Maldives

• Geography and Climate Vulnerability: The Maldives consists of over 1,190 coral islands grouped into 26 atolls in the Indian Ocean, near India and Sri Lanka. The islands are flat, with the highest point at just 2.4 meters above sea level, making them highly susceptible to rising sea levels and climate change.

• Historical Background: Initially inhabited by Buddhists from the 5th century BCE, the Maldives became a Muslim sultanate in the 12th century. It was a Portuguese territory in the 16th century, followed by Dutch and British control, before gaining independence in 1965 and becoming a republic in 1968. The tourism industry began to thrive in the 1970s.

• Socio-Economic Overview: The Maldives has a population of around 557,426, primarily Sunni Muslims speaking Dhivehi. The economy is driven by tourism and fishing, with significant reliance on imports and foreign labor, particularly in tourism and construction. Challenges include environmental vulnerability, income inequality, and the need for job creation for its youthful population.

• Labor and Employment: The workforce is expanding, with a significant portion employed in tourism, which is the primary economic sector. Other important sectors include fishing, construction, and government services. There is a push to develop IT, renewable energy, and aquaculture to diversify the economy and create new jobs.

• Cultural and Workplace Dynamics: Maldivian culture values indirect communication, respect for authority, and strong community ties. The workplace is influenced by Islamic practices, and there is a growing shift towards gender equality and intercultural sensitivity due to the diverse workforce.

• Economic Challenges and Opportunities: The Maldives aims to reduce its economic dependency on tourism by developing sectors like IT, sustainable energy, and aquaculture. The nation's economic stability is threatened by global events that impact tourism, prompting efforts to broaden economic activities beyond resort areas.

• Maldives Retirement Pension Scheme

  • Employers must contribute 7% of an employee's pensionable wage, which includes basic salary and certain allowances.
  • Employees also contribute 7% of their pensionable wage to the scheme.

• Goods and Services Tax (GST)

  • Employers are responsible for collecting and remitting GST at a rate of 8% on taxable goods and services, which indirectly impacts employment costs.

• Skills Development Levy

  • Applicable to employers with more than ten employees, with the rate varying based on business activities.

• Work Permit Fees

  • Employers of foreign workers must pay fees for work permits.

• Employee Withholding Tax (EWT)

  • Employers withhold EWT based on progressive tax brackets, ranging from 0% to 15% depending on income levels.
  • Employees must file an annual income tax return to reconcile any over or underpayments of EWT.

• VAT and Business Regulations

  • Businesses must register for VAT if annual taxable supplies exceed a certain threshold, with a standard rate applied to taxable services.
  • Zero-rated supplies apply to services exported outside the Maldives.
  • VAT on imported services may be subject to a reverse charge mechanism.

• Special Economic Zones (SEZs) and Tourism Sector

  • SEZs offer various tax incentives, including exemptions from import duties and business profit tax.
  • The tourism sector is subject to a higher GST rate of 16%.

• Additional Tax Considerations

  • Maldivian residents may receive a foreign tax credit to offset taxes paid on foreign income.
  • Customs duties vary by item classification and are applicable to imported goods, with some exemptions.

In the Maldives, the Employment Act (Law No. 2/2008) governs vacation leave entitlements, stipulating that employees are entitled to 30 days of paid annual leave after one year of continuous service, which cannot be accumulated or carried over. Upon termination, unused vacation leave must be settled. Part-time employees typically receive pro-rated leave, and employment or collective bargaining agreements can offer more favorable terms. The Act also outlines other leave types, including sick leave, maternity and paternity leave, and provisions for unpaid leave for Hajj. Additionally, the Maldives celebrates various national and religious holidays, with religious holidays based on the lunar Islamic calendar, causing dates to shift annually. Employers are required to maintain accurate leave records and may offer more generous leave entitlements than the law stipulates.

The Maldives Employment Act (Law No. 2/2008) outlines minimum employee benefits including 30 days of paid annual leave, paid public holidays, and specific maternity and paternity leave entitlements. The Act also mandates notice periods and severance pay for terminated employees, and allows for a probationary period in employment contracts. Overtime pay is required for work beyond standard hours.

Additional optional benefits provided by some employers include health insurance, housing, transportation, and meal allowances, along with relocation allowances, profit sharing, and flexible work arrangements. Health insurance is mandatory for all Maldivian citizens under the National Framework of Social Health Insurance Act and for migrant workers as per the Maldives Immigration Act.

