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Maldives – Employer of Record

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Country Introduction – MALDIVES

Maldives, officially the Republic of Maldives, is a small archipelagic state in South Asia situated in the Indian Ocean. It lies southwest of Sri Lanka and India, about 700 kilometres from the Asian continent’s mainland. The Maldives is one of the most popular tropical vacation locations and has been recognised by the international tourism community as well. And to top that off, it is quite an interesting place to be, with its unique history, culture, and traditions.

Contract of Employment

The Employment Act mandates the employer to enter into an Employment Agreement in writing. Such agreement shall be entered on or before the commencement of employment. There are no exceptions to the rule, and consequently even small employers are required to comply.

The particulars of Employee, such as, name, present and permanent address, phone no, identity card no (for Maldivians), passport no & work permit no (for foreigners), date of birth, nationality, name and address of emergency contact person.

Details of Employment, such as job title, job level / grade: (if applicable), date of commencement of employment, probation period, place of employment, normal working hours per day and per week, pay period and type of employment (that is fixed term, permanent or project based), salary and allowances and other benefits, leaves and holidays, grievance and disciplinary procedures must be specified.

Types of Employment Agreement recognized under the Act.

1. Fixed Term Agreement (definite term)

–  Maximum duration of two (2) years.
–  The contract must specify that it is a fixed term contract and contract starting date and end date.
–  The employment relationship is deemed as terminated upon the expiry of the Fixed Term.
–  If the duration of a Fixed Term contract is more than 2 years, then the contract is deemed as permanent.

The employee has statutory ‘right not to be unfairly dismissed’. Due process of the law must be followed (i.e. employer must show (1) substantial fairness, and (2) procedural fairness) to terminate an employee after the probation period, but before the expiry of the Fixed Term.

2. Permanent Agreements (indefinite term)

–  Permanent employment relationship on an indefinite duration.
–  The employment relationship will remain unless termination by the employer, employee or by operation of law.
–  The employee has statutory ‘right not to be unfairly dismissed’ (upon completion of probation period)

3. Employment agreements specific for a specific work (such as projects)

–  Such contracts are neither deemed as Fixed Term nor Permanent Employment
–  The contract must specify that it is an employment contract for a specific work
–  The employment relationship is deemed as terminated upon completion of work
–  The employee has statutory ‘right not to be unfairly dismissed’ (upon completion of probation period)

Probation Period

The Employment Act provides for probation period. The maximum duration of probation period is three (3) months. Probation period cannot be extended or renewed.

A significant aspect of probation period is that either party has the right to terminate the contract during the probation period without cause or reason, and without following any due process.

Termination

The Act provides that every employee has a statutory right not to be unfairly dismissed.

As a general rule, an employee may be terminated where further continuation of employment is unworkable or detrimental to the employer. The courts have established that in termination of employment the employer must establish (1) procedural fairness and (2) substantial fairness.

Procedural fairness means the case must be fully investigated as per the written policies of the company and among other things, the concerned employee must be given the opportunity to respond to the allegations of misconduct.

Substantial fairness means the actual reason(s) for termination must be reasonable and fair, taking into account all the circumstances of the case, previous record of the concerned employee and previous decisions of the company in similar cases.

In order to terminate the employee without notice, the employer must establish, on balance, that any other reasonable employer would have treated the particular misconduct in hand to be so serious that no other reasonable employer would have tolerated.

Notice period for termination:

The Employer may terminate the service of an employee or call upon the employee to resign from the service of the Employer. In this case the employee would be entitled to a notice period as specified below:

–  Two weeks’ notice for any person in employment for more than six months but less than one year
–  Once month notice for any person in employment for more than one year but less than five years
–  Two months’ notice for any person in employment for more than five years

The notice period is not applicable where the termination is due to gross misconduct. Even in instances where the employee is terminated under notice, due procedures and substantial fairness must be established.

Remedies for unfair dismissal

The principal remedies for unfair dismissal are re-instatement, re-engagement, and compensation. The most commonly awarded remedy is re-instatement.

Working Hours

The standard work week in Maldives is 48 hours per week or eight hours a day, Sundays to Thursdays. Friday and, to a lesser extent, Saturday, are the rest days for employees.

Overtime

Employees shall not be required to work overtime except unless this has been agreed in the employment agreement. Any work carried out over time shall be subject to the requirements of subsection (b) and Section 38 of this Act. An employee working overtime shall be paid 1 1⁄4 times his hourly working wage as over time, and if working overtime on a Friday or a public holiday shall be paid 1 1⁄2 times his hourly working wage as over time.

Time for Prayer

Every employee shall be allowed 15 (fifteen) minutes to pray during each prayer period in such a manner that it does not disrupt work. In the event that a 15 (fifteen) minute break for prayer is not allowed, a fifteen-minute break shall be allowed every four consecutive hours of work.

Annual Leave

Employees are entitled to 30 days of annual leave on completion of each year in employment.

