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The Ultimate Guide To
Employment in Papua New Guinea

Papua New Guinea Facts

Population size: 7,776,115
Currency: Papua New Guinean Kina (PGK)
Capital city: Port Moresby
Languages spoken: English, Hiri Motu
Ease of Doing Business: 119

Employing in Papua New Guinea: What You Need to Know

Papua New Guinea’s terms and conditions of employment are mostly overseen by the Employment Act (Chapter 373) for citizens, and both the Employment Act and the Employment of Non-Citizens Act (Chapter 374) for foreigners. In some cities, including Port Moresby, Lae, Rabaul and Mount Hagen, terms of employment are prescribed under the Common Rules. In case of conflict, the legislation which provides more favourable conditions to the employee is preferred. As a country still in its early stages of development, the law can be confusing and at times obscure. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in PNG.

Key Factors to Consider When Employing in Papua New Guinea

There are several key areas to be aware of within PNG’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.

  1. Contracts

    Fixed term contracts are permitted for permanent tasks. The maximum length of a single fixed-term contract is 24 months if the employee is unaccompanied by dependents, or 36 months if they are accompanied, as stipulated by the Employment Act Sections 22(2) and (4). Unlimited renewals are permitted.

Employee Entitlements

Information Explanation
Medical Leave ?

Employees are entitled to six days paid sick leave in each year, which may be accumulative to a maximum of 18 days per year.

Annual Leave Accrual Entitlement ?

Employees are entitled to 14 consecutive days paid leave including non-working days occurring within that period of paid leave.

Maternity Leave in Papua New Guinea ?

Female employees are entitled to not less than 108 days of maternity leave.

Employment Termination

Information Explanation
Termination of Employment ?

Generally, the employment contract is considered terminated upon the date at which both parties agreed it would conclude. If the contact is terminated prior, the notice periods are as follows:

  • One day’s notice if the employee has been employed for less than 4 weeks
  • One week’s notice if the employee has been employed for between 4 weeks and 1 year
  • Two weeks’ notice if the employee has been employed for between 1 and 5 years
  • Four weeks’ notice if the employee has been employed for 5 years or more

Employment may be terminated immediately, without notice or payment, if the employee:

  • Wilfully disobeys a reasonable or lawful order
  • Misconducts themselves by an act or omission inconsistent with their duties
  • Commits fraud or is guilty of dishonesty
  • Habitually neglects their duties
  • Is imprisoned for a period exceeding 7 days
  • Is continually absent from their employment without leave or reasonable excuse
  • Is convicted of an offence or any other employment law

Probation

Information Explanation
Probation Period ?

Papua New Guinea’s Employment Act of 1978 does not specify any probationary period regulations.

Pension

Information Explanation
Pension Requirements ?

The system of welfare and benefits is still in its early stages of development in Papua New Guinea and therefore is not only complex but also difficult to obtain details of. The general contribution for pension is employer contribution of 8.4% of salary and employee contribution of 6%.

Outsourcing Employment Through a GEO Employer of Record Service

Using Shield GEO Employer of Record Services in Papua New Guinea

Papua New Guinea is one of the world’s fastest developing economy, largely thanks to rapid growth in the mining and resources sector. As the PNG Government implements initiatives to continue growth, it has also introduced measures to assist foreigners set up businesses in PNG.

Companies entering Papua New Guinea must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Papua New Guinea Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a PNG entity established that can run payroll.

Payroll

Payroll Papua New Guinea
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

Currency ?

Papua New Guinean Kina (PGK)

 
Grossed income Tax Rate (%)
0-10,000 22
10,001-18,000 30
18,001-33,000 35
33,0001-70,000 40
70,001-250,000 42
Tax Returns Supplied

Yes

Payroll and Tax in Papua New Guinea

There are specific rules for payroll and taxation in Papua New Guinea, depending upon whether your company employs foreign nationals or local PNG employees. The primary concerns for a foreign company that needs to comply with tax laws in PNG are: Individual income tax (IIT) for employees in PNG, social security costs, payroll tax, sales tax, withholding tax, business tax and the training levy. PNG is unique in that many of the benefits usually available through a government-established social security scheme are instead conducted through private insurers.

Information Explanation
Remote payroll ?

A remote payroll in PNG is where a foreign company, i.e. a non-resident company, payrolls a resident employee in PNG. The best option for a non-resident company to payroll its employees (local and foreign) in PNG is to use a fully outsourced service like a GEO or FESCO which will employ and payroll the staff on their behalf.

Local Payroll Administration ?

In some cases, a company will register their business in PNG under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal payroll ?

