Specifics of Employer of Record (EOR) Companies in Madagascar

As a reminder, Madagascar's labor code was updated and validated in 2024 with the aim of aligning it with international standards and strengthening social protection for workers and employees. This update included, for the first time, regulations governing umbrella companies.

Umbrella companies, named also Employer of Record (EOR) emerged in France in the 1980s through associations of senior executives who, while unemployed, continued to provide services to companies in exchange for payment. The practice was subsequently structured by the creation of umbrella companies and was finally regulated by the French labor code in 2008.

Umbrella companies have developed internationally, based on this French structure, particularly for expatriate workers to enjoy all the benefits and security of being an employee.

Umbrella employment (Employer of Record) in Madagascar, as defined in the new Labor Code, has interesting specificities and presents both similarities and differences compared to "international" practices or those in other countries (for example, France). Here is a comparative analysis to understand the practice of umbrella, employer of reference, in Madagascar:

1. What the Malagasy Labor Code says about umbrella companies

Some key points taken from the articles of the Malagasy Labor Code (Law No. 2024-014):

• Umbrella employment is formally recognized in the Labour Code (Section 9).
• Three parties are involved: the umbrella company , the employee under the umbrella company arrangement , and the client company .
• The contract between the umbrella company and the client company is a commercial contract (governed by commercial law).
• The employment contract is between the umbrella company and the employee under the umbrella company: the Malagasy Labor Code applies.
• The purpose of the work: the employee is "made available" to the client company. However, the umbrella company remains the legal employer . It can delegate "organizational authority" to the client company.
• The duration of the umbrella company contract can be fixed or indefinite (Art. 78).
• The salary of the employee under an umbrella company arrangement is set by mutual agreement between the umbrella company and the employee, but must comply with certain legal provisions of the Code (in particular those concerning minimum remuneration, etc.).
• The termination of the employment contract between the umbrella company and the contractor is governed by articles 35 to 51 of the Labor Code.
• A forthcoming decree will specify for which "jobs or types of employment" umbrella company arrangements are authorized, and will define the "substantive and formal conditions" of the umbrella company employment contract. (Art. 82)
• The Malagasy Code limits the use of umbrella companies: according to summaries, the purpose of the umbrella company contract must concern “occasional” tasks or specific missions, not normal permanent activities of the client company .
• Those working under an umbrella company in Madagascar have access to protection and social security : CNAPS, OSTIE, FMFP, etc. for umbrella company employees.

2. Comparison with “international” umbrella companies, and in this case, with French umbrella companies

For comparison, here are some points drawn from the practices of umbrella companies in other contexts such as France:

• Traditional umbrella employment in France is also based on a three-way relationship : umbrella company – umbrella employee – client company.
• Umbrella companies in France are governed by laws and a specific collective agreement, which sets strong guarantees (e.g., minimum remuneration, termination conditions, obligations of the umbrella company).
• In France, certain limits are imposed: the client company cannot use umbrella employment to replace an employee on strike, or for permanent non-occasional activities.
• International umbrella employment (e.g., for a freelance consultant working for a foreign client) exists: umbrella companies take care of invoicing, the contract, payroll, and provide insurance, while maintaining the contractor as an employee in their country of origin.
• In international umbrella employment, according to certain models, the worker can be “seconded” or “expatriated” depending on the duration or location of the assignment.

3. Specificities of Madagascar in relation to international models

In light of the two previous sections, here is what is specific to Madagascar (or at least “distinctive”):

1. Recent legal framework
   • Wage portage is explicitly codified for the first time in the Malagasy Labour Code (2024), which shows that the Malagasy legislator recognizes this model as an integral part of the labour market.
   • The fact that a decree is needed to specify the “types of jobs” for which umbrella employment is permitted shows that the scheme will be regulated (Art. 82).
2. Limited (or “strict”) use
   • The Code limits the use of umbrella companies to specific/occasional missions , which probably prevents abuse for permanent workforce needs (this is a restriction similar to what is seen in some countries, but it depends heavily on the wording of the forthcoming decree).
   • This limitation is important: it ensures that umbrella employment remains a “flexibility solution” and not a systematic means of “cut-rate” hiring.
3. Social protection
   • Employees using umbrella companies benefit from Malagasy legal protections, which in the context of umbrella employment strengthens their security (contributions, social protections).
   • This can make Malagasy umbrella companies particularly attractive for self-employed individuals who want to combine autonomy and protection.
4. “Employer of Record” (EOR) approach
   • Several players (e.g., Madeinmada ) present their payroll services in Madagascar as an “Employer of Record” (EOR): the payroll company acts as the legal employer, takes care of payroll, social obligations, etc.
   • This speaks to client companies (especially foreign ones) who want to engage talent in Madagascar without creating their own local entity.

4. Risks and challenges / Points to watch

• The implementing decree (Art. 82) is crucial: depending on how it is written, access to porting could be more restrictive or broader than what the Code suggests.
• The model depends heavily on the strength of the umbrella companies : if they do not manage their obligations well (salary, contributions, etc.), the "umbrella" employee could be exposed.
• As in other countries, there is a risk of abuse (client company trying to "carry" regular employees under the guise of umbrella company) — the Malagasy legislator seems to anticipate this by limiting the use.
• For international missions, it will be necessary to see how Malagasy umbrella companies interact with tax obligations (possible double taxation, etc.) and social security schemes depending on the worker's residence.

5. Conclusion — Is it “aligned” or “stricter/more flexible” than international standards?

• Aligned in the background : Malagasy wage portage follows the classic tripartite scheme found in many systems (France, elsewhere).
• Slightly more regulated in terms of use : the limitation to “occasional” or expert missions can make the scheme more “protected and controlled” than a completely unrestricted arrangement.
• Real social protection : the fact that those who are employed benefit from social rights (even in an “autonomous” status) shows a desire for balance: security and flexibility.
• EOR's perspective : the "Employer of Record" logic offers a very strategic entry point for foreign companies, which can make Malagasy umbrella employment a lever for HR outsourcing.

Madeinmada | PSM, a payroll management company in Madagascar

Madeinmada is a company active in the field of payroll management in Madagascar. The company is committed to respecting and implementing the new labor code for its employees and employees working within its structure on behalf of local and foreign companies and NGOs.

Why choose Madeinmada as your EOR, Umbrella Company?

Madeinmada has established itself as a key player in the umbrella company sector, an Employer of Record (EOR) Services provider in Madagascar. With in-depth knowledge of the legal framework and expertise in human resources management, Madeinmada offers tailored support to professionals and companies seeking to benefit from payroll management and umbrella company services, talent recruitment, and administrative support for employees.

Whether you are an expert looking for a specific mission or a company requiring particular skills for a defined period, Madeinmada offers you a flexible and secure solution, aligned with the requirements of the Malagasy Labor Code.