Guide to hiring employees in Papua New Guinea

Source: istock

Overview

Papua New Guinea is an excellent destination for businesses looking to expand globally. It has the largest economy in the Pacific Islands and provides significant investment and trade opportunities. The country’s key investment prospects lie in the development of infrastructure and its abundant natural resources in forestry, oil and gas, fisheries, and mining.

What’s more, its young and growing population presents a sizeable potential talent pool for businesses.

However, to draw on this talent pool, there are several factors to bear in mind within Papua New Guinea's employment framework - particularly for companies planning to build a full local office and HR department. Such challenges can be mitigated by using a locally sourced payroll provider who is fluent in the local laws and regulations for both local and international employees.

This guide provides a comprehensive overview for hiring employees in Papua New Guinea.

Capital	Port Moresby
Languages spoken	Tok Pisin, English, Hiri Motu
Population size	8.95 million
Payroll frequency	Fortnightly
Currency	Papua New Guinean Kina (PGK)
VAT	5%

Taxes in Papua New Guinea

Employer contributions in PNG

Salary tax is assessed fortnightly, regardless of the frequency of your payroll process.

Income subject to tax
Any compensation or benefit provided to your employees in Papua New Guinea is classed as taxable employment income. In addition to salary or wages, this also includes consultancy or professional service fees. The current tax rate stands as 42%.

Any employees who receive employment income only will not need to submit an annual income tax return; in this instance, you will be required as an employer to fully tax at source through payroll withholding.

Personal allowances or tax deductions are provided by Dependent Rebates. These are built into the national tax rates, and there is an allowable rebate for employment expenses of up to 25%.

Compensation laws

Employee laws in Papua New Guinea outline rules for payment schedules depending on the type of work your employees conduct; casual employees should receive their wages once a day of work has been completed, piece-rate workers must be paid when they have completed their piece-rate duties, or every two weeks if the job exceeds a two-week period

PNG citizens typically receive payment every two weeks; however, you can arrange for a monthly payment schedule for your expat employees or contractors. There is no statutory requirement to provide employees with a 13th or 14th-month salary.

If you provide food rations to your employees, these must be paid at no longer than a monthly interval.

Superannuation funds
Papua New Guinea does not have a formal social security system. However, if you have 15 or more employees, you will need to register with Papua New Guinea’s retirement program (superannuation fund). You will also be required to withhold and contribute to this fund. The contribution rate is 8.4% of the employee’s salary for the employer and 6% for the employee.

The superannuation funds are regulated by the Bank of Papua New Guinea.

Employees that are citizens of Papua New Guinea are eligible for retirement benefits at age 55.

Training levy
As an employer, you are required to pay a training levy on annual payrolls of more than PGK 200,000.

The payroll cost is made up of salaries, taxable benefits, superannuation contributions and gratuities.

Employee contributions in PNG

Personal income tax
An employee is classed as a tax resident if they live in Papua New Guinea or if they commence residing there within the tax year. A residency position will also be established if an employee is present in the country for more than half of the tax year.

Residents of Papua New Guinea are taxed on their worldwide income. Taxpayers whose income is taxed through salary or wages tax are not required to complete an annual income tax return while tax resident employees with other income such as interest, rental income, or dividends must complete an annual income tax return. The employee can claim up to 25% of allowable deductions.

While non-residents are taxed on whatever income they make within Papua New Guinea, this includes any wages or salary paid by a foreign contractor for any duties performed in-country. Any Papua New Guinea-sourced passive income, including dividends, interest, and royalties, may also be subject to withholding tax.

Superannuation
Superannuation contributions are a legal requirement for residents of Papua New Guinea citizen employees, while non-citizen employees can make voluntary contributions. It is compulsory for citizen employees to be a member of an Authorised Superannuation Fund (ASF) if they work for more than 59 days in any three-month period, and voluntary for non-citizen employees.

