Employer of Record in Vanuatu

Expanding your team into Vanuatu offers access to a diverse talent pool, but understanding the local employment landscape is crucial. To legally hire employees in Vanuatu, companies typically have a few primary avenues, each with distinct implications for compliance, cost, and operational complexity. Navigating these options effectively ensures your expansion is both compliant and strategic.

When considering hiring in Vanuatu, your main options include:

• Establishing a local legal entity: This involves registering a subsidiary or branch office within Vanuatu, which grants your company the ability to directly employ staff. This path requires significant upfront investment in time, legal fees, and administrative resources.
• Partnering with an Employer of Record (EOR): An EOR, such as Rivermate, acts as the legal employer for your staff in Vanuatu, handling all local compliance and administrative tasks, while you retain full control over day-to-day management.
• Engaging independent contractors: This option allows for project-based work without formal employment, but it requires careful classification to avoid misclassification risks under Vanuatu's labor laws.

How an Employer of Record (EOR) Works in Vanuatu

An Employer of Record simplifies global hiring by assuming the legal responsibilities of employment on your behalf. In Vanuatu, an EOR typically takes care of:

• Legal Compliance: Ensuring adherence to Vanuatu's specific labor laws, employment contracts, and statutory requirements, including minimum wage, working hours, and termination protocols.
• Payroll Management: Handling local payroll processing, tax withholdings, social security contributions, and other mandatory deductions in accordance with Vanuatu's regulations.
• HR Administration: Managing employee onboarding, benefits administration (if applicable), leave management, and overseeing compliant termination processes.
• Risk Mitigation: Assuming the legal and compliance risks associated with employment in Vanuatu, protecting your company from potential penalties or disputes.

Benefits for Companies Hiring in Vanuatu without a Local Entity

Utilizing an EOR service provides significant advantages for businesses looking to hire in Vanuatu without the commitment of establishing a local entity:

• Speed to Market: Rapidly onboard employees in Vanuatu without the lengthy process of entity registration and setup.
• Reduced Costs: Avoid the substantial expenses associated with establishing and maintaining a local subsidiary, including legal fees, office space, and administrative overhead.
• Compliance Assurance: Guarantee full adherence to Vanuatu's complex and evolving employment regulations, mitigating compliance risks.
• Flexibility: Test the Vanuatu market or hire specialized talent for specific projects without long-term corporate commitments.
• Focus on Core Business: Delegate administrative, HR, and compliance burdens to the EOR, allowing your internal teams to concentrate on strategic initiatives and growth.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Vanuatu includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Vanuatu.

Vanuatu's tax system lacks income, capital gains, and withholding taxes, relying mainly on indirect taxes like VAT and customs duties. Employers have specific social security obligations, primarily contributing to the Vanuatu National Provident Fund (VNPF), which funds retirement, disability, and death benefits. Employers must deduct 4% of employees' gross salaries and contribute an additional 4%, totaling 8%, with payments due monthly by the 15th.

Vanuatu does not impose income tax withholding, and there are no tax deductions or allowances for employees. Foreign workers and companies must comply with VNPF contributions, with foreign entities also needing to consider VAT registration if applicable. Penalties may apply for late or incorrect remittances, emphasizing the importance of timely compliance.

In Vanuatu, salary levels vary by industry, role, experience, and location, with urban centers like Port Vila offering higher wages. For example, hotel managers earn between 4,000,000 and 7,000,000 VT annually, while IT support specialists range from 2,200,000 to 4,000,000 VT. Minimum wage as of 2025 is set at 220 VT/hour for general workers, with potential sector-specific increases. Employers must comply with this legal minimum and stay updated on any legislative changes.

Compensation packages often include bonuses and allowances such as performance bonuses, housing, transportation, meal allowances, overtime pay (at 1.5x regular rate), and statutory leave entitlements. Some companies also provide a 13th-month salary as a year-end bonus. Payroll is typically processed bi-weekly or monthly via bank transfers, with employers responsible for tax and social security contributions. Salary trends are expected to rise due to economic growth, inflation, skills shortages, and policy changes, emphasizing the importance for employers to regularly review and adapt their compensation strategies.

Employees in Vanuatu are entitled to a minimum of 2 weeks (10 working days) of annual leave per year of continuous service, with leave accruing pro-rata and paid at the regular wage. Leave timing is flexible, typically agreed upon between employer and employee, and can sometimes be taken in advance or cashed out under specific conditions.

Public holidays are observed with paid time off, including major dates like New Year’s Day, Labour Day, Independence Day, Christmas, and others. Employees working on public holidays are generally entitled to overtime pay or a day off in lieu.

Sick leave provides 6 paid days annually, with medical certification required for absences over two days. Parental leave includes 14 weeks of maternity leave, 5 days of paternity leave, and adoption leave, all with payments from the Vanuatu National Provident Fund (VNPF). Other leave types such as bereavement, study, sabbatical, and special leave are available depending on employer policies.

