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Employment in Mozambique

As Mozambique is one of the poorest and least developed nations in the world, it is not surprising that it has a largely unskilled workforce and high unemployment. A large majority of the Mozambican population is engaged in the informal or shadow economy. Accordingly, the current rate of unionisation is very low (estimated to be 2.5% of the labour force). Despite the introduction of the reformed Labour Law in 2007, the overall structure of the labour market remains rigid and an impediment to investment and business.

Key points on employment in Mozambique

The main labour law governing Mozambican employment is the Labour Law, which applies to both foreign and national employees. There is also a law which governs the hiring of foreign employees, under which foreign employees are hired in accordance with a prescribed quota. If no part of the quota is available, the procedure is more complex, as additional requirements must be met (for example, professional experience, academic level or professional training, and the respective evidentiary documentation, for example, a certificate or diploma).

The Labour Law is applicable to employment contracts both concluded and executed in Mozambique.

  1. Contracts

    All employment contracts must be made in writing (except those for a duration not exceeding 90 days). Contracts must be dated and signed by both parties and must contain the following clauses:

    • Identification of the employer and the employee.

    • Professional category, tasks or activities agreed.

    • Workplace.

    • Duration of the contract and conditions for its renewal.

    • Amount, form and periodicity of remuneration.

    • Date of commencement of execution of the employment contract.

    • The date of termination of the contract, and a justification of the form of contract utilised, in the case of fixed term contracts.

    • The date of signature of the contract, in the case of a fixed term contract for a determined period, and its termination date.

    Under Mozambican labour law, there are 3 types of employment contracts:-

    • permanent employment contract;
    • fixed-term employment contract;
    • unfixed-term employment contract.

    Term contracts are only allowed for the fulfilment of temporary tasks e.g. temporary replacement of an employee, performance of tasks required by an exceptional or abnormal increase of production, as well as to carry out seasonal activity; performance of activities that do not relate meeting the employer’s permanent needs; performance of construction work, a project or other specific, temporary activity, including execution, management and supervision of civil construction works, public works and industrial repairs, under a contract; and provision of services complementing the latter, in particular subcontracting and outsourcing services.

    Fixed-term contracts are allowed a maximum duration of two years. They may be renewed twice by agreement of the parties. Small and medium enterprises are exempted from this requirement, being free to freely enter into fixed-term contracts without regard for the limitation on renewals for the first 10 years of their activity.

    If the employee continues his or her employment, fixed-term term contracts are assumed to be converted to permanent employment contracts following completion or the maximum number of renewals. As an alternative, both parties may opt for payment of compensation equivalent to 45 days wages for each year of service.

    Unfixed-term employment contracts are only permissible when it is not possible to predict with certainty the date of termination, subject to a justifiable reason. Such contracts are deemed to be converted into a permanent employment contract if the employee remains in service after being given notice of termination or, in the absence thereof, after seven days following the return of the replaced employee or completion of the activity, service, construction work or project for which he had been hired.

    Foreign employees

    The general rules on hiring foreigners are set out in Decree 55/2008 of December 30. Employment contracts concluded with a foreign citizen must comply with the following rules:

    • it must be reduced in writing;
    •  it must always be concluded for a fixed-term and for a period not exceeding two years, renewable by submitting a new application;
    • it does not become a permanent employment contract, regardless of the number of renewals;
    • in the event of termination for any reason, the employer must give notice of the fact to the entity that oversees the employment area and migration services of the province of the place of work within 15 days of the date of termination.

    Collective bargaining agreements

    Collective employment regulation instruments may be negotiated (collective bargaining agreement, accession agreement and voluntary arbitration decision) or not negotiated (compulsory arbitration decision). Collective bargaining agreements may be made by company agreement (signed by a trade union association and a single employer for one company), collective bargaining agreement (signed by a trade union association and several employers for various companies) or collective bargaining agreement (signed between trade union associations and employers’ associations).

    Collective bargaining instruments are binding on employers parties thereto or covered thereby, as well as all employees of the company, regardless of their membership of the signatory union and date of joining the company.

  2. Probation Periods

    Probationary periods may not exceed the following statutory limits:

    The trial period has the following maximum duration:

    • Term employment contract – 90 days for fixed-term contracts lasting more than one year; 30 days, for fixed-term contracts lasting between six months and one year; 15 days for fixed-term contracts lasting up to six months; and 15 days for unfixed-term contracts whose expected duration is equal to or greater than 90 days;
    • Permanent employment contract – 180 days for mid-level and senior technicians and employees engaged in leadership and management positions jobs, and 90 days for employees as a whole.

    Either party can terminate an employment contract at will during the probationary period, provided that he or she gives advance notice of at least seven days.

    If the duration of the trial period is not set out in writing in the employment contract, it is presumed that the parties wished to exclude it.

  3. Termination Procedures

    There are four ways in which employment contracts may be terminated, namely:

    • Expiry.