Larger companies with a commitment to PNG may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Papua New Guinean payroll, and can fulfill all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with PNG employment laws.

Fully outsourced payroll and tax ?

Companies can outsource the employment and payroll of their staff in Papua New Guinea to a GEO, like Shield GEO. This is possible for both foreign workers and PNG nationals. This is the easiest, fastest and safest way to payroll staff in PNG.

Shield GEO manages all aspects of payroll for workers in PNG, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

 

 

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Tax Figures

Information Explanation
Corporate Income Tax ?
  • Resident companies not engaged in mining or petroleum operations: 25%
  • Non-resident companies, including those engaged in mining operations: 48%
  • Resident mining companies: 35%
  • Petroleum companies, resident or non-resident: 50%
Income Tax Rate ?
Grossed income Tax Rate (%)
0-10,000 22
10,001-18,000 30
18,001-33,000 35
33,0001-70,000 40
70,001-250,000 42
Payroll Tax ?

N/A

Sales Tax ?

Sales and services tax are levied by provincial governments, averaging 3%.

Withholding Tax ?
  • 17% dividend and royalties withholding tax, which can be reduced typically to 15% under a tax treaty.
  • Foreign contractors are subjected to withholding tax of 12%
  • Overseas shipping incurs a withholding tax of 2.4%
Other Tax ?

All businesses whose annual payroll exceeds PNK100,000 are subject to a 2% training levy. Mining operations are required to pay a 1.25% levy on export sales value of mined products.

Time to prepare and Pay Taxes ?

207 hours

Time required to start a Business ?

41 days

Immigration and Work Permits in Papua New Guinea

In general, all non-citizens seeking employment in Papua New Guinea require a valid work permit before commencing work. Work permits must be secured for employees, and sponsored by a locally licensed and incorporated entity, which can be a problem for companies just entering the PNG market. If you have yet to complete the incorporation process you can use an outsourced management company or GEO Employer of Record to sponsor the employee for the necessary permits.

Have your own Company?

It is possible for companies that have established a Rep (Representative) Office or WFOE (Wholly Foreign Owned Enterprise) in PNG to arrange work permits. It takes around 6 weeks for approval and then another 2 weeks for issuance of the permit itself. It is highly recommended to utilise a PNG Immigration specialist to assist with the application and processing.

Regardless of the type of work permit, the appropriate application form must be completed and submitted. Applicants must be outside the country at the time of application.

1. The employer must ensure that the applicant’s intended position is permissible for foreign employees.

The PNG Government provides guidelines around which occupations may only be engaged in by PNG citizens. As a general guide, high skill level jobs are open for free recruitment of foreigners, as the number of PNG citizens able to undertake this employment is limited due to a skills shortage. However, semi-skilled jobs should be advertised in PNG first, and unskilled or low-skilled jobs are reserved for PNG citizens. Employees must ensure the position that is offered to the applicant is permitted under the Government’s guidelines.

Time: 1 day

Cost: Free

If the job must be advertised, as required by these guidelines, the following criteria are applied:

  • The job vacancy must be advertised in the Post Courier and the national newspapers (i.e. minimum 2 advertisements)
  • The advertisement must measure at least 60mm x 60mm

If no suitable citizen is found, the employer can apply for a work permit for a foreigner. This application must include a copy of the advertisement and be made within 3 months of the advertisement. The employer must also supply a statement explaining why no citizen was found suitable for the vacancy.

Time: Depending on which newspaper

Cost: As above.

1. The employer begins a new work permit application

Under s18 of the Employment Act, an employer must make an application for a work permit before engaging any foreigner in employment in PNG.

The application form must first be completed.

The following documents must be included:

  • Copy of the photo page of employee’s passport and two recent, passport sized photographs of the employee
  • Copy of updated résumé
  • Copy of job description
  • Certificated evidence of educational qualifications
  • Copy of employment contract signed by both the employee and the employer
  • Copy of the applicant’s right thumb print
  • Evidence of membership of any relevant professional association, specifically, any of the following:
    • Institute of Engineers PNG
    • Certified Practicing Accountants of PNG
    • Nursing Council of PNG
    • Maritime Safety Authority
    • Pharmacy Board of PNG
    • Law Society of PNG
    • Medical Board of PNG
    • Papua New Guinea Association of Surveyors
    • Papua New Guinea Institute of Architects
    • Civil Aviation Authority.

Proof of registration is usually done by submitting a letter or Membership Certification from the relevant association with the work permit application.