In Vanuatu, employers must provide mandatory benefits such as a minimum wage, paid annual leave, public holidays, sick leave, maternity and paternity leave, and severance pay, ensuring basic employee security. Additionally, optional perks like health insurance, life insurance, extra paid leave, transportation and housing allowances, professional development, and Employee Assistance Programs (EAPs) are commonly offered to enhance compensation packages and attract talent.

Health insurance is a significant benefit, with coverage typically including medical consultations, hospital stays, and medications; employers may cover full or partial premiums, aligning with employee expectations, especially for skilled roles. The national provident fund (VNPF) requires both employer and employee contributions, with employees accessing savings upon retirement or under specific circumstances. Benefits packages vary by industry and company size, with larger firms and sectors like finance and tourism offering more comprehensive perks.

Employment agreements in Vanuatu are vital for defining the rights and obligations of employers and employees, ensuring legal compliance and reducing disputes. They typically include essential clauses such as job description, remuneration, benefits, leave entitlements, and termination procedures. The agreements can be either fixed-term, suitable for temporary roles, or indefinite-term, offering ongoing employment stability.

Probationary periods, usually lasting 1-3 months, allow employers to assess new hires, with shorter notice requirements during this phase. Confidentiality and non-compete clauses are common to protect business interests, but non-compete clauses must be reasonable in scope and duration to be enforceable. Contract modifications require mutual agreement and written documentation, while termination must follow legal notice periods based on service length, with potential entitlement to severance pay.

Vanuatu is emerging as a favorable destination for remote work due to its relaxed lifestyle, tropical climate, and improving digital infrastructure. While there is no specific remote work legislation, existing employment laws—such as the Employment Act—apply equally to remote employees, covering rights, minimum wages, health and safety, and tax obligations. Employers are responsible for providing a safe work environment, complying with legal standards, and maintaining clear communication and necessary resources for remote staff.

Flexible work options include full-time remote, hybrid, compressed workweeks, flextime, job sharing, and part-time arrangements. Implementing effective policies, communication protocols, and regular performance check-ins are recommended for smooth operations. Data protection remains a priority, with employers advised to enforce confidentiality agreements, security measures, and employee training, despite developing data laws in Vanuatu. Equipment and expense policies should specify provision details, reimbursement limits (e.g., internet up to VUV 5,000/month, office supplies up to VUV 2,000/month), and potential home office stipends (e.g., VUV 20,000).

Connectivity can be variable, especially outside urban centers, with internet and mobile networks available but sometimes unreliable. Employers should consider providing VPNs, collaboration tools, and backup solutions like mobile hotspots to ensure consistent remote access.

Employment termination in Vanuatu is regulated by the Employment Act and common law, requiring employers to follow specific procedures, provide notice or compensation, and document the process. The notice period varies based on the employee's length of service, with minimums of 1 week for less than 1 year, 2 weeks for 1-3 years, and 4 weeks for 3 or more years. Employers can opt for payment in lieu of notice, and employment contracts may specify longer periods.

Severance pay is generally due when employees are terminated without just cause or due to redundancy, calculated as approximately two weeks' pay per year of service, provided the employee has completed at least one year of employment. Termination grounds include "just cause" (e.g., misconduct, poor performance) where no notice or severance is required, and "without cause" (e.g., redundancy), which mandates notice or payment in lieu and severance.

Employers must adhere to procedural steps such as conducting investigations, providing written notices, allowing employee responses, maintaining documentation, and ensuring final payments are made promptly. Employee protections against wrongful dismissal include claims of unfair dismissal and discrimination, with remedies like reinstatement or compensation. Legal advice is recommended to ensure compliance and mitigate legal risks.

Vanuatu offers diverse freelancing opportunities across sectors such as tourism, construction, IT, business services, and agriculture. Key roles include tour guides, tradespeople, developers, consultants, and farm workers. Engaging freelancers requires understanding legal distinctions; contractors are characterized by limited control, independence, and ownership of tools, whereas employees are highly controlled and integrated into core operations.

Legal compliance involves clear contracts outlining scope, payment, IP rights, and dispute resolution. IP rights can be assigned or licensed, with contracts specifying ownership and use. Contractors are responsible for their taxes, including income tax and VAT if applicable, and must secure their own insurance, as businesses are not mandated to provide coverage.

Vanuatu's work permit system primarily caters to foreign nationals seeking employment, with key visa types including the Work Permit Visa, Business Visa, Investor Visa, and Special Category Visa. The Work Permit Visa requires sponsorship from a local employer, a labour clearance, and submission of documents such as passport copies, qualifications, police clearance, and medical reports. The processing time ranges from 4 to 8 weeks, with fees varying based on employment duration and type.

Employers must ensure all foreign workers hold valid permits, comply with labour laws, and notify authorities of employment changes. Employees are responsible for adhering to visa conditions and renewing permits timely. For long-term residence, pathways to permanent residency typically require 10 years of continuous residence, good conduct, and economic contribution, with applications supported by residence and financial documents.