What You Need to Know About Payroll Taxes in Lesotho

Managing payroll taxes in Lesotho is a critical task for any business, whether you’re a small startup with a handful of staff or a larger enterprise operating across multiple locations. In Lesotho, employers must contend with withholding personal income tax (PAYE), possible contributions to workmen’s compensation or industrial injury funds, and certain withholding taxes on payments to contractors or non-residents. Getting it right matters. Failing to withhold correctly or to remit on time can lead to penalties, interest, audits, or strained relationships with employees who see unexpected deductions.

This article aims to demystify payroll tax obligations in Lesotho. You’ll learn how taxes are calculated, when and how to file and pay, what rules differ by business size or whether the employer is local or foreign, and how to maintain compliance.

Fiscal Year in Lesotho

April 1st - March 31st is the 12-month accounting period that businesses in Lesotho use for financial and tax reporting purposes.

Payroll Cycle in Lesotho

The payroll cycle in Lesotho is usually Monthly, with employees being paid last day of the month.

Minimum Wage in Lesotho

In April 2025, Lesotho’s government enacted a 5 percent increase to all sectoral minimum wages for the 2025/2026 financial year, bringing factory‐sector rates to between LSL 2 724 and LSL 3 041 per month; construction to LSL 3 226–LSL 5 664; wholesale and retail to LSL 3 088–LSL 3 276; small retail to LSL 2 792–LSL 2 950; hospitality to LSL 2 779–LSL 3 058; and domestic workers to LSL 872.

Bonus Payments in Lesotho

There is no mandatory provision for a 13th-month salary in Lesotho.

Types of Payroll Taxes in Lesotho

In Lesotho, the landscape of payroll taxes is not overly fragmented, but there are several major categories you must be aware of. Each carries its own rules, thresholds, and compliance requirements.

Tax Example 1: Pay As You Earn (PAYE) / Employee Income Tax Withholding

PAYE is the primary mechanism by which the government collects income tax from employees. Employers must withhold tax from each employee’s remuneration (salaries, wages, bonuses, allowances, benefits in kind) and remit that to the Revenue Services Lesotho (RSL).

Key features include:

 
• Why required: Ensures the government collects income tax progressively through the year, rather than requiring large lump sums later.
 
• Rates / thresholds: As of April 2025, resident individuals pay 20% on income up to LSL 74,040 per year and 30% on income above that.
 
• Tax credit / rebate: Residents are entitled to a non-refundable tax credit of LSL 11,640 per year (or LSL 970 per month) to reduce their liability.
 
• Deductible contributions: Employee contributions to approved pension or provident funds (up to 20% of employment income) may be deductible before applying tax brackets.
 
• Deadline / penalties: The withheld tax must be remitted to the RSL by the 15th of the month following the pay period. Late remittance or incorrect withholding can result in penalties, interest charges, or audits.

Tax Example 2: Withholding Tax on Contractors, Technical Services & Non-residents

Beyond regular employee tax, Lesotho imposes withholding taxes (WHT) on various types of payments, particularly when dealing with contractors, service providers, or non-residents.

Key points:

 
• What / why: When paying for services (accounting, consulting, legal, technical, construction, etc.), the payer (often the business) must withhold a portion of the payment as tax and remit it. This helps ensure income is taxed even when the recipient is not a resident.
 
• Rates:    
       
  • Resident contractors: 5% withholding tax
       
  • Non-resident contractors: 10%
       
  • Non-resident technical / service income (e.g. from RSA): 7.5% (in some cases)
 
• Deadlines / remittance: Must be withheld at the time of payment, and remitted to RSL monthly by the 15th following the end of the period in which the withholding occurred.
 
• Penalties: Failing to withhold or remit can attract fines, interest, and possibly disallowance of certain deductions.

Tax Example 3: Fringe Benefits Tax (FBT) / Benefits in Kind

Lesotho imposes taxation on certain benefits or perks an employee receives beyond salary.

Key facts:

 
• What / why: Benefits such as housing, vehicles, utilities, or other perks are sometimes viewed as additional compensation and taxed under FBT rules or included as part of employment income.
 
• Rate: The FBT rate is 40% on the taxable portion of the benefit.
 
