Compliant HR, Payroll, Immigration & Tax
Lesotho is geographically surrounded by South Africa and is economically integrated with it. The Lesotho economy is based on agriculture, livestock, manufacturing and mining. Most households subsist on farming. The formal sector employment consists mainly of female workers in the apparel sector, (they are the largest exporter of garments to the US from sub-Saharan Africa – Brands include Foot Locker, Gap, Gloria Vanderbilt, JCPenney, Levi Strauss, Saks, Sears, Timberland and Wal-Mart). The males are mainly miners and migrate to South Africa for three to nine months. There is also some employment by the Government of Lesotho (GOL).
The Lesotho western lowlands form the main agricultural zone. 50 percent of the population earn income through informal crop cultivation or animal husbandry with nearly two-thirds of the country’s income coming from the agricultural sector.
Some attractions in Lesotho are the Katse Dam, Ts’ehlanyane National Park and the Maletsunyane Falls.
Maloti (L; M or LSL plural) and South African Rand
1 April – 31 March
Maloti (L; M or LSL plural) and South African Rand
1 April – 31 March
Lesotho Size: 30,000 km2 (11,583 sq mi)
Population Size: 2 million people
The name Lesotho roughly translates to “the land of the people who speak Sesotho”.
1 January (New Year’s Day)
11 March (King Moshoeshoe I’s Anniversary)
19 April (Good Friday)
22 April (Easter Monday)
01 May (Workers Day)
25 May (Africa Day)
30 May (Ascension Day)
04 October (Independence Day)
25 December (Christmas Day)
26 December (Boxing Day)
Lesotho’s Immigration Laws do not hold provisions for short term work permits. Best option would be to appeal to the Labour Commissioner directly and request an exemption from work authorization requirements. A letter of confirmation can then be, if the situation is fit to award such decision, issued. This letter from Labour allows the holder to travel to Lesotho on a Tourist visa and still work (although the visa stamp will state this is not allowed, the letter overrules this). This route, however, is not an option if the work will take longer than 2 weeks. When duration of work to be done is longer than 2 weeks an actual work permit must be applied for.
A long-term work permit in Lesotho is issued by the Ministry of Labour, not Home Affairs. The Ministry of Labour may – after studying the profile of the applicant, his or her qualifications and CV and the related vacancy – issue a foreigner with a work permit valid for 2 years. The bottom-line is to convince the Ministry that no fit local is losing out on getting this job.
It is important to note: Lesotho distinguishes between work and residence permits. As soon as work authorization is obtained from the Ministry of Labour the work permit holder must get a residence permit from the Ministry of Home Affairs in order to also legally reside in the country. With the work permit and the required personal documents (e.g. medical certificate and police clearance from home country) in hand getting the residence permit is a formality and done within 2 days.
Tourist visa can be issued at the Lesotho boarder or at the Embassies if the passport holder is visa restricted.
Long term visas take 2 – 4 weeks to process and is usually valid for 2 years.
Residence permit is to be applied for separately from a work permit. Residence permits are approved by the Minister of Home Affairs in Lesotho.
Lesotho has a residence-based tax system in terms of which residents are subject to tax on their world-wide income, whereas non-residents are subject to tax only on their Lesotho-sourced income.
Corporate Tax Rate
- Resident companies and permanent establishment of foreign companies are subject to corporate tax at the rate of 25%.
- A concessional tax rate of 10% applies to income from manufacturing and commercial farming.
Personal Income Tax (PIT) (Employees and Sole Traders)
Two marginal rates are applicable when calculating PIT. 20% and 30%
Company Income Tax (CIT)
For manufacturing companies and commercial farming 10%
Other companies 25%
The Lesotho Revenue Authority (LRA), which was established by Act of Parliament in 2001 and became operational in 2003, is principally responsible for the assessment, collection and remittance to the Government of public revenues in Lesotho.
Ground Floor, Finance House Building, Government
Office Complex, Kingsway Road, Maseru
+266 22 313796
Income tax as the name denotes is a tax payable on a person’s taxable income and is classified as a direct tax. It is regulated by the provisions of the Income Tax Act of 1993 and its regulations thereof. It is imposed upon all persons earning income; being individuals, partnerships, companies or other taxable entities, to name a few; associations, trusts, clubs. It is assessed annually, and all rates changes also fixed annually by parliament’s motion through the Minister of Finance’s recommendation through his budget speech.
