Before the first payroll
- Register as an employer with MRA and keep your TPIN handy.
- Collect each employee's details, TPIN, bank or mobile money details and start date.
- Agree the pay structure: basic pay, allowances, benefits and regular deductions.
- Decide which employees are in the pension scheme and confirm the contribution rates.
Step 1: work out gross pay
Gross pay is basic pay plus overtime, allowances and other earnings for the month. Keep a record of which items are taxable and which are not, because that decides taxable pay.
Step 2: work out taxable pay
Taxable pay is gross pay less items that are not taxable. Check with MRA how each allowance and benefit is treated, since the rules decide what is taxed.
Step 3: calculate PAYE band by band
Malawi PAYE uses monthly bands. Each band has its own rate, and that rate applies only to the part of taxable pay that falls inside the band. The first band is tax-free. Add up the tax from each band to get the employee's PAYE for the month.
A common mistake is to apply the highest rate to the whole salary. That overstates PAYE. Always work slice by slice.
The bands and rates are announced through the national budget and can change. Get the current monthly bands from MRA before you run payroll.
Step 4: pension contributions
For employees in the pension scheme, deduct the employee contribution from pay and record the employer contribution as an extra cost. Use the rates required by law and by your scheme rules.
Step 5: other deductions and net pay
Deduct loans, salary advances and other agreed deductions. Net pay is gross pay less PAYE, the employee pension contribution and other deductions.
Step 6: approve, pay and give payslips
Have someone other than the preparer review and approve the payroll. Pay staff, then give each employee a payslip that shows earnings, deductions and net pay.
Step 7: record payroll in the books
Record salaries and employer costs as expenses, PAYE and pension as amounts payable and net pay as paid from the bank. Pay PAYE to MRA and pension to the fund by their due dates and clear the payable accounts.
Doing it in InsightBooks
InsightBooks calculates PAYE on the monthly bands slice by slice with a breakdown per employee, calculates employee and employer pension with configurable rates, takes the run through approval, emails payslips and posts the journal for you.
Frequently asked questions
Is PAYE in Malawi a flat rate?
No. It is marginal: each rate applies only to the part of monthly taxable pay inside its band, and the first band is tax-free.
Where do I find the current PAYE bands?
From the Malawi Revenue Authority. Bands are set through the national budget and can change.
Is the employer pension contribution deducted from the employee?
No. The employee contribution is deducted from pay. The employer contribution is an additional cost to the employer.
Sources
- Malawi Revenue Authority (PAYE). Check current PAYE bands here. No rates are quoted in this guide.
Related
- Payroll Software with Malawi PAYE and PensionRun monthly payroll with Malawi PAYE bands, pension (NPS) contributions, benefits, deductions, payslips and approvals, then post salaries straight to your books.
- Accounting Software for Malawi BusinessesDouble-entry accounting in MWK with chart of accounts, journals, trial balance, profit and loss, balance sheet, cash flow, period locks and multi-branch reporting.
- School Accounting and Fees Invoicing SoftwareInvoice school fees, record payments, manage expenses, payroll and supplier bills and produce financial reports for private schools and colleges in Malawi.