Resident tax rates are as follows:

Annual taxable income (PGK)	Tax due
0 - 12,500	0%
12,501 - 20,000	22%
20,001 - 33,000	30%
33,001 - 70,000	35%
70,001 - 250,000	40%
250,001+	42%

The tax rates for non-resident employees are as follows:

Annual taxable income (PGK)	Tax due
0 - 20,000	22%
20,001 - 33,000	30%
33,001 - 70,000	35%
70,001 - 250,000	40%
250,001+	42%

Minimum wage and working hours in Papua New Guinea

The national minimum wage in Papua New Guinea is PGK 3.50 per hour. This figure is correct as of September 2022.

The standard work week is 44 hours in Papua New Guinea, with employees typically working eight hours during the week and four hours on Saturdays – the official Working Schedule may deviate from the foregoing depending on the assignment status of the employee (e.g rotational vs. Residential) and shall therefore be as per the terms of the Employment Contract.

Subject to the terms of the Employment Contract, overtime can be claimed for time worked in excess of the Working Schedule, which overtime rates are as follows:

Overtime worked on a Sunday shall be paid at twice the hourly rate;
Overtime worked on a public holiday shall be paid at the hourly rate;
Overtime worked at any other time other than a Sunday or public holiday shall be paid at one and a half times the hourly rate.

Employee Benefits in Papua New Guinea

pexels-kampus-production-8636606

Source:Pexels/Kampus Production

Papua New Guinea’s labour laws outline a number of benefits that should be offered to all employees.

Mandatory benefits in PNG
In addition to superannuation, Papua New Guinea citizen employees are entitled to annual leave, sick leave, maternity leave, and time off for public holidays. We will cover these aspects in more detail later in the guide.

Supplementary benefits in PNG
Offering your Papua New Guinea employees benefits beyond the mandatory requirements demonstrates that your company is invested in staff wellbeing. Supplementary benefits should reflect your employees’ needs and provide them with additional support for their everyday expenditures.

For example, additional benefits in Papua New Guinea include:

Accommodation
Housing allowance
Company vehicle or transportation stipends
Education expenses
Meals
Utility expenses

Not all these benefits are necessarily fully taxable, as there are certain reliefs available. For instance, education expenses do not result in an additional tax charge for your employee, and utilities are not taxable if you pay them directly as an employer.

Accommodation is taxed at national rates, based on the type of property and its value. You will need to pay a tax charge of PGK 125 per fortnight for the provision of a vehicle with fuel or PGK 95 per fortnight if fuel is not part of the benefits package.

Types of leave available in Papua New Guinea

The leave benefits below are only applicable to PNG citizens and not expatriates.

Annual Leave

In Papua New Guinea, all employees are entitled to 14 consecutive days of paid annual leave for every year of service. This leave is known as recreational leave.

Annual leave can be accumulated for a period of up to four years under an agreement between you and your employees.

Sick leave

Employees are entitled to up to six days of paid sick leave per year if they have worked for your company for at least six months.

However, some areas of Papua New Guinea have established rules that offer more sick leave than this. For example, Port Moresby has a general rule that employees receive 15 days of annual leave together with nine days of paid sick leave.

Nursing child absence

Employees in Papua New Guinea are eligible for two half-hour periods over the course of a day for nursing a child. These periods should be counted as working hours, and therefore paid at the standard rate of pay.

Maternity leave

Employees in the public sector are eligible for six weeks of paid maternity leave prior to the delivery date and a further six weeks after the baby is born.

Private sector employees are generally not eligible for paid maternity leave. The current laws state that a female employee is only entitled to unpaid time off in this instance, although they can use their annual leave or sick days to cover their maternity leave.

Public holidays

Papua New Guinea observes the following public holidays:

New Year’s Day
Good Friday
Holy Saturday
Easter Sunday
Easter Monday
King's birthday
National Remembrance Day
National Day of Repentance
Independence Day
Christmas Day
Boxing Day

Attracting talent in Papua New Guinea

pexels-tima-miroshnichenko-5439368

Source: Pexels/Tima Miroshnichenko

Training and development

Local talent growth depends on companies making significant investments in training and developing their staff. A growing number of Papua New Guinea employees would like more training and development in both technical and soft skills.

