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Everything an employer should know about hiring in
The Federated States of Micronesia
Hiring in The federated states of micronesia
Micronesia, officially known as the Federated States of Micronesia, is a country in Oceania. It is made up four groups of islands, namely Caroline Islands, Gilberts Islands, Mariana Islands, and Marshall Islands. Fishing, sale of fishing rights to foreign nations, is the main source of revenue. This is followed by tourism. Micronesia’s main trading partners are the United States, Japan, Australia and Guam. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Micronesia’s legal and tax regulations. Employment regulations including probation, holidays and termination are covered by the Labor Code. Labor Code stipulates that there is no maternity or paternity leave. The personal income tax rate is 10%, and the corporate tax rate is 21%. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Micronesia’s Labor Code and tax laws.
statutory labor requirements
Probation Period
- Probationary period is generally of 6 months
Public Holidays
- New Year's Day (1st January)
- Constitution Day (11th May)
- United Nations Day (23rd October)
- FSM Independence Day (3rd November)
- Veterans Day (11th November)
- Christmas Day (25th December)
Maternity Leave
- There is no mandatory paid maternity leave
Paternity Leave
- There is no paternity leave
Work Hours
- The law sets a standard of an eight-hour day and a five-day workweek
Overtime
- The law mandates premium pay for overtime.
- There are no legal provisions prohibiting excessive or compulsory overtime.
13th / 14th Month Pay
- No
- There is no evidence that there is a statutory requirement to pay the 13th or 14th month salary.
- The labour code refers to governmental employees.
income tax
- Tax laws are administered and enforced erratically.
- The personal income tax rate is 10 percent, and the corporate tax rate is 21 percent.
- All persons performing services as “employees” are subject to the wages and salaries tax
- All “wages and salaries” of employees are subject to the tax.
- Wages and salaries include almost everything of value an employee receives in exchange for his services.
- “Wages and salaries” are taxable even though not paid in cash.
- For example, money due you at the end of the year but not yet paid is taxable in the year.
- Likewise, if someone gives you merchandise or other goods in exchange for your services, the value of those goods are taxed as “wages and salaries”
- The tax is six percent (6%) of the first $11,000 and ten percent (10%) of any excess earned during each calendar year.
- Employees earning less than $5,000 during a calendar year are entitled to a $1,000 deduction before computing the tax.
|
Income Tax |
|
|
Up to $11,000 |
6% |
|
Above $11,000 |
10% |
immigration
- The Federated States of Micronesia allows anyone to enter the nation visa-free. In fact, there is no such thing as a Micronesia visa.
- The permitted length of stay varies from 30 days to 365 days.
- For example, the citizens of the United States can remain in Micronesia for up to a year, while the nationals of the Schengen Area can visit for just 90 days.
- All the other travelers can stay for 30 days in Micronesia, but once they get arrive, they can extend their stay up to 60 days.
- The only thing that is required of you before you go to Micronesia is to have a valid passport that does not expire for 120 days (about 4 months) from the date of your arrival.
- Foreigners seeking to settle down in Micronesia’s idyllic isles for work or a business related enterprise, will need to have a working permit before they travel.
- Work permits and permanent residency visas can be obtained by writing to the Federated States of Micronesia Department of Resources and Development.
- The department will let you know what further evidence you need to provide; this may include an official business invitation from the company you’ve been sent to work with or a birth certificate
value added tax
- The sales tax ranges from 3% to 5% depending on the state
|
Sales Tax |
|
|
Standard Rate |
3% to 5% |
withholding tax
- There is no withholding tax on dividends, interest and royalties
statutory benefits
- These are mandatory benefits as postulated by law
- These include public holidays, sick leave, overtime pay
- Statutory benefits also include social security benefits
|
Statutory Benefits |
|
Public Holidays |
|
Overtime Pay |
|
Social Security Benefits |
payments and invoicing
- An Employer’s Income Tax Quarterly Withholding Return must be filed for each quarter, showing each employee, the amount of wages paid, and the amount of tax withheld, along with certain other information.
- These tax returns and the payment of the tax withheld are due on January 31, April 30, July 31 and October 31.
- An employer not withholding the tax from employees or withholding the tax but not paying it over to the Division of Customs and Tax Administration can be held liable for the tax, interest and penalties.
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 Micronesia ranked 158th 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 % |
No statutory obligation |
| Vacations % | No evidence, however one college gives 2 months leave. 16.66% |
| 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 24.9% |
employer accruals
Additional information (Country Accruals)
| Social Security | 7.5% |
| Description | Gainfully employed persons, including self-employed persons earning at least US$10,000 a year or with at least one employee (small businesses). Voluntary coverage for self-employed persons earning less than US$10,000 a year.
|
| Exclusions | Casual employees who work less than one week in any calendar month and family labor. Special systems (individual retirement plans) for some types of government employees. |
Employer Accruals Additional information
| Employment Accruals | ||
| Overtime | The law mandates premium pay for overtime. | Subjective |
| Social Security | Social security contribution to be paid by the employers must be at 7.5% of twice the salary of the highest-paid employee per quarter. | This equals 7.5% of 2 monthly salaries per quarter |