  • Evidence of English language proficiency, if relevant. Certain countries are not required to show proof of speaking English, and can be found on page 18 of the Work Permit Guide. Proficiency may be proven though the IELTS Certification, English Language Instruction Institution certification, tertiary qualification in English or 5 years secondary education at a school taught in English.
  • Employer’s Certification of Incorporation from the Investment Promotion Authority
  • Evidence of fee payment

All documents must be certified as true and correct by a Justice of the Peace or other notary.

Time: 1-2 days, depending on the level of preparation by the applicant and employer

Cost: K1,000 for each year of the work permit.

2. Application is screened and assessed

The application will be assessed by the Department of Immigration and the Department of Labour to ensure that all supporting documentation provided is genuine, the occupation is not reserved and all advertising requirements have been met, that the applicant has the requisite skills, qualifications and experience, and language abilities.

From this point, the application will be processed into the Foreigner Work Permit Application System.

Time: 3-6 weeks, contingent upon all information being correctly submitted.

Cost: Included in application fee

3. Application verified and endorsed for approval

The work permit will be printed, and referred to the Department Secretary to finalise the decision on whether or not the grant the work permit. The work permit and work permit card will both be available for collection once the Secretary’s approval is obtained. The employer must retain the work permit and ensure the card is provided to the employee.

Employers must maintain a Register of Work Permits including a list of all current work permits granted to any foreigners engaged in work with the employer, and all work permits cancelled by the Secretary.

Time: 1-2 days

Cost: Included in application fee.

4. Apply for entry permit

Once the work permit is granted, the applicant requires an entry permit. The application form must be filled out, and the following documents must be attached:

  • One passport sized photograph
  • Proof of fee payment

The fee can be paid at the Department of Finance or the nearest IRC or BMS office by the employer.

Time: Approximately 1-2 weeks.

Cost: K 1,000.

Use the Shield GEO solution?

Once you get in touch with us, one of our consultants will take all the work off your hands, coordinate with our local partners to get all the required permits organised, provide the processing time, costs, document-checklist and keep you informed through the process. Contact us to know more.

Types of visas in Papua New Guinea

Category Description of Visa
Work Permit

there is an employment contract of a commercial nature between an employer and employee.
Short term work permits are valid for up to six months from the date they are granted and cannot be renewed; long term work permits are valid from between 1-3 years and may be renewed. The length sought must be indicated by the employer on the application.

Business visa

Business visas are issued by the Department of Immigration to foreigners who are in PNG for one of the following purposes:
– Business meetings
– Board meetings and conferences
– Exploratory business visit
– Participation in a business negotiation
Business visa holders are not permitted to engage in employment.

APEC Business Travel Card

The APEC Business Travel Card allows the holder to conduct business meetings, discussions and negotiations only, not engage in employment. This is renewable.

Setting up a company in Papua New Guinea

When setting up a company you may want to consider these factors:

  1. Business factors

    Companies should consider business factors such as:

    • The industry and type of business
    • Nationality of the headquarters/individual(s) and
    • Presence of existing trade agreements or relationships
  2. Location

    Location will be another factor. Separate cities and regions may have different rules, costs and availability. It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.

  3. Regional language

    Regional language may be an influence. There are over 850 languages used in PNG, which is the most linguistically diverse region on Earth. There are three official languages alone – English, Tok Pisin, and Hiri Motu – of which the second is most frequently spoken.

The most popular type of company entity set up in Papua New Guinea is the limited liability company. While representative offices of foreign companies can be set up, they are not permitted to carry out business, and may only conduct market research. Finally, branches can be set up for companies incorporated outside of PNG and may engage in trade and issue invoices.

Limited Liability Company

Setting up a business in Papua New Guinea is relatively cheap.

Unlike most other countries, a company in PNG is not required to have any articles of association or memorandum, and a constitution can be adopted at any time.

The basic steps are as follows:

1. Obtain a company seal

2. Reserve a company name and complete registration process

3. Register with Tax Authorities and Employment Register

4. Apply for a trade license

5. Open an Authorised Superannuation Fund account

6. Register workers for private work injury insurance

In order to set up a company in PNG, it must have:

  • A name which does not contravene any law, be misleading or identical to the name of another company
  • One or more shares and shareholders
  • One or more directors, of which one must be a resident of PNG. A company is not required to appoint a secretary, although this is optional
  • A physical address in PNG i.e. no PO boxes

Detailed instructions of the process, as well as times and costs involved, are explained below.

1. Obtain a company seal

Companies are not legally required to make a company seal, although a seal is necessary to meet the Companies Act requirements for the issuance of share certificates to enter into deeds and contracts. Seal makers will charge different service fees but most can be obtained within a week or applied for online.

