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Hiring in Lesotho

Lesotho, officially known as the Kingdom of Lesotho, is a country in Southern Africa. Maseru is the capital and the largest city of Lesotho. The economy is largely based on agriculture, livestock, mining and manufacturing. Lesotho is rich in natural resources such as water and diamonds. Lesotho’s main trading partners are US, Madagascar, Canada, European Union and South Africa. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Lesotho’s legal and tax regulations. Employment regulations including probation, holidays and termination are covered by the Labor Code. Labor Code stipulates that employees are entitled to 12 days of annual leave. Residents are taxed on their worldwide income; non-residents are taxed on their Lesotho-source income only. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Lesotho’s Labor Code and tax laws.

statutory labor requirements

Probation Period

  • The Labor Code sets the maximum period for probation as four months.

Annual Leave

  • Employees are entitled to a minimum of 12 working days of annual leave in a year (one day in respect of each month of continuous employment with the same employer).

Public Holidays

  1. New Year's Day (1st January)
  2. King Moshoeshoe I's Anniversary (11th March)
  3. Good Friday (10th April)
  4. Easter Monday (13th April)
  5. International Workers' Day (1st May)
  6. Ascension Day (21st May)
  7. Africa Day (25th May)
  8. King Letsie III's Birthday (17th July)
  9. Independence Day (of Lesotho) (4th October)
  10. Christmas Day (25th December)
  11. Boxing Day (26th December)

Maternity Leave

  • The general duration of maternity leave is twelve weeks and comprises 6 weeks before and 6 weeks after the confinement
  • If the pregnant woman contracts any illness or has any complications while being pregnant, they can be allowed to take leave for up to eight weeks.

Paternity Leave

  • There is no statutory paternity leave

Sick Leave

  • Sick leave during the first six months of continuous employment with the same employer is unpaid. If the length of employment is greater than six months, employee is entitled to sick leave with full pay for up to 12 days and to sick leave on half pay for up to 24 days in each period of 12 months' continuous employment.

Work Hours

  • Normal working hours are 45 hours a week in five or six-day reference period. 
  • In a 05-day workweek, the daily working hours are 09 hours while in a 06-day workweek, daily working hours are 08 hours for five days and 05 hours for sixth day

Overtime

  • The general overtime work must not exceed 11 hours per week.
  • For overtime work, a supplement is paid in addition to the pay received by the employee for corresponding work during normal working hours.
  • The overtime supplement is at least 25%, i.e., workers are paid 125% of their normal wage for overtime hours.

Notice Period

  • Statutory written notice period is provided under the Labor Code, which states that unless otherwise stipulated in collective agreement, the notice period will be as follows:
    • 07 days’ notice for less than 6 months of service;
    • 14 days’ notice for less than 1 year of service;
    • one-month notice for more than 1 year of service;
    • three-month notice for more than 10 years of service;

Severance

  • The Labor Code has made provisions for a severance pay that is directly linked to the length of service of the employee.
  • For any employee who has completed more than one year of continuous service with the same employer, a severance payment equivalent to two week’s wages is paid for each completed year of service. 
  • Amount of severance pay is capped at a certain level and the amount is updated regularly by the Minister in consultation with the Wages Advisory Board.
  • Severance pay is not paid to employees who have been dismissed by the employer for misconduct.

13th / 14th Month Pay

  • No 
  • There is no statutory requirement to pay the 13th or the 14th month salary.
  • There is no evidence that bonuses are customary, however employees can negotiate bonuses with the employers.

income tax

  • Residents are subject to tax on worldwide income. 
  • Non-residents are subject to tax only on Lesotho-source income.
  • Taxable income is computed as gross income (excluding exempt income), less any allowable deductions. 
  • Employment income does not include benefits subject to the fringe benefits tax.
  • Pension income is taxable in the same way as any other income.
  • Individual income tax generally is levied at progressive rates of 20% or 30%. 
  • A flat rate of 40% is levied on trustees, non-exempt fringe benefits that are not taxed at the employer level and non-residents who elect to be taxed by assessment on income that otherwise would be subject to withholding tax.