If an employee doesn’t utilize his or her annual leave in full in any given year, it’s forfeited.

For example, say an employee works for 2 years and 2 months. And only took an annual leave of 20 days by the end of his or her second year. The balance of 10 days will be forfeited as a general rule.

And on the above example, say that the employee wished to resign on the anniversary of 2 years and 2 months in employment. He/she has worked 2 months in their “third year”. That is considered as “accrued leave”, which will accrue at the rate of 2.5 days per calendar month. This means on the last working date; the employee has to be paid 5 days equivalent salary as part of the final settlement pay.

Sick leave

An employee is entitled to sick leave up to 30 days every year. The employer may not grant sick leave unless a medical certificate issued by a registered medical practitioner is produced in evidence of a medical condition that would prevent the employee from work. There is one exception. The employee may up to a total of 15 days a year opt for sick leave without producing a medical certificate if on every occasion the sick leave does not exceed 2 consecutive days.

Maternity Leave

Female employees will be granted sixty days’ maternity leave. The durations for both the maternity and paternity leaves are now different because of the new policy.

The employment act also states that the leave must be based on a medical certificate that specifies the estimated date of giving birth issued by a licensed medical practitioner and that the act does not allow the leave to begin 30 days before the estimated date of birth.

It is also important to note that the wages of the female employee must be duly paid on the same day salary payments are made in the normal course of business even if the employee is on maternity leave. A further leave of 28 days can be given to an employee if she is not able to return to work due to her ill health or the baby’s. But, the employer has the preference to not pay the employee for the duration of this leave.

Paternity Leave

The duration of the leave is currently set at 3 days.

Ramadan Bonus

Only Muslim Maldivian employees have to be paid mandatorily. Which is MVR 3,000 and should be paid before the start of Ramadan.

Reimbursement of Expenses

Nominal personal and business expenses are not taxable.

Goods and Services Tax (G.S.T):

Goods and Services Tax (GST) is a tax charged on the value of goods and services supplied in the Maldives. GST is charged under the Goods and Services Tax Act (Law Number 10/2011).

Registration is compulsory if the value of taxable supplies of a business exceeds MVR 1 million per annum. However, importers of goods to the Maldives and suppliers of tourism goods and services are required to register even if the value of their supplies does not exceed the MVR 1 million thresholds.

The act imposes a G.S.T rate of 6% and a T.G.S.T rate of 12%.

Income Tax

Income Tax is levied under the Income Tax Act (Law Number 25/2019). Companies that make more than MVR 500,000 as taxable income per tax year will have to pay 15% of the taxable income as Income Tax.

Employer/Employee Contributions

The employer and employee will have to pay 7% of the employee’s salary to the Maldives Pension Fund every month. The employer will have to pay for the expatriate’s medical and provide expatriate insurance annually.

Public Holidays

All workers are entitled to nine public holidays, which includes:

–  Day of Commemoration of the Birth of Prophet Mohamed
–  Eid-ul Al’haa
–  Eid-ul Fitr
–  First Day of Ramadan
–  Hajj Day
–  Independence Day
–  Republic Day
–  The Day Maldives Embraced Islam
–  Victory Day

Severance Pay

If the period of service is less than one year, the employer is to give one month’s notice or pay a month’s salary.

If the employee has served for a period between 1 and 4 years, the requirement is to give 2 months’ notice or pay two months’ salary.

If an employee has been in employment for a period exceeding 4 years, the employer has to provide 3 months’ notice, or pay 3 months’ salary.

Work and Residence Permits (Expatriates)

Employment for foreigners in Maldives is allowed under the permission granted from the Permits and Foreign Employment Division (PFED) of Maldives Immigration MI. MI issues a Work Visa (WV) based on Employment Approval (EA) issued by PFED. EA is a written statement granting permission for expatriates to work in the Maldives. It is the responsibility of the employee to confirm that EA is approved before arriving to Maldives for Employment.

Obtaining EA:

EWS will handle the EA for expatriate workers.

It will take about two weeks to process an expatriate employee’s EA.

The work permit fee is approximately MVR 450 (USD 30) per month.

EA Process:

1.  Online Preliminary Check
2.  Verification
3.  Approval

The employee must arrive in Maldives for employment within 90 days from the date of issue of the EA. Even though the EA is issued to an employee, MI reserves the right to prohibit the employee from entering into Maldives, if he/she is on the screening hit list.

EA documents (employee):

1.  Employee’s passport Bio data page colour copy (valid for more than 01 year)
2.  Passport size digital photo of the employee (white background).
3.  Letter of Appointment including employment agreement
4.  Relevant educational/professional certificate(s) of the employee

EA Extension:

All the EA’s issued from XPAT are issued with an expiry date. Application for EA extension should be submitted (three) 3 months before the expiry of EA. Applied EA will be extended for 1 year; however, if the quota expires before (one) 1 year, the EA will be extended up to quota expiry.

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