Guide to employment, payroll and benefits in


Rivermate offers complete payroll, benefits and compliance services for


01. Overview

Last updated: 

August 19, 2021

United States Dollar
Melekeok - Palau State Capital
Ease of doing business
GDP growth

02. Grow your team in


with Rivermate

Payroll, benefits, taxes, and compliance can be difficult to manage in


, particularly if you don't have established local relationships. You can hire employees in


effectively, conveniently, and in full compliance with all relevant labor laws using Rivermate's global employment solution. We handle the responsibilities and legal risks associated with foreign employment so you can concentrate on growing your company.

03. Summary

Palau, officially the Republic of Palau and traditionally known as Belau, Palaos, or Pelew, is a Pacific island nation. The country is made up of about 340 islands and links the Caroline Islands' western chain to parts of the Federated States of Micronesia. It covers 466 square kilometers in total. Koror is the most populated of the islands. Ngerulmud, the capital of Melekeok State, is situated on the nearby island of Babeldaob. Palau is bordered on the north by international waters, on the east by Micronesia, on the south by Indonesia, and on the west by the Philippines. Migrants from Maritime Southeast Asia first settled the country approximately 3,000 years ago. In the 16th century, Spain was the first European nation to explore the islands, and they became part of the Spanish East Indies in 1574. The islands were sold to Imperial Germany in 1899 under the terms of the German–Spanish Treaty after Spain's defeat in the Spanish–American War in 1898. They were administered as part of German New Guinea. The League of Nations made the islands a part of the Japanese-ruled South Seas Mandate after World War I. As part of the Mariana and Palau Islands campaign during World War II, skirmishes were fought between American and Japanese forces, including the main Battle of Peleliu. Palau was added to the United States-managed Trust Territory of the Pacific Islands in 1947, along with other Pacific islands. The islands acquired full sovereignty in 1994 under a Compact of Free Association with the United States after voting against joining the Federated States of Micronesia in 1979. Palau is a presidential republic with a free association agreement with the US, which offers protection, funding, and social services. The bicameral Palau National Congress wields legislative authority. Palau's economy is primarily dependent on tourism, subsistence agriculture, and fishing, with foreign assistance accounting for a large portion of the country's gross national product. The country's currency is the United States dollar. The culture of the islands is a blend of Micronesian, Melanesian, Asian, and Western influences. The bulk of Palau's population is of mixed Micronesian, Melanesian, and Austronesian ancestry. Japanese people make up a smaller percentage of the population. Palauan and English are the official languages of the nation, with Japanese, Sonsorolese, and Tobian recognized as regional languages.

04. Public holidays

05. Types of leave

Paid time off

Public holidays

Sick days

Maternity leave

Paternity leave

Parental leave

Other leave

06. Employment termination

Termination process

To terminate an employee prior to the expiration of their contract, various processes must be followed, including presenting the employee with written notice and a copy of the notification to the Bureau of Labor and Human Resources. The written notice should include the employee's name, the employee's identification certificate number, and the cause for termination. Employers are required to compensate employees for work accomplished, regardless of whether they are local or nonresident employees.

Notice period

Any contract's notice period is agreed upon at the outset.

Severance pay

There are no provisions regarding severance payment but the employee should be paid for any work they have completed before termination.

Probation period

All probationary employees must remain in this status for six months from the start of their initial employment.

07. Working hours


Palau's labor laws make no provision for a maximum number of working hours or for overtime pay. The typical workweek is 40 hours.


Overtime is not specifically regulated. However, due to a lack of specific regulations, employers may require employees to work longer shifts without compensating them for overtime. While this approach is unlikely to have legal consequences, the employer may face problems with employee satisfaction and their reputation as a fair employer.

08. Minimum wage


In Palau compensation rules are a hotly debated issue. The current legal minimum hourly pay is $3.50. This minimum wage applies exclusively to citizens and excludes specific job sectors, such as domestic labor, agricultural work, non-governmental organizations, and student employees. A full-time local worker earns around $2,730 per month on average.

09. Employee benefits


Palau has a comprehensive national health-care system that covers more than 95 percent of the population. Even the minority of people who are uninsured will get government assistance in an emergency. The national health insurance system mandates both employers and workers to pay 2.5 percent to the insurance plan, for a total of 5 percent. The insurance covers all workers in both the public and private sectors, regardless of nationality. Retirees are also included.

There are no criteria for benefits or incentives in this nation. However, you are allowed to provide additional remuneration as long as it is consistent with your budget, objectives, and beliefs.

10. Why Rivermate as your Employer of Record / PEO?

Establishing an entity in


to hire a team takes time, money, and effort. The labor law in


has strong worker employment protection, requiring great attention to details and a thorough awareness of local best practices. Rivermate makes expanding into


simple and effortless. We can assist you with hiring your preferred talent, managing HR and payroll, and ensuring compliance with local legislation without the hassle of establishing a foreign branch office or subsidiary. Our PEO and Global Employer of Record solutions in


give you peace of mind so you can focus on running your business.

Please contact us if you'd like to learn more about how Rivermate can help you hire employees in


via our Employer of Record / PEO solution.

Ready to get started? Our friendly staff is ready to assist you with all your questions, let's connect.