Taxable Income (LSL)

Rate

0 – 61 080

20%

Over 61 0800

30%

deductible expenses

Personal Deductions

  • A resident individual (other than a resident minor) is allowed a non-refundable personal credit of LSL7 260 against the individual’s liability for income tax. 
  • As a rule, the personal credit is available only to residents of Lesotho. 
  • However, it is also available to non-residents who live permanently outside Lesotho but who are employed full-time in Lesotho or engaged full-time in a business in Lesotho. 
  • An employee may deduct contributions to an approved resident superannuation fund, up to 20% of employment income. 
  • Charitable donations generally are not tax-deductible expenses, except for sports related donations of LSL1 000 or more, which may be deductible if certain conditions are fulfilled.

Business Deductions

  • Interest incurred by a taxpayer on borrowings used by the taxpayer in the production of income subject to tax is an allowable deduction, subject to thin capitalization limitations 
  • Research and experimental expenditure if incurred in the production of income subject to tax
  • Depreciation on depreciable assets

Deductible Expenses

Personal Deductions

  • A resident individual (other than a resident minor) is allowed a non-refundable personal credit of LSL7 260 against the individual’s liability for income tax. 
  • As a rule, the personal credit is available only to residents of Lesotho. 
  • However, it is also available to non-residents who live permanently outside Lesotho but who are employed full-time in Lesotho or engaged full-time in a business in Lesotho. 
  • An employee may deduct contributions to an approved resident superannuation fund, up to 20% of employment income. 
  • Charitable donations generally are not tax-deductible expenses, except for sports related donations of LSL1 000 or more, which may be deductible if certain conditions are fulfilled.

Business Deductions

  • Interest incurred by a taxpayer on borrowings used by the taxpayer in the production of income subject to tax is an allowable deduction, subject to thin capitalization limitations 
  • Research and experimental expenditure if incurred in the production of income subject to tax
  • Depreciation on depreciable assets

immigration

  • Lesotho offers several visa categories that cover a number of reasons for foreign nationals to enter the country. 
  • Some of the most common visas in Lesotho include: 
    • Tourist visas 
    • Business visas 
    • Official and diplomatic visas 
    • Student visas 
  • Lesotho doesn’t offer a work-specific visa. 
  • Foreign employees can travel to Lesotho on the basis of a general tourist visa and apply for a work and residence permit after they arrive.
  • In order to obtain a visa for traveling to Lesotho, applicants will need to provide the following documents: 
    • A completed visa application 
    • A valid passport with a blank page for the entry stamp 
    • A recent passport photograph 
    • Proof of vaccination against yellow fever 
    • Proof that the applicant has travel health insurance 
  • Employees should bring the following documents with them to apply for a work and residence permit in Lesotho: 
    • A letter of invitation from the employer in Lesotho 
    • A valid passport 
    • A passport photo 
    • A completed application 
    • Proof of accommodations in Lesotho

Type of Visa/Permit

Documentation

Validity

Eligibility

Tourist Visa

  • A completed visa application 
  • A valid passport with a blank page for the entry stamp 
  • A recent passport photograph 
  • Proof of vaccination against yellow fever 
  • Proof that the applicant has travel health insurance 

3 months                                                                                                                                                             

  • Foreigners intending to visit Lesotho for tourist purposes must apply for a tourist visa

Business Visa

  • A completed visa application 
  • A valid passport with a blank page for the entry stamp 
  • A recent passport photograph 
  • Proof of vaccination against yellow fever 
  • Proof that the applicant has travel health insurance 

3 months

  • Foreigners intending to visit Lesotho for business related events such as meetings, conferences etc. must apply for a business visa

Work Permit

  • A completed visa application 
  • A valid passport with a blank page for the entry stamp 
  • A recent passport photograph 
  • Proof of vaccination against yellow fever 
  • Proof that the applicant has travel health insurance 
  • A letter of invitation from the employer in Lesotho 
  • Proof of accommodations in Lesotho

1 years

  • Foreigners intending to work in Lesotho must apply for a work permit

 value added tax

  • VAT is levied on the supply of goods and services within and outside Lesotho by taxable persons in Lesotho, and on imports.
  • The standard VAT rate is 15% (increased from 14% as from 1 April 2018). 
  • The VAT rate for electricity is 8% and telecommunications is 12% (increased from 9% with effect from 1 April 2019). 
  • Banking services, except for the leasing of bank deposit boxes and insurance services, are exempt from VAT. 
  • Zero-rated supplies include maize meal, maize grain, beans, peas, lentils, milk, bread, agricultural inputs (fertilizers, seeds and pesticides), paraffin, livestock and poultry feed. 
  • Exports also are zero-rated (although exports of natural resources will be exempt. 
  • Sanitary towels are zero-rated as from 1 April 2019.

