Do I Need a Local Entity to Hire in Tanzania?

In Tanzania, a "local entity" typically refers to a registered business presence, such as a subsidiary or branch office, that can act as the employer. This setup is essential for managing payroll, tax obligations, and compliance with local labor laws. Without a local entity, foreign companies cannot directly employ individuals, as they would lack the necessary legal framework to fulfill employer responsibilities.

Fortunately, an alternative exists: using an Employer of Record (EOR). An EOR allows you to hire employees in Tanzania without the need to establish a local entity, ensuring compliance with local payroll and employment regulations while minimizing administrative burdens.

What is Required to Employ Someone in Tanzania?

• Local employing entity required to directly employ? Yes (a local entity is necessary for direct employment)
• Payroll registration required? Yes (registration with the Tanzania Revenue Authority is mandatory)
• Withholding/tax remittance required? Yes (employers must withhold and remit income tax)
• Social contributions required? Yes (employers must contribute to the National Social Security Fund)
• Local employment agreement required? Yes (written contracts are standard practice)
• Mandatory benefits to budget? Yes (includes paid leave, social security, and health insurance)
• Works council/collective agreements considerations? Usually (certain sectors may have collective agreements)

Best Options If You're Hiring in Tanzania

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but be cautious about misclassification risks.

While hiring contractors in Tanzania allows you to avoid setting up a local entity, it’s crucial to ensure that the contractor is genuinely independent. Misclassification can lead to legal complications, especially if the contractor is treated like an employee.

Consider these factors when hiring contractors:

• Ensure the contractor has multiple clients and is not exclusively working for you.
• Allow contractors to set their own hours and methods of work.
• Keep the contractor's role clearly defined and project-based.

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 Tanzania, depending on the type of business and required registrations.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated 500,000–1,500,000 TZS per month ($215–$650)
• Payroll provider: Estimated 100,000–300,000 TZS per employee per month ($43–$130)
• Employer registrations and recurring compliance: Estimated 200,000–500,000 TZS per year ($87–$215)
• Corporate tax filings and annual reporting: Estimated 1,000,000–3,000,000 TZS per year ($430–$1,300)

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, typically around 10% of gross salary)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Tanzania

Hiring in Tanzania 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 Tanzania 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.