Employer of Record in Marshall Islands

Hiring employees in the Marshall Islands requires understanding local employment regulations and establishing a compliant operational presence. Businesses looking to expand their workforce into this Pacific island nation must navigate legal frameworks concerning contracts, payroll, and benefits, which can be a complex and time-consuming process. Ensuring adherence to the Republic of the Marshall Islands' labor laws for 2025 is crucial for any international employer, regardless of the scale of their operations.

When considering hiring in the Marshall Islands, companies typically have a few primary avenues:

• Establishing a local legal entity, which involves significant time, cost, and administrative burden.
• Partnering with an Employer of Record (EOR) like Rivermate, which acts as the legal employer on your behalf.
• Engaging individuals as independent contractors, a flexible option that requires careful consideration of classification rules to avoid misclassification risks under local statutes.

How an EOR Works in Marshall Islands

An Employer of Record (EOR) streamlines the process of hiring in the Marshall Islands by handling all local employment responsibilities. This allows your company to operate without needing to establish a separate legal entity. The EOR manages the following key aspects:

• Payroll processing and tax withholding: The EOR ensures employees are paid accurately and on time, handling all local income tax, social security, and other mandatory contributions in compliance with Marshallese regulations.
• Compliance with local labor laws: This includes drafting compliant employment contracts, adhering to working hour regulations, managing leave entitlements, and ensuring fair termination practices in line with the Republic of the Marshall Islands' labor code.
• Benefits administration: An EOR manages mandatory and voluntary benefits, such as health insurance, pension schemes, or other required contributions, ensuring employees receive their full entitlements according to local standards.
• HR and administrative support: From onboarding to offboarding, the EOR handles all necessary HR documentation, employee records, and communications, acting as the primary point of contact for employment-related matters.
• Visa and work permit sponsorship (if applicable): For foreign nationals, an EOR can assist with the complex process of obtaining necessary work permits and visas, ensuring legal employment status in the Marshall Islands.

Benefits for Companies Looking to Hire in Marshall Islands Without a Local Entity

Utilizing an Employer of Record service offers distinct advantages for businesses aiming to tap into the Marshall Islands' talent pool without the overhead of a traditional expansion:

• Rapid market entry: Bypass the lengthy and costly process of company registration, allowing you to hire and begin operations quickly.
• Reduced legal and financial risk: Transfer the burden of compliance with Marshall Islands' complex employment laws, tax regulations, and administrative requirements to a specialized EOR.
• Access to local talent: Recruit and onboard skilled professionals in the Marshall Islands without needing a physical presence or a permanent legal establishment.
• Cost-effectiveness: Avoid the significant overheads associated with establishing and maintaining a subsidiary, making international expansion more financially viable.
• Focus on core business activities: Delegate all employment-related administrative tasks to the EOR, freeing up your internal resources to concentrate on strategic growth and operations.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Marshall Islands 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 Marshall Islands.

Employers in the Marshall Islands primarily have social security tax obligations, with contributions funding retirement, disability, and survivor benefits. They must withhold and remit social security contributions from employee wages, matching the employee’s contribution. The contribution rates and thresholds are set by MISSA and should be verified annually. Social security reporting is typically quarterly, with deadlines at the end of the month following each quarter, and non-compliance may lead to penalties.

Unlike many countries, the Marshall Islands does not impose a broad income tax, so employers are not required to withhold income tax from wages. Employee deductions and allowances are generally not applicable. Employers must maintain accurate payroll records and comply with reporting deadlines to avoid fines. Foreign workers are subject to the same social security contributions, and foreign companies may face additional licensing and tax obligations, including potential treaties that could influence their tax liabilities.

Salaries in the Marshall Islands vary by industry and role, with key sectors including government, healthcare, education, and tourism. Typical annual salary ranges (USD) as of 2025 are:

The minimum wage is set at $2.00 per hour, with periodic reviews for adjustments. Employers must comply with this legal minimum, and exemptions may apply to certain worker categories.

Compensation packages often include bonuses and allowances such as performance bonuses, housing, transportation, medical, and education support, varying by industry and role. Payroll is typically processed bi-weekly or monthly, with common payment methods including direct deposit, checks, or cash.

Salary growth is expected to be gradual, influenced by inflation, economic development, and demand for skilled labor, especially in technology, healthcare, and tourism sectors. U.S. aid continues to play a significant role in economic stability, impacting salary trends and government spending.