Pay as You Earn (PAYE) is a tax charged by an employer from an employee’s earnings, then remitted to LRA. All natural persons are entitled a tax credit (which is a saving of tax) from their tax liability, the amount of which is reviewed annually by the Minister of Finance
Employment income is the total earnings of an employee that arise from an employment relationship. Total earnings refer to all income received by or credited in favour of an employee arising from an employment relationship.
Employment income includes the following: wages, salaries, bonuses, allowances, overtime payments, leave payments, commission, gratuity, supplementary pay, fees, severance pay and other income of similar nature. It may even be gifts by the employer or third parties that would otherwise not be given, but for the employment relationship.
How is the employment income taxed?
Under the PAYE system, the amount of tax to be deducted from the employee’s remuneration or total earnings depends on the following:
- The employees’ total earnings,
- The applicable marginal tax rates,
- Allowable deductions (e.g. Contributions to an approved pension fund, retirement annuity fund.)
Resident Individuals: marginal rates per annum
- 1st M61, 080. 00 @ 20%,
- excess @ 30%
- Less Tax Credit of M7, 260.00
- Non-residents: standard rate – 25%
Corporate tax is managed under the Income Tax Act of 1993
Provisional tax can be paid in 2 equal instalments and is to be paid in full prior to the financial year end.
There is no payroll tax in Lesotho.
Lesotho has concluded Double Taxation Agreements (DTA) with the following countries: South Africa, Ireland, United Kingdom & Mauritius
Types of contracts
Employment contracts can be as follows:
- Make no reference to a time limit i.e. it does not contain a termination date and may be terminated by either party.
- Reference to a specific time period of a fixed duration. This contract will automatically terminate, and no notice needs to be issued.
- State specific work or to undertake a specified journey; No notice of termination shall be required of either party, but an employer who terminates such a contract before its completion shall pay the employee all wages and other remuneration that would have been owing to the employee if he or she had continued to work until the completion of the contract
Notice of termination
- For contracts without reference to limit of time, either party may terminate the contract upon giving the following notice:
- where the employee has been continuously employed for one year or more, one month’s notice;
- where the employee has been continuously employed for more than six months but less than one year, a fortnight’s notice.
- where the employee has been continuously employed for less than six months, one week’s notice.
Payment in lieu of notice
- Without prejudice to section 67, the employer may pay an employee in lieu of providing notice of termination under section 63.
- In such cases, the employee shall be paid a sum equal to all wages and other remuneration that would have been owing to the employee up to the expiration of any notice of termination which may have already been given or which might then have been given.
- Where the termination of employment under a contract without reference to limit of time has been at the initiative of the employee in circumstances in which notice was required, and the employer has not waived the right to notice, the employee may be ordered to pay the employer a sum equal to the basic wages to which the employee would have been entitled during the portion of the notice period that was not observed. This provision may not be invoked if the termination of employment occurred in the circumstances referred to in section 67 or 68 (c).
This applies to the recruiting, procuring, hiring, engaging, supplying and forwarding of persons who are to be employed wholly or partly outside Lesotho.
“Labour agent” means a person who engages in the business of procuring, recruiting, hiring, engaging, supplying or forwarding of persons to be employed wholly or partly outside Lesotho.
No engagement in recruiting without licence
- Subject to the provisions of this Part no person shall engage in or carry on the business of a labour agent unless he or she is the holder of a valid licence.
- Any person who engages in or carries on the business of a labour agent contrary to the provisions of subsection (1) shall be guilty of an offence and liable on conviction to a fine not exceeding two thousand maloti or imprisonment for a period not exceeding one year or both.
Labour agent’s licence and conditions
Every application for a licence to engage in or carry on business as a labour agent (hereinafter called a “labour agent’s licence”) shall be made to the Labour Commissioner.