VAT

Standard Rate

15%

Reduced Rate

12%

Reduced Rate

8%

Zero Rate

0%

withholding tax

  • The WHT rates on various types of payment are set out below (the tax is a final tax for non-residents, unless the non-resident files an income tax return, in which case the non-resident may elect to be assessed at the applicable income tax rate). 
  • The rates for non-residents apply to payments to both corporations and individuals, and may be reduced under an applicable tax treaty.

Payments

Residents

Non-residents

Dividends

-

0%/25%

Interest

10%

15%/25%

Royalties

-

15%/25%

Management fees

-

15%/25%

Natural resource

payments

-

25%

Lesotho Sourced Services

-

10%

Payments to resident

contractors

-

5%

termination

  • Employment relationship may be terminated by either party.
  • Dismissal must be objectively justified on the basis of circumstances relating to the operational requirements of the undertaking or connected with the employee (capacity or conduct).
  • Employers are required to provide a written statement for the reasons of dismissal to a dismissed employee. 
  • The prohibited grounds for dismissal include marital status; pregnancy; maternity leave; family responsibilities; filing a complaint against the employer; race; color; sex; religion; political opinion; social origin; nationality/national origin; trade union membership and activities; lawfully taking leave (authorized absence from work) and HIV status.
  • Statutory written notice period is provided under the Labor Code, which states that unless otherwise stipulated in collective agreement, the notice period will be as follows:
  • 07 days’ notice for less than 6 months of service;
  • 14 days’ notice for less than 1 year of service;
  • one-month notice for more than 1 year of service;
  • three-month notice for more than 10 years of service;
  • The Labor Code has made provisions for a severance pay that is directly linked to the length of service of the employee.
  • For any employee who has completed more than one year of continuous service with the same employer, a severance payment equivalent to two week’s wages is paid for each completed year of service. 

statutory benefits

  • These are mandatory benefits as postulated by law
  • These include probationary period, annual leave, public holidays, sick leave, maternity leave, overtime pay, notice period, and severance pay
  • Statutory benefits also include social security benefits

Statutory Benefits

Probationary Period

Annual Leave

Public Holidays

Maternity Leave

Sick Leave

Overtime Pay

Notice Period

Severance Pay

Social Security Benefits

 payments and invoicing 

  • The assessment year in Lesotho is the 12-month period from 1 April to 31 March.
  • Where both spouses of a married couple earn income, each is separately assessed and each is entitled to the single person’s abatement.
  • Taxpayers generally must submit an annual tax return no later than the last day of the third month following the end of the assessment year (except for tax on employment income that is withheld by the employer).

ease of doing business

  • The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • According to the World Bank Lesotho ranked 122nd in the World in 2019 in terms of ease of doing business.

employee accruals

   
Christmas Bonus%

0%

Christmas Bonus Over Vacations %

0%

Severance per Year %

Employees are entitled to severance pay that equals two weeks of pay after one year of service (2.74% of annual salary)

Vacations % Employees are entitled to a minimum of 12 working days of annual leave in a year
(3.29% of annual salary)
Notice %

Employees are entitled to 30 days of notice period for one year of service or more (8.24%)

Christmas Bonus Over Notifications% 0%
Vacations Plus% 0%
Total percentage of Salary (yearly) The total employment accruals as a percentage of salary per anum are equal to 14.36%

employer accruals

Employer Accruals Additional information

    Employment Accruals
Annual Leave Employees are entitled to a minimum of 12 working days of annual leave in a year This equals 3.28% (12/365 days) of annual income
Maternity Leave The general duration of maternity leave is twelve weeks and comprises 6 weeks before and 6 weeks after the confinement This equals 23% (12/52 weeks) of annual income
Sick Leave Sick leave during the first six months of continuous employment with the same employer is unpaid. If the length of employment is greater than six months, employee is entitled to sick leave with full pay for up to 12 days and to sick leave on half pay for up to 24 days in each period of 12 months' continuous employment. This equals 3.28% (12/365 days) of annual income
Severance  For any employee who has completed more than one year of continuous service with the same employer, a severance payment equivalent to two week’s wages is paid for each completed year of service. This equals 3.84% (2/52 weeks) of annual income

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