Employees in the Marshall Islands are entitled to various leave types, primarily governed by employment contracts and company policies. While there are no statutory minimums for annual vacation or parental leave, employers commonly provide paid vacation, with specifics such as accrual, carryover, and payout outlined in employment agreements. Public holidays are fixed and universally observed, including New Year's Day, Remembrance Day, Labor Day, Constitution Day, Fisherman's Day, President's Day, Christmas, and New Year's Eve.

Overall, leave policies are flexible and largely determined by individual employment contracts, emphasizing the importance for employers to stay updated on policy details to ensure compliance and support employee welfare.

Employees in the Marshall Islands are entitled to mandatory benefits including minimum wage, social security contributions, workers' compensation, paid leave, and maternity leave. Employers must comply with these legal requirements to ensure employee security and legal adherence. Common optional benefits that enhance compensation packages include health insurance, housing and transportation allowances, life insurance, and training opportunities, which are especially valued in high-cost urban areas.

Health insurance coverage varies, with employers often subsidizing premiums; plans typically cover medical visits, hospital stays, and medications. Retirement benefits are primarily provided through the national social security system, but many employers supplement this with additional retirement plans, such as employer-matched contribution schemes. The cost of benefits varies, with health insurance premiums ranging from a few hundred to several thousand dollars annually, and retirement contributions generally between 3% and 6% of salaries.

Employers should benchmark benefits, conduct employee surveys, and analyze costs to remain competitive. Compliance with labor laws—covering wages, social security, workers' compensation, leave, and maternity leave—is essential for legal operation and employee satisfaction.

Employment agreements in the Marshall Islands are vital for defining the rights and obligations of employers and employees, ensuring legal compliance and minimizing disputes. Agreements should be tailored to the specific job and industry, adhering to local labor laws.

There are two main types:

Employers should ensure agreements specify key terms such as duration, compensation, and conditions, aligning with legal standards to protect both parties.

The Marshall Islands currently lack specific remote work legislation; existing labor laws apply equally to remote and on-site employees. Employers must include clear remote work terms in employment contracts, covering work hours, performance, and communication, while ensuring compliance with regulations on working hours, overtime, health and safety, and non-discrimination. Employers are responsible for providing necessary equipment or reimbursements and safeguarding employee data and privacy.

Flexible work arrangements are increasingly common, offering options such as telecommuting, flexible hours, and part-time work, which can boost productivity and widen talent access. Key data points include:

This evolving landscape emphasizes the importance for employers to formalize policies and adapt infrastructure to support remote work effectively.

Employment termination in the Marshall Islands is regulated by the Labor Act 1988, emphasizing compliance with notice, severance, and procedural requirements. Employers must provide minimum notice periods based on employee tenure: 1 week for less than 1 year, 2 weeks for 1-5 years, and 1 month for over 5 years. Contracts may specify longer periods, which must be honored.

Severance pay is mandatory when employees are terminated without just cause, calculated as one week's wage per year of service. For example, an employee earning $200 weekly with 10 years of service would receive $2,000. Severance is not required if termination is due to gross misconduct, poor performance, or other just cause. Grounds for termination include misconduct, poor performance, redundancy, or business closure.

Procedural compliance involves maintaining documentation, providing written notice, explaining reasons, offering response opportunities, and settling final wages and severance. Employees are protected against wrongful dismissal, including discrimination, retaliation, breach of contract, and procedural violations. Employers should ensure fair, lawful terminations to avoid legal disputes.

Freelancing in the Marshall Islands is gaining popularity, driven by businesses seeking specialized skills and individuals valuing autonomy. Key legal distinctions between employees and independent contractors hinge on control, investment, and relationship permanency, with contractors typically having more control, investment, and project-based work. Misclassification risks penalties, making clear contracts vital.

Essential contract elements include scope, payment, duration, confidentiality, IP rights, and dispute resolution. Contracts should specify IP ownership, especially for work involving intellectual property, and clarify use of pre-existing IP. Contractors are responsible for their taxes and insurance, with no withholding required from businesses. Common sectors include IT, construction, tourism, education, healthcare, and professional services, with roles ranging from software developers to electricians and tutors.

Foreign nationals wishing to work in the Marshall Islands must secure appropriate visas and work permits through sponsorship by a local employer, following the RMI Office of Immigration's regulations. The main visa types include:

Employers play a key role in sponsoring foreign workers, ensuring all documentation and compliance obligations are met. The process emphasizes proper documentation, including health and police clearances, proof of employment, and payment of applicable fees.