Hiring independent contractors from Madagascar has become an increasingly popular option for businesses and individuals seeking specialized skills for specific projects.
Whether you’re a company looking to bring in expert knowledge or an individual in need of particular services, understanding the different types of contracting arrangements available is crucial to ensuring smooth operations and legal compliance.
The following paragraphs explore the key aspects of hiring contractors from Madagascar, highlighting the relevant legal frameworks including tax considerations, and the various contracting models available.
Freelancers
Freelancers, or independent contractors, operate under a service provision contract with their clients. The contract outlines the scope, deadlines, and payment terms for the services to be provided.
Freelancers are typically taxed at a rate of 5% on their service fees (called a tax on intermittent income-IRI) under a simplified tax regime, and the tax is usually withheld by the client.
Unlike employees, freelancers are not required to make contributions to social security or health insurance, as they are considered self-employed. Therefore, they are responsible for managing their own healthcare and retirement plans.
Wage Portage
This type of contract involves a three-party relationship between the wage portage company, the client company, and the employee under portage.
The portage company acts as the employer, providing the employee with a formal employment contract governed by the Labour Code (Article 77). However, this employee works for the client company, fulfilling specific tasks as agreed upon in a commercial contract between the portage company and the client. This contract is therefore governed by the commercial Code.
Taxation for employees under portage follows the same rules as traditional employees, with income taxes (taxes on Income, Salaries, and Similar Earnings- IRSA) deducted by the portage company. While the portage company handles social security and other employee benefits, the client company does not have any direct employment relationship with the individual under portage.
Freelancers vs Wage Portage: A Comparison
| Aspect | Freelance | Wage portage company |
| Cost | Freelance fees are generally lower since freelancers set their own rates. | Portage companies typically charge higher fees due to overhead and administrative costs. |
| Flexibility | Freelancers offer more flexibility in project scope, timelines, and terms. | Portage companies may require more detailed terms and structured contracts, which can take longer to amend. |
| Administrative Burden | The client is responsible for handling contracts, invoicing, taxes, and compliance with labor laws. | The portage company manages all administrative tasks, including tax payments, invoicing, and compliance with labor regulations. |
| Professionalism | Freelance contractors vary in their professionalism, which depends on individual experience and organizational skills. | Portage companies tend to offer a higher level of professionalism on more specific and advanced subjects, and they provide formal structures, including tax identification (NIF) and a clear employment framework. |
| Legal Compliance | The client must ensure the freelancer complies with tax laws and labor regulations. | The portage company ensures all legal compliance, including tax payments, social security contributions, and labor rights. |
| Delivery Guarantee | Delivery may be more variable, as freelancers work independently without oversight. | Portage companies generally offer more reliable delivery, as they monitor the contractor’s performance and ensure they meet the agreed terms. |
Best Practices for Effectively Hiring Contractors in Madagascar
Whether working with a freelancer or a wage portage company, there are several practical considerations to keep in mind, which can help ensure a smooth and effective collaboration.
Where to Find Contractors in Madagascar
When hiring contractors in Madagascar, it’s pertinent to explore various channels such as local networks, online platforms, or social media to find qualified candidates.
LinkedIn is the number one channel that will mostly guarantee that you get in touch with a professional candidate. Either you post an announcement specifying your requirements, or you “head-hunt” with the pertinent keywords.
Looking or posting your search through online platforms such as jobmada is another approach worth considering. Although, it might take some time before you get any applicants.
Word of mouth and community connections can also be invaluable in identifying reliable contractors. With this approach, Facebook is the best tool. You can either directly post your requirements in specific groups, or you can mobilize your local network and ask them to share your request within their circle such as alumni/university groups.
For more advanced and specific needs, wage portage companies can be contacted directly by email. However, do not hesitate to ask feedback of their former clients, on LinkedIn for example.
Key Considerations for Successful Contractor Management
Clear terms of engagement: Once a candidate is selected, establish clear terms of engagement through detailed contracts. This minimizes misunderstandings and ensures both parties are aligned from the start.
Monitoring progress: Regular check-ins and performance reviews are essential for monitoring progress and ensuring the project stays on track.
Cultural differences: Understanding the local work culture, which may involve a more relaxed approach to time and deadlines, can help manage expectations and foster smoother collaboration.
To wrap up, hiring contractors in Madagascar requires an understanding of the legal and administrative framework, whether opting for freelancers or a wage portage company.
Freelancers offer more flexibility and operate under service provision contracts with simpler tax and no social security requirements.
Wage portage offers the structure and benefits of formal employment, with the portage company managing taxes and all social security obligations.
To ensure smooth collaboration, businesses may adhere to best practices such as finding qualified contractors through multiple channels, establishing clear terms of engagement, maintaining regular communication, and being mindful of the local work culture.
Legal Framework for Contractors in Madagascar
In Madagascar, the legal framework for hiring contractors is primarily governed by the Commercial Code (Code du Commerce- Law n 99-018 on the Status of the merchant) related to service provision, and the Fiscal Code which regulates taxation aspects.
Contractors in Madagascar can be broadly classified into freelancers who operate independently, and those working through wage portage company (portage salarial) which is a unique employment structure where an individual is employed by an umbrella company.
