Timor-Leste: A Guideline to Payroll and Employer of Record

Run your business seamlessly with Neeyamo as we help you go beyond borders to manage your international payroll and hire new talent in Timor-Leste.

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Overview

Timor-Leste is a small country in Maritime Southeast Asia, comprising the eastern half of the island of Timor, the nearby island of Atauro and Jaco, and an exclave in the western part of the island named Oecusse. It borders Indonesia to the west and the Timor Sea to the south.

Timor-Leste's economy is heavily dependent on its natural resources, particularly oil and gas. The country has significant offshore oil and gas fields, which have been the main driver of economic growth since their discovery in the late 1990s

Neeyamo provides assistance for onboarding and management of employees in Timor-Leste along with processing of a firm's payroll, compliance, benefits and more.

Tools And Instances

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Global Work

A tech-based EOR solution to manage your extended workforce

Facts And Stats

Capital

Dili

Currency

United States dollar (USD)

Official Language

Tetun Portugese

Fiscal Year

1 January - 31 December

Date Format

DD/MM/YYYY

Country Calling Code

+670

Other Languages

English and Indonesiane Tetun Prasa, Tetun Terik, Adabe,

Time Zone

West Africa Time Zone (UTC+1)

Global Payroll

Overview

Handling payroll for a widespread workforce can pose as a major challenge for any firm. The added complication of compliance can make things worse and drastically effect the time and efforts that can be used in other equally important aspects of an organization's development.

Over the years, Neeyamo has observed these complexities and strived to provide a global payroll solution through a single technology platform, Neeyamo Payroll.

Payroll Taxes

Payroll tax is the percentage amount retained from an employee's salary and paid to the government to invest in the welfare of the general population.

Employee Taxes

Timor-Leste residents are taxable on a worldwide income basis, while nonresidents are taxable only on the income sourced from Timor-Leste. 

Income Tax Rate (%)
0 - 6,000 0%
Over 6,000 10%

 

 

 

Non-residents:

Wages paid to employees who are non-residents of Timor-Leste are taxed at a flat rate of 10% of the total monthly salary.

Social Security contribution scheme in Timor-Leste: 4%

Employer Taxes

Social Security Contributions: 6%

Payroll Cycle

Overview

Undoubtedly, payroll is a critical aspect of any organization. The pay cycle is a notable feature that provides a sense of accountability for an employee to be paid consistently for their work.

Frequency

The frequency cycle in Timor-Leste is Monthly.

13th Month Cycle

In Timor Leste, there is no statutory requirement to pay a 13th or 14th month salary.

Global Work

Overview

An Employer of Record service provider helps you get rid of the hassle of handling the complexities that come with setting up a new employee in remote locations. They act as legal employers, facilitate salary payments, and handle everything from health insurance, payroll taxes, and employee benefits to comply with local tax laws and regulations.

This ensures that the client company can focus on the employee’s everyday tasks safely in the knowledge that they have a cost-effective solution as they continue their global expansion.

HR Mandates and Practices

Minimum Wage

The current minimum wage in Timor-Leste is set at USD 115 per month. This figure has been in effect since June 1, 2012.

Overtime

In Timor-Leste, the standard work day is 8 hours long. The maximum number of working hours per week is capped at 44 hours.

Compensation for overtime shall be as follows:

  • An additional fifty percent (50%) of the Employee's normal hourly salary rate for the first two (2) hours of overtime.
  • An additional one hundred percent (100%) of the Employee's normal hourly salary rate for any overtime hours beyond the initial two (2) hours.

Compensation for Over Cycle Work:

  • Over-cycle work is compensated with an additional 200% of the employee’s normal hourly salary rate.
  • Employees are entitled to additional days of rest corresponding to the days worked beyond the standard cycle.

Data Retention Policy

There is no general data protection law in Timor-Leste.

Labour Code (Law No. 4/2012): Requires employers to maintain certain employment records, such as contracts, payroll, and other employment-related documentation. These records should be kept for the duration of the employee's employment and for a specified period after termination, often for at least 5 years to comply with potential audits or legal requirements.

Tax Regulations: Businesses must retain tax-related documents, such as invoices and tax returns, typically for a minimum of 5 years. This helps ensure compliance with tax laws and regulations.

General Privacy and Data Protection: Timor-Leste is in the process of developing more robust data protection and privacy regulations. While there are no specific data protection laws as comprehensive as those found in the EU or other regions, businesses should still ensure they handle personal data responsibly, adhering to best practices and international standards where possible.

Hiring and Onboarding Requirements

Hiring

Timor-Leste's labor laws prohibit discrimination in the workplace. The Constitution and various labor regulations emphasize equal treatment and non-discrimination based on race, gender, religion, and other factors.

Proficiency in Tetum and/or Portuguese is highly advantageous for candidates. Knowledge of other local languages can also be beneficial, depending on the role and the region in which the company operates. English is becoming increasingly important, especially in sectors that deal with international businesses or organizations.

