Social Security Institute (CNSS). In-country bank accounts are not mandatory, but can be helpful.
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.
Probation periods in Morocco vary depending on job role: 15 days for blue-collar workers, a month and a half for white-collar workers, and three months for management. The maximum working time is 12 hours a day, 44 hours a week and 2288 hours per year, with every employee guaranteed one unbroken 24-hour day of rest each week. Overtime is paid at 125% for work between 6am and 9pm, and 150% at other times; these rates increase to 150% and 200% respectively if they fall on the employee’s designated rest day.
Compensation, Bonuses, Severance
Minimum wage rates in Morocco vary depending on the type of work involved, with the public sector the highest at MAD 3300 per month (approx. £270; $370; €310). The private-sector rate is MAD 2828.71 per month (approx. £230; $310; €265), while the rate in the agricultural sector is MAD 1994.20 per month (approx. £160; $220; €185). 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.
Notice periods for regular employees start at eight days, increasing to a month after one year of service, and to two months after five years. For senior management, these periods increase to one, two and three months respectively. Severance pay should be paid if an employee has at least six months’ service, starting at 96 hours of salary per year of service, increasing to 144 hours per year after five years of service, 192 hours per year after ten years and 240 hours per year 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; $3300; €2800) exempt. Beyond this, the following five bandings apply:
- Beyond MAD 30,000 up to MAD 50,000 (approx. £4000; $5500; €4700): 10%
- Beyond this up to MAD 60,000 (approx. £4800; $6600; €5600): 20%
- Beyond this up to MAD 80,000 (approx. £6500; $8900; €7500): 30%
- Beyond this up to MAD 180,000 (approx. £14,400; $19,800; €16,800): 34%
- Beyond MAD 180,000: 38%
Corporation tax starts at 10%, rising to 20% for profits over MAD 300,000 per year (approx. £24,000; $33,000; €28,000), and to 31% for profits over MAD 1 million (approx. £81,000; $110,000; €94,000). VAT runs at 20%, with rates of 7%, 10% and 14% applicable to certain goods and services.
Social security contributions are made in four areas:
- Family allocation: 6.4% employer
- Social allocation: 8.98% employer, 4.48% employee
- Professional training: 1.6% employer
- Medical care: 4.11% employer, 2.26% employee
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 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 the employee’s normal rate. Mothers can then take up to a year of additional leave, but this is unpaid. Paternity leave entitlement is three days on full pay.
If a worker is ill or injured, they must provide their employer with a medical certificate explaining their absence and the likely duration of it. Any employee who is absent for longer than six months can be dismissed. 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.
Morocco is a far more straightforward proposition for prospective foreign businesses than most other African countries. Nevertheless, it isn’t without its fair share of individual rules and requirements, especially the strong labor and union laws in place to protect worker rights. To ensure your payroll in Morocco starts off compliant and stays there, partnering with a global payroll provider represents the safest, most hassle-free option.
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.