Employing staff in the Maldives: an employer's guide to the basics

Hiring your first employee is a big step for any business. In the Maldives, the relationship between employers and employees is governed mainly by the Employment Act (Law No. 2/2008) and its amendments, together with rules on pensions, tax and foreign workers. This guide summarises the essentials. It is a starting point, not a substitute for reading the law or getting advice on a specific situation.

The Employment Act and who enforces it

The Employment Act sets minimum standards for contracts, working hours, leave, wages, dismissal and workplace safety. It has been amended several times; the Sixth Amendment (2020) and Seventh Amendment (2022) made notable changes covered below. The Labour Relations Authority (LRA) oversees compliance and handles complaints, and the Employment Tribunal decides disputes. The official English text of the Act is published on the LRA's website.

Employment agreements

Every employee should have a written employment agreement. It should state, at minimum:

• the names of the employer and employee;
• the job title and main duties;
• where the work will be done;
• the start date and, for fixed-term work, the end date;
• wages, how and when they are paid, and any allowances;
• working hours and days;
• leave entitlements; and
• any probation period and notice requirements.

The agreement cannot give the employee less than the Act guarantees. If a clause offers less, the legal minimum applies instead. Keep signed copies, and give the employee a copy too.

Working hours and overtime

The Act limits normal working time to 48 hours a week, not counting authorised overtime. Breaks are not counted as working time. Overtime must be paid at a higher rate: at least 1.25 times the normal hourly wage on ordinary days, and a higher rate (reported as 1.5 times) when it falls on a public holiday. Employees should not be required to work overtime unless their agreement provides for it. Some categories of workers, such as senior managers and certain shift workers, are treated differently, so check the exemptions if they might apply to your staff.

Leave entitlements

• Annual leave: 30 days of paid annual leave after one year of continuous service. Probation periods are not counted when working out eligibility. Unused leave is generally paid out when employment ends.
• Sick leave: at least 30 days of sick leave in each year of service. Under the Sixth Amendment, an employee can take up to 15 of those days without a medical certificate, as long as each absence is no longer than two consecutive days. Beyond that, the employer can ask for a certificate from a registered medical practitioner.
• Maternity and paternity leave: the Act provides paid maternity leave and paternity leave. The entitlements have been revised over the years, so check the current version of the Act for the number of days that applies.
• Public holidays: employees who work on a public holiday are entitled to extra pay on top of their normal wage.

Wages and the minimum wage

Wages must be paid in full and on time, at least monthly, and employers should keep payroll records. The Sixth Amendment empowered the minister to set a national minimum wage, advised by a Minimum Wage Advisory Board. The first minimum wage order was issued in 2021, with rates that differ by sector, and it applies to Maldivian employees. The Seventh Amendment (2022) postponed the obligation to pay the minimum wage to expatriate employees until a date announced by the minister.

Because the rates and their scope are set by order and can change, look up the current minimum wage order before setting salaries rather than relying on figures quoted online.

Pension contributions (MRPS)

Employers must register their Maldivian employees aged 16 to 65 with the Maldives Retirement Pension Scheme (MRPS). Each month, both the employer and the employee contribute 7% of the employee's pensionable wage: the employer pays its share and deducts the employee's share from their salary, then pays both to the scheme. For foreign employees and self-employed Maldivians, participation is voluntary.

Income tax on salaries

Since 1 April 2020, employment income has been taxable in the Maldives under the Income Tax Act (Law No. 25/2019). Employers are responsible for Employee Withholding Tax: each month, they calculate tax on the employee's remuneration (after the employee's MRPS contribution, and including allowances and benefits in kind), deduct it from the salary, and pay it to MIRA. Income up to MVR 720,000 a year (about MVR 60,000 a month) is taxed at 0%, so many employees pay no income tax, but employers must still run the calculation correctly. Our guide to income tax for employees explains the rates in detail.

Hiring foreign workers

Many Maldivian businesses rely on foreign staff, especially in construction, tourism and services. Hiring a foreigner involves several steps, all managed through the government's Xpat system:

1. Register as an employer on the Xpat system and declare your worksite.
2. Apply for a foreign worker quota for the specific job categories you need. You may need to show that no suitable Maldivian candidate is available, for example by advertising the job through the national job centre.
3. Apply for a work permit entry pass for the employee, which they present on arrival.
4. Arrange the work permit medical, which must be submitted within 15 days of arrival.
5. Obtain the work visa through the Xpat system within the deadline after arrival.

Employers pay quota and work permit fees (the Employment Act framework has set an annual quota fee of MVR 2,000 and a work permit fee of MVR 350, but check current amounts) and are responsible for keeping every foreign employee's permit and visa valid. Missing deadlines leads to fines, and the government has suspended Xpat services for employers with unpaid fees and fines. The process is explained step by step in our guide to the Maldives work visa.

Foreign employees are also entitled to the protections of the Employment Act, including written agreements, working hours limits, leave and timely payment of wages. Holding an employee's passport is not a lawful way to manage staff.

Ending employment

The Act sets rules on when and how an employment agreement can be ended, the notice that must be given, and what counts as unfair dismissal. Employers generally need a valid reason, such as misconduct or poor performance, and must follow a fair process. Disputes can be taken to the Employment Tribunal. Keep records of warnings, meetings and decisions. If you are considering dismissing someone, take advice first.

Health and safety

Employers have a duty to provide a safe workplace, suitable equipment and training. This is especially important in construction, marine work and kitchens. Accommodation provided for workers should also be safe and adequate.

Records employers should keep

Good records protect both you and your employees, and you will need them if the Labour Relations Authority, MIRA or the pension office asks questions, or if a dispute reaches the Employment Tribunal. Keep, for every employee:

• the signed employment agreement and any later changes;
• copies of ID documents, and for foreign staff, their work permit, visa and medical records;
• time records, including overtime;
• payslips and payroll records showing gross pay, deductions (tax and pension) and net pay;
• leave records, including sick leave and any medical certificates; and
• records of warnings, performance discussions and disciplinary decisions.

Common mistakes new employers make

• No written agreement, or an agreement that offers less than the law requires.
• Unpaid or underpaid overtime, particularly in hospitality and retail where long shifts are common.
• Forgetting MRPS contributions or paying them late, which leads to penalties.
• Not running employee withholding tax because staff earn below the threshold. The calculation and reporting still need to be done.
• Letting foreign workers' permits or medicals lapse, which leads to fines and can block new permits.
• Treating employees as "freelancers" to avoid obligations. What matters is the real working relationship, not the label.

Where to get help

The Labour Relations Authority can answer questions about the Employment Act and handles complaints. MIRA publishes guidance on employee withholding tax, and the pension administration office can help with MRPS registration. For hiring foreign workers, the Xpat system and the Ministry of Homeland Security and Technology's helpline are the first points of contact. For dismissals, disputes or unusual contracts, consult a Maldivian employment lawyer.

A practical checklist for new employers

• Written agreement signed before the first day of work.
• Payroll system that records hours, overtime and leave.
• MRPS registration for Maldivian staff, with monthly contributions.
• Monthly employee withholding tax calculation and payment to MIRA.
• Xpat employer account, quota and permits in place before foreign staff start.
• Calendar reminders for work permit, visa and medical renewals.
• Copies of the current minimum wage order and the Employment Act to hand.