• Integration / reporting: If FBT applies, those benefits should not be double counted as taxable in both payroll and separate benefit regimes. Employers need to assess whether they operate a formal FBT regime or include benefit values in income subject to PAYE.
 
• Penalties: Mis-reporting or non-inclusion of benefits can trigger audits, additional taxes, and penalties.

How to Pay Employees in Lesotho

Once you’ve calculated gross pay and withheld the necessary taxes, the process of actually paying employees in Lesotho has its own practical steps.

In Lesotho, the standard method for salary disbursement is via bank transfer to the employee’s local bank account. Employers generally pay salaries in the local currency, the Lesotho loti (LSL). While the South African rand (ZAR) is legal tender in some contexts, payroll practice is to use LSL consistently.

Salaries are typically paid monthly, often on or before the last working day of the month. Employees must be issued payslips that clearly show gross pay, all deductions (taxes, benefits, contributions), and net pay.

For foreign employers without a local Lesotho-registered entity, partnering with a payroll provider or using an Employer of Record (EOR) ensures compliance with registrations, filings, and remittances.

Key considerations at a glance:

 
• Payment method: Bank transfer is the norm; cash is rare and more regulated
 
• Currency: Salaries generally paid in Lesotho loti (LSL)
 
• Frequency / timing: Monthly payments, typically by the end of the month
 
• Foreign employers: Use EOR or local payroll provider if no local entity
 
• Payslips: Must detail gross pay, each deduction, and net pay

How To Set Up Payroll in Lesotho

Getting payroll set up correctly from the start is crucial. It protects you legally, builds trust with employees, and avoids headaches down the road.

 
• Register with RSL (Revenue Services Lesotho) to obtain a Taxpayer Identification Number (TIN) and PAYE registration
 
• Gather employee data: personal info, bank details, tax status, allowances, pension fund membership, benefit elections
 
• Define pay periods and dates for processing
 
• Determine gross pay elements: base salary, overtime, allowances, bonuses, benefits
 
• Implement deduction rules: PAYE, withholding taxes, FBT, pension contributions, other statutory deductions
 
• Choose payroll system or provider to automate calculation, withholding, recordkeeping, and filing

Other key points:

 
• Use official tax tables or approved payroll software to ensure correct withholding
 
• Maintain contemporaneous records (payroll registers, payslips, remittance confirmations)
 
• Train payroll staff or the provider to stay current on tax updates and regulatory changes

Example of Salary Tax Calculation

Suppose an employee is a Lesotho resident earning LSL 100,000 annually (≈ LSL 8,333 per month) and contributes LSL 5,000 to an approved pension fund. Here’s a simplified approach:

 
1. Deduct pension contribution (allowed up to 20%): Chargeable income = 100,000 − 5,000 = 95,000
 
2. Apply tax brackets:    
        
   • First LSL 74,040 taxed at 20% → 14,808
        
   • Remaining 20,960 taxed at 30% → 6,288
        
   • Total tax before credit = 21,096
 
3. Subtract tax credit (residents): 11,640 → Tax due = 9,456
 
4. Divide by 12 to get monthly withholding: 788 LSL (approx)

Submitting Employee Tax in Lesotho

 
• Use the RSL e-Tax or electronic filing portal
 
• Submit monthly PAYE return showing total salaries, deductions, and withheld amounts
 
• Remit the withheld PAYE and withholding taxes by the 15th day of the following month
 
• Reconcile and file annual tax reconciliations where required

Payroll Tax Due Dates in Lesotho

Payroll and Employee Tax Contributions in Lesotho

Understanding the tax obligations for both employers and employees is crucial when operating in Lesotho’s business landscape. The main payroll burdens fall on correctly withholding employee income tax (PAYE) and managing withholding taxes on service payments or non-resident payees. Employers rarely face broad social security burdens but must remain aware of specific industry liabilities such as workmen’s compensation and ensure benefits and fringe perks are handled correctly.

Payroll and Employee Tax Contributions in Lesotho

Understanding the tax obligations for both employers and employees is crucial when operating in Lesotho's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in Lesotho.

Employer Tax Contributions

Employer payroll contributions are generally estimated at 0% on top of the employee salary in Lesotho.