The Maldives Retirement Pension Scheme (MRPS), established by the Pension Act of 2009, is a mandatory contributory scheme for most formal sector employees, with a total contribution of 14% of salary split between employers and employees. Private pension plans are also available, offering a supplementary retirement income option.

The Employment Act of the Maldives (Law no. 2/2008) outlines the legal framework for employment termination, specifying grounds such as serious misconduct, poor performance, redundancy, mutual agreement, and the expiry of a fixed-term contract. Notice requirements vary based on the duration of employment, ranging from two weeks to two months. Severance pay is not generally mandated but may be applicable in cases of redundancy or constructive dismissal.

The Maldives also has robust anti-discrimination legislation, including the Constitution (2008), Employment Act (2008), and Gender Equality Act (2016), which protect against discrimination on various grounds such as race, sex, religion, and more. Redress mechanisms include workplace complaints, the Human Rights Commission of the Maldives, and civil courts.

Employers are responsible for ensuring non-discriminatory practices, providing training on anti-discrimination policies, and handling complaints effectively. The standard workweek is 48 hours, with mandated rest on Fridays and public holidays, and employees are entitled to 30 days of paid annual leave.

Workplace safety is governed by the Employment Act and the Occupational Safety and Health Act (OSHA) of 2023, emphasizing employer obligations for risk mitigation, safe work environments, and employee training. Employees have rights to a safe workplace, training, and reporting unsafe conditions. The Ministry of Economic Development oversees the enforcement of these regulations.

• Types of Employment Agreements in the Maldives: The Maldives Employment Act categorizes employment agreements into three types: definite term, indefinite term, and specific to certain types of work.

  • Definite Term Agreements: These contracts are for a set period not exceeding two years and terminate automatically at the end of the term without notice. They are typically used for project-based work or temporary roles requiring specialized skills.

  • Indefinite Term Agreements: Also known as permanent contracts, these do not have a fixed end date and provide ongoing employment. This type is common for full-time positions, offering employees job security and benefits.

  • Specific Work Agreements: Tailored to meet the needs of particular industries or job types, these agreements vary in details and regulations.

• Key Elements of Employment Contracts: Contracts should clearly identify the parties involved, job responsibilities, compensation details, working hours, leave policies, and termination procedures. They should also address confidentiality and include dispute resolution mechanisms.

• Probationary Periods: The probation period is capped at three months, during which either party can terminate the employment without notice. Employees retain rights to benefits like minimum wage and overtime during probation.

• Confidentiality and Non-Compete Clauses: Confidentiality clauses are enforceable and prevent the disclosure of sensitive information. Non-compete clauses are generally not enforceable unless they are reasonable and narrowly tailored, focusing instead on non-solicitation clauses as a viable alternative.

• Legal Advice: Employers are advised to consult legal professionals when drafting employment agreements to ensure compliance and enforceability of the terms.

The Maldives is becoming a popular destination for remote workers, offering a serene environment and growing internet infrastructure. However, remote work in the Maldives requires adherence to certain legal and technological guidelines, as well as employer responsibilities.

Legal Regulations:

• Employment Contract: Must clearly define remote work terms including working hours and performance expectations.
• Work Permit Requirements: Foreign remote workers should check with the Maldives Immigration Department for necessary permits.
• Taxation: Remote workers must be aware of potential tax liabilities in the Maldives and their home country.

Technological Infrastructure Requirements:

• Internet Connectivity: Essential to have reliable and high-speed internet.
• Cloud-Based Tools and Communication Tools: Necessary for effective remote collaboration and communication.

Employer Responsibilities:

• Ergonomics and Mental Health: Employers should support ergonomic work setups and promote mental well-being to combat isolation and burnout.
• Flexible Work Arrangements: Include part-time work, flexitime, and job sharing, with proportional benefits for part-time roles.
• Equipment and Expense Reimbursements: Policies vary by company; some may provide necessary equipment or offer allowances.

Data Protection and Privacy:

• Employer Obligations: Must protect company data as per the Personal Data Protection Act of Maldives, 2016, including implementing secure storage and training employees on data security.
• Employee Rights: Include accessing personal data, objecting to data processing, and reporting data breaches.
• Best Practices for Data Security: Recommendations include using secure devices, VPNs, strong passwords, and regular data backups.

Overall, while the Maldives offers a unique opportunity for remote work, both employers and employees must navigate various legal, technological, and security considerations to ensure a productive and secure working environment.

• Standard Working Hours: In the Maldives, the Employment Act sets the standard work week at 48 hours, spread over Sunday to Thursday, with a daily maximum of 8 hours.