A labour agent’s licence shall be issued by the Labour Commissioner in accordance with any regulations prescribed by the Minister. Before issuing any such licence the Labour Commissioner shall
- satisfy himself that the applicant is a fit and proper person to hold a licence and is in a position to fulfil the obligations thereunder;
- require the applicant to furnish such security as the Labour Commissioner deems necessary for the applicant’s proper conduct as a labour agent;
- require the applicant, if an employer, to furnish such security as the Labour Commissioner deems necessary for the payment of wages and other obligations which may become due;
- satisfy himself or herself that adequate provision has been or will be made for safeguarding the health and welfare of the persons to be recruited; and
- have regard to the provisions of the relevant Conventions and Recommendations on migrant workers of the International Labour Organisation and, in particular, take into account the possible untoward effect of the withdrawal of the persons proposed for recruitment upon the population of Lesotho and their health, welfare, morality and development in relation to recruitment for employment wholly or partly outside Lesotho.
Every labour agent’s licence shall be issued subject to the provisions of the Code. including any regulations made by the Minister thereunder, and such conditions as the Labour Commissioner may, in accordance with any directions of the Minister, specify therein. In addition, the Labour Commissioner may, in order to safeguard the population of any area against any untoward consequences of the withdrawal of the persons proposed for recruitment from such area, or for any other good and sufficient reason, specify in the licences conditions as to all or any of the following matters:
- the restriction of the number of persons who may be recruited in any area;
- the closing of any area to recruiting;
- the employment of persons in a particular area only within a specified area;
- the amount of the advance of wages which may be paid to an employee or recruited person and the conditions under which such an advance may be made or recovered.
Any holder of a labour agent’s licence who fails to comply with any condition of the licence shall be guilty of an offence and shall be liable on conviction to a fine of two thousand maloti or to imprisonment for one year or both. In addition, the Labour Commissioner may cancel or suspend the licence forthwith.
Period of licence; fee; transfer
- A labour agent’s licence shall be valid, unless previously cancelled or suspended, for such period not exceeding 12 months from the date of issue thereof as may be specified therein. The Minister may prescribe the fee to be paid for such a licence and may prescribe different fees for different licences.
- A labour agent’s licence shall not be transferable, but the Minister may make regulations to provide for the holder of a power of attorney given by a licensed labour agent lawfully to engage in recruiting or in operations as a labour agent.
Employer of Record for Lesotho:
Although an Employer of Record often works with a staffing agency, the two are separate business entities. Each has specific roles and responsibilities in their symbiotic relationship.
An employer of record serves as an employer for tax purposes while an employee performs work for the client, such as a staffing firm or other business. An employer of record handles all personnel functions, including payroll processing and funding; tax deposits and filing; and employment contracts and paperwork. Maintaining a Certificate of Insurance, and Verification forms; unemployment insurance; and workers’ compensation are done. An employer of record also performs background checks and drug screenings; administers benefits; terminates employees; and may handle worker issues. Conversely, a staffing firm recruits’ employees and assigns them to businesses for worker absences, temporary skill shortages, seasonal work, or special projects. Their main focus is to match temporary, temp-to-hire, long-term, or permanent workers with clients in need.
Using an employer of record allows the client company to free up time and cost-effectively outsource its necessary human resource functions, employee benefits, payroll, workers’ compensation, and compliance issues. The money saved by outsourcing these functions can be used to expand the business, provide steady income for the owner, or fill a variety of other purposes. Onboarding quality talent is done quickly by an employer of record so clients can quickly ramp up staff and staffing agencies can deliver top quality workers to their clients. Most staffing agency owners don’t have the HR training, payroll and accounting skills, compliance knowledge, or risk management, insurance, and employee benefits background to meet the demands of being an employer.
Responsibilities and Liabilities
The client company or staffing agency owner retains control over business operations and responsibility for workplace safety and compliance. The employer of record assumes responsibilities and liabilities for employment issues such as administration, payroll, taxes, benefits, and maintaining employee records. Because the employer of record assumes most of the responsibility for compliance and tax laws, the client or staffing services owner receives peace of mind, knowing their business is being taken care of by qualified professionals.
Whereas an employer of record and staffing agency often work together, they have diverse purposes in the workplace.
Information in this document was obtained through various media outlets, government publications and the Employ-Africa network of immigration specialists. This is provided as information only and does not constitute actual legal advice.