Onboarding

The specific documents required for employee onboarding in Timor-Leste can vary depending on the nature of employment and the regulations set by the General Inspection of Labor and Employment Disputes (GITED). However, here is a list of commonly required documents:

  • Employment Contract
  • Registration with the General Inspection of Labor and Employment Disputes
  • Employee Documentation
  • Wage and Benefit Disclosure
  • Work Rules and Policies
  • Notification to Previous Employer
  • Tax and Social Security Registration
  • Occupational Health and Safety

Probation

The Standard Probationary Period: Up to 1 month.

High Technical Complexity or Responsibility: For workers with high technical complexity or confidence-based roles, the probationary period may be up to 3 months.

Fixed-Term Employment Contracts:

  • Contracts ≤ 6 Months: The probationary period may not exceed 8 days.
  • Contracts > 6 Months: The probationary period may not exceed 15 days.

Leave

Public Holidays

  • 1 January - New Year's Day
  • 3 March - Veterans Day
  • 28 March - Maundy Thursday
  • 29 March - Holy Friday
  • 10 April - Idul Fitri
  • 1 May - Labour Day
  • 20 May - Independence Restoration Day
  • 30 May - Corpus Christi
  • 17 June - Idul Adha
  • 30 August - Popular Consultation Day
  • 1 November - All Saints' Day
  • 2 November - All Souls' Day
  • 3 November - National Women's Day
  • 12 November - National Youth Day
  • 28 November - Independence Day
  • 7 December - Memorial Day
  • 8 December - Immaculate Conception
  • 25 December - Christmas Day
  • 31 December - National Heroes Day

Maternity Leave

In Timor-Leste, female workers are entitled to 12 weeks of paid maternity leave, with 10 weeks required to be taken after delivery. This leave includes a compulsory 6-week period after childbirth, during which they receive two-thirds of their usual remuneration, with future social security payments expected to cover this contingency. If the 6-week compulsory leave extends beyond the 12 weeks of paid maternity leave, employees can use their paid sick leave and annual leave entitlements.

Paternity Leave

Male employees are entitled to 5 consecutive working days of paid paternity leave following the birth of their child.

Leave to assist children

Workers with children under ten years old in Timor-Leste are entitled to up to 5 days off per year to provide essential assistance in case of their child's illness or accident upon presenting relevant certification.

Vacation

The period of vacation shall not be less than 12 working days.

Termination

Overview

Termination with Cause

Employers in Timor-Leste can terminate an employee for cause based on serious breaches such as misconduct, unjustified absences, or crimes related to work. This requires clear evidence and a fair investigation to justify the termination.

Termination without Cause

When terminating an employee without cause, employers must issue a written notice detailing the reason, pay the appropriate severance, and provide a job certificate. This ensures that the termination process is documented and fair.

Additional Procedural Requirements

A written notice of termination must specify the reason for the termination, whether with or without cause. Employees can appeal their dismissal to the Labor Inspector or Labor Court within a designated timeframe, ensuring their right to contest unfair dismissals.

Termination During Probationary Period

During the probationary period, which cannot exceed three months, either party may terminate the contract without notice or severance. This allows flexibility during the trial phase of employment.

Wrongful Dismissal

If termination procedures are not followed or if there is no valid reason for dismissal, employees can file a wrongful dismissal claim. The Labor Court will review the claim and determine appropriate remedies or compensation for the employee.

Notice Period

There are two main scenarios for notice periods:

  • Employee Initiated Termination: Employees intending to resign must provide their employer with a written notice of at least 30 days.
  • Employer Initiated Termination: The notice period required from the employer depends on the employee's length of service:
  1. Less than six months: 10 days written notice
  2. Six months to 1 year: 15 days written notice
  3. Over one year: 30 days written notice

Severance Pay

Severance pay in Timor-Leste is based on the employee’s length of service and final wage rate:

  • 3 months to 1 year: 30 days of the last wage rate
  • 1 to 2 years: 60 days of the last wage rate
  • 2 to 3 years: 90 days of the last wage rate
  • 3 or more years: 120 days of the last wage rate

Payment of Severance Pay:

Employers must pay the calculated severance amount to the employee or their heirs upon termination.

Important Note:

Severance pay entitlements and calculations may vary due to collective bargaining agreements or individual contracts, so it’s essential to review these documents for specific terms.

Visa

Overview

The requirements below apply when a foreign national is applying for a tourist visa prior to arrival.

  • Tourist Visa Documentary Requirements (Application made outside the country)
  • Travel documents
  • TN departure transportation ticket/ Return ticket or other means of transportation
  • Declaration of accommodation
  • Documents justifying the purpose or conditions of the stay / Required document of the reasons and condition of the stay.
  • Proving document of professional skill
  • Validity: 60 days
  • Application fee:
  1. Issuance: (USD) $100,00
  2. Extension: (USD) $150,00

Employee Background Checks

Legal and Background Checks

In general, legal and background checks in Timor-Leste can involve verifying an 

  • Individual's identity
  • Criminal record
  • Educational qualifications
  • Employment history and other relevant information

Last updated on August 14, 2024.

If you have any queries or suggestions, reach out to us at irene.jones@neeyamo.com

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