• Exemptions: Certain employees, such as those in emergencies, on seafaring vessels, aircraft, religious officials, and on-call duty, are exempt from these standard hours.

• Rest Days: Friday and Saturday are official rest days. Work on these days requires additional compensation.

• Overtime Compensation: Overtime is paid at 1.25 times the regular hourly wage on weekdays and 1.5 times on Fridays, public holidays, or rest days. Employee consent is required for overtime.

• Breaks: Employees must receive a 30-minute meal break after five consecutive hours of work and a 15-minute prayer break during each prayer period or every four hours.

• Night Shifts and Weekend Work: Night work, defined as work between 7:00 pm and 6:00 am, may include a night shift allowance and reduced working hours. Weekend work requires overtime pay at 1.5 times the regular wage, and ideally, an alternative rest day should be provided.

• Health and Safety: Employers must ensure the health and safety of night shift workers, including adequate lighting and access to medical facilities.

These regulations aim to protect employee welfare, ensuring fair compensation and adequate rest.

Understanding competitive salaries in the Maldives is essential for attracting and retaining employees. Factors influencing these salaries include job title, industry, experience, skills, education, location, and company size. The cost of living, particularly in resort areas, also affects salary competitiveness. The Maldives has set minimum wage tiers for different sectors and business sizes, with specific rates for public and private sectors. Employee benefits are categorized into mandatory (like annual leave and social security) and discretionary (such as health benefits and various allowances). Payroll cycles are typically monthly for full-time employees, but can be more frequent for temporary workers, all dictated by employment contracts.

The Employment Act of Maldives outlines specific legal requirements for notice periods and severance pay during employment termination for indefinite term contracts. Here are the key details:

• Notice Periods Based on Tenure:

  • Two weeks' notice for employees with tenure over six months but less than a year.
  • One month's notice for tenure over one year but less than five years.
  • Two months' notice for tenure over five years.

• Exceptions: Immediate termination is allowed in cases of serious misconduct.

• Employer's Obligations:

  • Must provide written notice or opt for payment in lieu of notice.
  • Must pay severance and compensate for unused annual leave upon termination.

• Employee Rights:

  • Can resign with immediate effect if not given the mandated notice, treated as dismissal without reasonable cause.

• Severance Pay:

  • Applicable to employees involuntarily terminated or constructively dismissed.
  • Calculated based on length of service, ranging from one to three months' salary.

• Types of Termination:

  • With notice: Employer provides written notice as per tenure.
  • Without notice: Permitted only for serious misconduct.
  • Employee resignation: Must align with notice period requirements.
  • Constructive dismissal: Valid if employer significantly alters employment terms detrimentally.

• Termination Process:

  • Written notice must be provided.
  • Employee typically works during the notice period.
  • Final paycheck includes all dues.

• Documentation and Disputes:

  • Documentation of the termination process is crucial.
  • Disputes are handled by the Labour Relations Authority (LRA).

Understanding these regulations is essential for both employers and employees to ensure compliance and proper handling of employment termination in the Maldives.

In the Maldives, the distinction between employees and contractors is primarily based on the level of control the hiring entity has over the worker. Employees are under direct supervision and control of the employer, including work methods, schedules, and tools, while contractors maintain greater autonomy, often using their own tools and setting their own schedules. Employees are integrated into the company's structure and may receive benefits, whereas contractors work independently, often for multiple clients, and typically do not receive employee benefits.

Key factors in determining the relationship include the work schedule, supervision level, equipment provision, and training. Correct classification of workers is crucial to comply with Maldivian labor laws and avoid penalties such as backdated payments and fines.

Contractors in the Maldives can engage through definite contracts or service agreements, with negotiations tending to be indirect and respectful of cultural norms. Industries such as tourism, construction, and IT frequently utilize contractors.

For freelancers, protecting intellectual property (IP) is essential. The Maldives Copyright Act provides that the creator initially owns the copyright unless otherwise agreed in writing. Freelancers are advised to draft clear contracts specifying IP ownership and consider registering their copyright for additional protection.

Freelancers must also navigate tax obligations, with income tax and Business Profits Tax (BPT) applicable based on earnings. Voluntary social security contributions can provide retirement benefits and formalize work status. Insurance options, including health, accident, disability, and professional liability insurance, are recommended to mitigate financial risks.

• Legislation Overview: The Maldives has several acts and regulations to ensure workplace safety and health, including the Occupational Safety and Health Act (Act No. 09/2023), the Employment Act (Law No. 2/2008), and the Public Health Protection Act (Law No 7/2012). These laws cover employer and employee responsibilities, risk assessments, hazard prevention, working conditions, discrimination, and public health emergencies.