    • Agreement to terminate the employment contract.

    • Cancellation by either of the parties.

    • Termination by either of the parties based on just cause.

    Termination

    An employer may only terminate an employee based on ‘just cause’, which includes the following:

    • The manifest inaptitude of the employee, discovered after the probation period.

    • A culpable and material breach of the employment duties of the employee.

    • His arrest or imprisonment, if, due to the nature employee’s functions, it would be harmful to the normal course of work.

    • Economic reasons related to the enterprise, which may be technological, structural or market-related. In this case, the law requires at least 30 days’ notice, in advance of the expected date of termination, to be given.

    In the latter case, where the termination embraces more than 10 employees at the same time, it is considered a collective redundancy, which involves a special and distinct procedure.

    Severance payment

    Compensation will depend on the type of contract, and the date on which it was concluded, among other things. For indefinite-term contracts, compensation is calculated on the basis of the employee’s salary and the years of service which he has provided. For fixed-term contracts, the amount of compensation due will be equal to the remainder of the remuneration which would have been received had the contract been fulfilled to its end.

    No severance payment is available for termination through expiry of the contract, or because of the manifest ineptitude of the employee, discovered after the relevant probationary period, and dismissal based on the misconduct of the employee. In the case of a permanent employment contract, the minimum amount of compensation payable may vary between three and 30 days’ pay per year of service (depending on the employee’s wage and the date of termination of the contract) or between 45 days’ pay and three months’ pay for every two years or part thereof (in those cases in which Act 8/98 of July 20 still applies, which depends on the date of termination of the contract).

    Collective dismissal

    The termination of employment contracts for more than ten constitutes a collective dismissal, which is subject to special provisions in the Labour Law. Employees are not entitled to management representation. However, for collective dismissals, negotiations may be held with the trade union body or affected employees and the Ministry of Labour.

    If an employer foresees a collective dismissal, he must firstly notify the trade union body and the affected employees, as well as the Ministry of Labour in order to start a negotiation process. The relevant notice must include a description of the reasons for the collective dismissal as well as the number of employees that will be affected. Negotiations must be conducted by the employee and the trade union and may not take more than 30 days. During the process the parties must address the following issues:

    • The grounds for the collective dismissal.

    • The possibility of avoiding or reducing its effects.

    • Measures to be adopted to mitigate consequences for the affected employees.

    If an employee feels that he or she was dismissed unfairly, the employee may object in the industrial court. If the court finds there was no just cause, the employee must be reinstated and is entitled to receive the remuneration payable between the date of termination and the date of effective reinstatement, for a maximum period of up to six months. Should reinstatement be considered impossible, the employee is entitled to compensation of 45 days’ pay for each year of service.

  4. Statutory Leave

    Working Hours

    A normal employee is not permitted to work more than eight hours per day and 48 hours per week, spread over six week days. However, this may be extended up to nine hours a day, provided the employee is granted an extra half-day of rest per week.

    For employees under a collective bargaining agreement, the normal daily work may exceptionally be extended up to 12 hours, provided that the weekly duration does not exceed 56 hours.

    Annual Leave

    Employees are entitled to statutory leave based on the type of contract they are under and the duration of service with the employer:

    • fixed-term employment contract of a duration greater than three months and less than one year – one day of vacation for each month of active service;
    • during the first year of work – one day of vacation for each month of actual work;
    • during the second year of work – two days of vacation for each month of actual work;
    • from the third year – 30 days of vacation each year of actual work.

    Medical Leave

    There is no mandated medical leave under the law.

    Maternity Leave

    Mozambican female employees are entitled to fully-paid maternity leave of up to 60 days.

  5. Pensions and Benefits

    Resident foreign employees are not required to make social security contributions if they can prove to the National Institute of Social Security that they are contributing to a similar social security scheme in another country.

    Under the law, the compulsory social security system includes protection in the events of sickness, maternity, disability, old-age and death, and covers all employees, both domestic and foreign, residing in the Mozambican territory, and their dependent relatives (Act 4/2007 of February 7 and Decree 53/2007 of December 3).

    Registration of employees and employers at the National Social Security Institute (Instituto Nacional de Segurança Social/INSS) is mandatory. Registration of employers must take place within 15 days of the date of commencement of business or acquisition of the company.

    Both employers and employees are required to make contributions to the INSS scheme. The base for the calculation of the contributions includes the basic wage, bonuses, commissions and other payments of a similar nature paid on a regular basis, as well as management bonuses.

    The current contribution rate is 7% [4% (employer) and 3% (employee)].

Outsourcing Employment Through a GEO Employer of Record Service

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Mozambique. For companies which intend to employ their staff directly through their incorporated Mozambican entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Mozambique.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Mozambique.

The Shield GEO solution is an attractive alternative where

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in Mozambique

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Mozambique

– the company needs help with tax, employment, immigration and payroll compliance in Mozambique

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