Do I Need a Local Entity to Hire in Madagascar?

In Madagascar, a "local entity" refers to a business structure recognized by local authorities, such as a subsidiary or branch office. This setup allows your company to be recognized as an employer, enabling you to fulfill payroll and employment obligations locally.

Without a local entity, you generally cannot manage local payroll, register as an employer, or comply with mandatory employment laws. However, using an Employer of Record (EOR) can simplify the process, allowing you to hire employees without establishing a local entity.

What is Required to Employ Someone in Madagascar?

• Local employing entity required to directly employ? Yes (required for direct employment unless using an EOR)
• Payroll registration required? Yes (must register with the Direction Générale des Impôts)
• Withholding/tax remittance required? Yes (employers must withhold income tax and remit to the tax authority)
• Social contributions required? Yes (mandatory contributions to the Caisse Nationale de Prévoyance Sociale)
• Local employment agreement required? Yes (written contracts are mandatory under local labor law)
• Mandatory benefits to budget? Yes (includes paid leave, health insurance, and retirement contributions)
• Works council/collective agreements considerations? Usually (certain sectors may require adherence to collective agreements)

Best Options If You're Hiring in Madagascar

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but you should be cautious about the nature of the relationship.

Hiring contractors in Madagascar can be a viable option, but it's essential to ensure that the contractor operates independently. Misclassification risks arise if the contractor's work resembles that of an employee, which could lead to legal complications.

• Ensure the contractor has multiple clients and is not exclusively working for your company.
• Maintain minimal control over how the work is performed to avoid the appearance of an employer-employee relationship.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to set up an entity in Madagascar, depending on the required registrations.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated 300,000–800,000 MGA per month ($75–$200)
• Payroll provider: Estimated 50,000–150,000 MGA per employee per month ($12–$37)
• Employer registrations and recurring compliance: Varies by complexity
• Corporate tax filings and annual reporting: Estimated 1,000,000–3,000,000 MGA per year ($250–$750)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 per month with Playroll)
• Pass-through statutory costs (e.g., employer social security contributions)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Madagascar

Hiring in Madagascar can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Madagascar quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.