Therefore, businesses need to provide the training and resources necessary to equip employees with the skill set they need to develop their careers. It’s essential for workers to feel as though they have a clear direction and progression path in their work, so companies should offer them mentorship programs, leadership training and upskilling opportunities. These benefits will help organisations to retain and attract goal-oriented employees.

Workplace wellbeing
The COVID-19 pandemic changed the global workforce’s attitudes towards work, and employees today expect more from their companies than ever before. Those that respond in kind stand to attract and retain more satisfied and committed workers.
Organisations should take time to review the resources they provide employees that help them to prioritise their wellbeing. For example, companies could:

Create safe, judgement-free spaces for employees to voice concerns or suggestions for improvement
Offer access to mental health support systems

Reward and remuneration initiatives
Another way to attract a motivated workforce is to introduce financial incentives such as bonuses, additional allowances, and employee stock schemes.

Additionally, one financial factor to bear in mind when it comes to talent acquisition is the growing call for transparency in order to achieve equality in remuneration. Companies should communicate their compensation packages clearly, ensure that what they offer is distributed equally and that any variances in pay are justifiable.

Termination of employment in Papua New Guinea

Probationary periods

There are currently no provisions under the Papua New Guinea labour laws regarding probationary periods.

Notice periods

If an employment contract does not state a termination notice period, notice should be given as follows:

If the employee has been employed for less than four weeks: one day’s notice
If the employee has been employed for more than four weeks but less than one year: one week’s notice
If the employee has been employed for more than one year but less than five years: two weeks’ notice
If the employee has been employed for five years or more: four weeks’ notice

As an employer, you can also terminate an employee with a shorter term, provided that you pay them a sum equal to the salary they would have received had they stayed for the entire duration of the notice period. Not providing them with due notice or payment in lieu will constitute as unfair dismissal.

If an employee chooses to end their contract without giving notice, they will have to pay back what you would have earned during that notice period. Notice is not required for breaches of contract or the following circumstances:

Wilfully breaking the law
Taking unauthorised leave on multiple occasions
Committing fraud
Being imprisoned for more than seven days
Regularly neglecting duties

An employee could be eligible for severance pay based on their annual leave status at the time of termination.

Employee background checks

Background checks are not mandatory in Papua New Guinea, but an employer may legally conduct a background check and/ or request a Police Clearance from the PNG authorities if this a condition of employment.

What are my options for hiring in Papua New Guinea?

If you’re looking to expand your business to Papua New Guinea, a company like Airswift can help you get started. We offer employment solutions designed to ensure you stay compliant across all local requirements, including tax, payroll, termination procedures and working hour obligations.

Our in-country teams have the expertise and knowledge necessary to save your organisation from unnecessary risk, freeing up your time to focus on the other prospects of international business growth.

Talent acquisition

Airswift can source and deliver the talent you need across a wide range of industries by leveraging our expertise and employee networks across Papua New Guinea.

Whether you want to hire for an urgent project or need to cover a staffing shortage, we are committed to finding a contractor to suit your needs. Our contract hire services are catered to organisations that need temporary hires to fulfil a range of requirements.

Finally, if you’re looking to hire candidates that can grow with your company, we have professional search services that provide access to highly skilled job seekers who are ready for work. We also take care of all the administrative processes, from shortlisting candidates to screening and onboarding them.

Employer of record

We can help you hire employees without setting up a local entity. Working with an Employer of Record in Papua New Guinea allows you to get up and running in as little as 72 hours. Once your employee has been given the green light, we will take care of everything from onboarding and benefits management to tax filings and annual leave allowance.

*Although the information provided has been produced from sources believed to be reliable, no warranty, express or implied, is made regarding the accuracy, adequacy, completeness, legality or reliability of any information. For the latest information and specific queries regarding particular cases, please contact our team.

Guide to hiring employees in Papua New Guinea

Overview