• Industry-Specific Regulations: Specific safety standards are set for the tourism and construction industries, focusing on emergency procedures, fire safety, construction site hazards, and more.

• Regulatory Bodies: Various ministries and agencies such as the Ministry of Economic Development, Labor Relations Authority, Health Protection Agency, and Ministry of Tourism are responsible for enforcing these laws and regulations.

• Employer Responsibilities: Employers must conduct risk assessments, establish safe work procedures, provide personal protective equipment (PPE), and develop emergency plans. They are also required to report workplace accidents and illnesses.

• Hazard Identification and Control: Employers need to identify hazards and implement control measures according to a hierarchy of controls, which includes elimination, substitution, and engineering controls.

• Industry-Specific Safety Standards: In the tourism industry, guidelines cover water-based activities and food hygiene. In construction, fall prevention and electrical safety are emphasized.

• Occupational Health Considerations: Protection from noise, extreme temperatures, and hazardous substances is necessary, along with addressing workplace stress and psychological well-being.

• Challenges and Areas of Improvement: Challenges include limited resources, lack of specialized professionals, and difficulties in implementing regulations in the informal sector. The absence of a centralized injury surveillance system hampers effective prevention efforts.

• Inspection and Compliance: Workplace inspections are crucial for verifying compliance and identifying hazards. The frequency and criteria for inspections vary, and follow-up actions may include issuing corrective orders and penalties for non-compliance.

• Accident Reporting and Investigation: Employers must report accidents, and investigations aim to determine root causes and prevent future incidents. The Occupational Safety and Health Act mandates immediate reporting for serious injuries and fatalities.

• Compensation Claims: The Employment Act provides a basis for compensation for work-related injuries or illnesses, with employers required to secure workers' compensation insurance to cover medical expenses, lost wages, and disability benefits.

The Maldives has an Employment Tribunal established under the Employment Act (Law No. 2/2008) to handle individual labor disputes, including issues related to employment contracts, dismissals, wages, and workplace discrimination. The Tribunal process begins with mediation and can escalate to a formal hearing if mediation fails, with decisions appealable to the High Court.

Additionally, arbitration is available for resolving labor disputes, particularly collective ones, through a voluntary process agreed upon by both parties. Arbitrators, selected with the help of the Department of Industrial Relations, issue binding decisions.

The Labor Relations Authority (LRA) conducts labor inspections to ensure compliance with labor laws, focusing on scheduled, complaint-triggered, targeted, and follow-up inspections. Non-compliance can lead to penalties ranging from warnings to criminal liability.

Whistleblower protections in the Maldives are currently limited but may be strengthened by a new Whistleblower Protection Bill under consideration. The country has ratified several key International Labour Organization (ILO) conventions, influencing its labor laws to align with international standards. However, challenges remain in fully implementing these standards, particularly concerning freedom of association and migrant workers' rights. Efforts to improve include legal reforms and capacity building initiatives.

Understanding communication styles in the Maldives is essential for business success, given its unique cultural blend. Here are the key aspects:

• Directness: Communication is generally indirect to maintain harmony and respect, with people often avoiding direct rejections.
• Formality: The workplace is hierarchical, requiring formal greetings and adherence to a top-down decision-making process.
• Non-Verbal Cues: Body language, silence, and facial expressions are crucial, with respect shown through eye contact and contemplative silences valued over quick responses.

Negotiation Practices:

• Building trust and rapport is prioritized, with a preference for indirect communication and a slow-paced negotiation process aimed at mutual benefits.
• Strategies include highlighting mutual benefits and maintaining a respectful demeanor, with an understanding of the hierarchical and collective decision-making process.
• Cultural considerations include deference to authority and appropriate gift-giving, avoiding extravagance.

Business Dynamics:

• Maldivian businesses are influenced by a collectivistic culture that values hierarchy, impacting decision-making, team dynamics, and leadership styles.
• Decision-making is typically top-down, which can slow processes and limit innovation.
• Leadership tends to be authoritarian, with a strong emphasis on building relationships with superiors.

Cultural and Business Calendar:

• The Maldives observes Islamic holidays like Eid al-Fitr and Eid al-Adha, and national holidays such as Independence Day and Republic Day, affecting business operations.
• Local festivals and observances like the birthday of Prophet Muhammad (ﷺ) may also influence business schedules.
• Cultural practices like adjusted work hours during Ramadan and closures during Friday prayers are important for operational planning.

Understanding these elements is crucial for effectively navigating the business and cultural landscape of the Maldives.