Time: 4 days

Cost: PGK 40-80

2. Reserve a company name and complete registration process

Companies must submit a registration application to the Registrar of Companies. Standard Form 1 must be submitted as well as three proposed company names, the registered office’s postal and street address, and the number and names of the directors, shareholders and secretaries.

In addition, the following documents must included in the application:

  • Certified copy of the company constitution, if there is one available
  • Form 2, the consent of all directors, including their full name, nationality, date of birth, postal and residential addresses
  • Form 3, the consent of any secretary, including their full name, nationality, date of birth, postal and residential addresses
  • Form 4, the consent of each shareholders, including their dates of birth, full or corporate name, nationality or country of incorporation, postal and residential addresses, number and class of shares, and consideration for shares
  • Form 6, an application for name reservation

Companies are not required to present a memorandum or articles of association, saving significant legal advisory costs. Companies may elect to adopt a constitution but this is not legally required.

The total cost payable is comprised of the application to register the company (PGK 150), the application to reserve a company name (PGK 50) and stamp duty (PGK 60 + PGK 40 if the company has a constitution).

Time: 19 days

Cost: PGK 560

3. Register with Tax Authorities and Employment Register

The Income Tax Act requires a company continuing business or deriving income in PNG to appoint an PNG resident as a public officer. This appointment must occur 3 months form the date the company commences business operations or begins earning income in the country, via written notice to the Internal Revenue Commission.

Tax notices and forms are filed to the attention of the Internal Revenue Commissioner. The forms may be submitted in a single filing, and the procedure takes between one week to a month.

If companies employ one or more employees on a weekly salary of more than PGK 126 per week, they must register as “group employer” through written notice to the Internal Revenue Commission.

Businesses or individuals with annual turnover exceeding or expected to exceed PGK 100,000 are required to register for goods and services tax (GST) by completing Form 1 with the Internal Revenue Commission. This form requires the company’s business name and description of its proposed main business activities along with the street and postal address of the registered office, and a statement of its monthly sales and liabilities.

Time: 9 days

Cost: No cost involved

4. Apply for a trade license

Companies in Port Moresby are required to obtain a trading license from the National Capital District Commission.

Time: 20 days

Cost: PGK 50

5. Open an Authorised Superannuation Fund account

The Superannuation (General Provisions) Act 2000 requires a company with 15 or more employees to contribute to an Authorised Superannuation Fund (ASF – a superannuation fund that has been approved and licensed by the Central Bank).

Employers must remit their employer contributions to the ASF within 14 days of the end of each calendar month during which the relevant contribution is due for deduction for an employee’s pay. It is considered an offence for employers not to make contributions, and the Central Bank has the power to instigate proceedings against any person committing such an offence.

Time: 7-10 days, completed simultaneously with previous procedure

Cost: No cost involved

6. Register workers for private work injury insurance

There is no registration requirement, but it is an offence for employers to employ any worker without an insurance or indemnity policy issued by a licensed insurer for injury arising during or out of employment.

Time: 10-30 days, completed simultaneously with previous procedure

Cost: PGK 200

Branch

Branches are often preferred over incorporating subsidiaries by companies wishing to consolidate their financial results.

Setting up a branch is in many ways quite similar to incorporating a new company in PNG. There is an application form to be filled in, in accordance with the Companies Act, which is relatively simple and the only real step in setting up the branch. However, there are stricter guidelines around financial reporting, alterations to the constitution and other activities that become a concern once the branch is set up.

The following must be provided:

  • The name of the overseas company
  • The full names and addresses of the parent company’s directors
  • The full address of the place of business in the parent country, or its principle place if there is more than one
  • Evidence of incorporation of the overseas company and copy of its constitution, if applicable, and an English version of any documents
  • The full name, residential address and postal address of one or more persons resident of incorporated in the country authorised to accept service in the parent country
  • Details of the activity the parent company intends to carry out via its branch

Time: Several weeks

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Papua New Guinea, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in PNG they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities. A GEO Employer of Record solution is an attractive alternative where

  • the company is looking to setup an office quickly
  • the company wants to work within a defined budget
  • the company wants to limit its initial commitment in PNG
  • the company needs help with tax, employment, immigration and payroll compliance in PNG

The complexity of employment regulations in Papua New Guinea makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in PNG allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in PNG.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into PNG. Read more about outsourced employment through Shield GEO.

  • Papua New Guinea Employer of Record Overview

Papua New Guinea Employer of Record Overview

  • Papua New Guinea Employer of Record Overview

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