Employee Payroll Tax Contributions

In Lesotho, the typical estimation for employee payroll contributions cost is around 11%.

Individual Income Tax Contributions

Lesotho imposes individual income tax at progressive rates, ranging from 20% to 30%.

Pension in Lesotho

The public pension is funded by the state and does not require contributions from the employer.

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Managing Common Payroll Challenges in Lesotho

Global employers operating in Lesotho often encounter unique payroll challenges that can affect compliance and efficiency, like navigating evolving tax laws and managing employee data. With a need for real-time accuracy, modern organizations must develop strategies to overcome these challenges effectively. Below, we explore some of the most common payroll hurdles and provide actionable solutions to streamline payroll processes in Lesotho.

Maintaining Accurate and Detailed Payroll Reports

Maintaining accurate global payroll reports is often challenging due to currency exchange complexities, data integration issues, and the need to keep employee information up-to-date – including tax information, hours worked, leave balances, and any changes in salary or job status. Generating accurate reports is easy with a comprehensive payroll automation tool that consolidates fragmented data sources, and can keep track of employee payments and deductions.

Keeping Up With Ever-Changing Tax Laws & Compliance Laws

In Lesotho, tax laws and compliance regulations can change frequently, presenting a significant challenge for global employers. Monitoring updates to federal, state, and local tax codes is crucial to avoid non-compliance and costly penalties, but requires significant time and resources. Partnering with local experts or a reputable global HR platform is an effective way to maintain compliance. These services can help employers stay compliant with evolving regulations while freeing up time for more strategic work.

Consolidating Multi-Vendor Payroll Analytics

Managing payroll across multiple vendors often leads to fragmented data and inefficiencies, making it difficult to consolidate analytics. These challenges can hinder decision-making, especially when trying to gain a clear view of workforce costs and trends. To address this, organizations can invest in a centralized payroll management system that unifies data from multiple vendors. A consolidated platform simplifies payroll tracking, ensures data accuracy, and provides actionable insights into payroll expenditures.

Integrating Multiple HR & Payroll Systems

Global companies are prone to using multiple HR or payroll systems across regions, which can easily lead to fragmented payroll data, increasing the risk of delays and errors in employee compensation. To combat this, seamless integration between payroll and other systems is critical.

Payroll management systems that connect with existing HR and financial platforms can help streamline workflows by reducing manual inputs and ensuring that all departments operate with up-to-date, accurate information. In turn, this helps guarantee on-time, accurate payroll, boosting employee satisfaction.

What Does a Global Payroll Management Platform Cover?

A global payroll management platform is a software solution designed to streamline and automate the payroll processes for organizations with employees across multiple countries. It helps ensure accurate and timely payment while maintaining compliance with legal and regulatory requirements in Lesotho.

Key functions of a payroll management platform can include:

• Consolidate payroll data: Streamline fragmented payroll data into one source of truth when you’re operating in multiple regions.
   
• Analytics and reporting: Advanced capabilities to analyze payroll data and generate automated reports per region.
   
• Monitor and standardize payroll: Get an accurate view of employee costs, bonuses, and taxes per region, catch variances, and standardize payroll processes across regions to minimize errors.
   
• Compliance and record-keeping: Maintains accurate payroll records and ensures adherence to labor laws and regulations, reducing the risk of legal issues.
   
• Employee self-service: Provides portals where employees can access pay stubs, update personal information, and manage benefits selections.

How Playroll Can Streamline Payroll & Taxes in Lesotho

Expanding globally is an exciting milestone for any company, but it comes coupled with complex payroll challenges. It doesn’t have to be complicated. At Playroll, our easy-to-implement global payroll management software combines automation with hands-on support to make global payroll truly simple. Here's how Playroll helps:

• Multi-Vendor Integration: Our platform syncs seamlessly with your providers and in-house systems to unify global payroll services in one platform.
   
• Standardize Payroll Processes: Unify your operations in one dashboard to ensure payroll is running smoothly globally, with advanced approval flows and reports.
   
• Improve Governance & Compliance: Improve compliance by centralizing all your compliance tasks and processes. Easily track your payment obligations, with digitized audit trails.
   
• Advanced Reporting: Access and configure your data, your way, with a comprehensive suite of payroll analytics and reporting tools.