Hire in Morocco with Confidence

Any business hiring in Morocco should understand the important legal distinction between who classifies as an independent contractor and who can be hired as an employee. Fines or penalties may be issued to businesses hiring independent contractors under the guise of employment. 

Just under half of Morocco’s workforce operates on a self-employed basis. The Moroccan Labor Code does not clearly distinguish between employees and independent contractors, although it does differentiate three types of contract: permanent contract, fixed-term contract, and project-specific contract. The first two are used for employees, while the last one is typically used to hire independent contractors. Moroccan labor law is grounded in international legal frameworks, national labor laws, and the Civil Code. 

Understanding the distinctions between an employee (mowaddaf or موضف) and an independent contractor (muqawil mustaqilun or مقاول مستقل) is critical to compliantly engaging workers in Morocco and thereby avoiding severe legal, financial, and other penalties. It is important to work with a partner like Worksuite to ensure you put in place an engagement framework that accurately classifies freelancers as independent contractors for you and lets you know when freelance talent must be engaged as a payrolled independent contractor or employed directly.

Moroccan Labor Code distinguishes between three main types of contract. The permanent contract (euqid li’ajal ghayr musamma or عقد لأجل غير مسمى) is an employment contract with an indefinite term. These contracts do not have to be in writing; the evidence for an indefinite-term employment contract can take the form of payslips and other documents. The fixed-term contract (eaqd aleamal muhadad almuda or عقد العمل محدد المدة) is an employment contract with a fixed duration; it must be in writing and can only be used in specific circumstances (such as temporary replacement of another employee, or accommodating a temporary increase in business activity). A third type is a project-specific contract (euqid eamil li’iinjaz eamal or عقد عمل لإنجاز عمل), for which the contract duration is entirely project-dependent. The latter contract is typically used to hire independent contractors in Morocco.

If the real substance of the company-contractor relationship proves to effectively be an employment relationship, the hiring company may suffer legal and financial penalties (including payroll taxes). It is therefore important to cooperate with an employment service partner like Worksuite when hiring in Morocco in order to ensure that independent contractors fall under the correct working relationship with your business.

Who is an Independent Contractor?

In Morocco, an independent contractor is defined as a natural person who puts his skills and expertise at the disposal of a client requesting assistance for a specific period of time. 

Individuals are generally considered to be independent contractors if they:

• Are subject to relatively little control by the hiring company, which means they are free to decide when, where, and how they complete their tasks.
• Do not have fixed hours of work that are determined by the hiring company.
• Are able to choose the location from which to undertake their work.
• Provide their own equipment, rather than receiving it from the hiring company.
• Can be (or are expected to be) dismissed once the contracted work is complete. 
• Are not integrated into the hiring company’s organizational structure.
• Are paid for a specific project or task rather than on a recurring basis.
• Can refuse to perform a task (unless that task is part of their contract).
• Are not entitled to a minimum amount of work or a minimum amount of pay.
• Are not listed on the hiring company’s normal payroll.
• May work for another client at the same time.

There are four main categories under which independent contractors operate in Morocco: 

• Auto-entrepreneur (almuqawil aldhaatiu or المقاول الذاتي): The “auto-entrepreneur” category allows anyone with a national ID card to register as self-employed, so long as they earn less than MAD 200,000 per year from selling a service or less than MAD 500,000 per year from selling physical products. (Individuals who already have employment contracts may be prohibited from registering as an auto-entrepreneur.) If the individual’s annual income is higher than this, they must establish a business entity, such as a sole proprietorship, company, or partnership.
• Sole proprietorship (milkiat fardia or ملكية فردية): To set up a sole proprietorship, individuals need to obtain a Negative Certificate (Certificat Négatif) from the Moroccan Office of Industrial and Commercial Property (OMPIC) to demonstrate their business name is not already in use by another entity. Once approved, the business can be registered with the Commercial Register of Morocco. 
• Company (sharika or شركة): Types of companies in Morocco include the Public Limited Company (sharikah musāhamah ʿāmmah dhāt mas’ūliyyah maḥdūdah or شركة مساهمة عامة ذات مسؤولية محدودة ش.ذ.م.م), the Limited Liability Company (LLC) (sharakuh dhat masyuwlih mahduduh or شركه ذات مسئوليه محدوده), the Partnership Limited by Shares (sharikat tawsiat bial’ashum or شركة توصية بالأسهم), and Simplified Public Limited Company (alsharikat almahdudat aleamat almubasata or الشركة المحدودة العامة المبسطة). Each type has specific requirements regarding minimum capital, the number of shareholders, executive boards, minimum share value, and company naming conventions, amongst other details. In addition to the steps for registering a sole proprietorship, companies must draw up their Articles of Association, and also submit an entry to the Journal of Legal Notices and one in the Official Bulletin within one month of registration.
• Partnership: This includes General Partnership (sharikat tadamun jamaeia or شركة تضامن جماعية), Limited Partnership (shirakuh mahduda or شراكه محدودة), and Joint Venture Partnership (ealaqat mashrue mushtarak or علاقة مشروع مشترك). Each type has specific requirements regarding shares, liabilities, dispute resolution mechanisms, and other details. In addition to the steps for registering a sole proprietorship, companies must draw up their Articles of Association, and also submit an entry to the Journal of Legal Notices and one in the Official Bulletin within one month of registration.

There are two main types of contracting model for working with independent contractors in Morocco.

A. Direct engagement of the contractor as self-employed or registered via their own company. Under this model, the hiring company engages directly with the independent contractor – either as an individual sole trader or as a limited company (see above) – and establishes a direct contract for the provision of services. The hiring company then pays the independent contractor directly, in accordance with the terms of the contract.

B. Third party. These firms come in two forms and both are specially designed to vet and engage freelancers compliantly as either contract employees or independent contractors on your behalf.

• Temp agency: Here, the hiring company engages with a staffing agency, which in turn supplies one of its own independent contractors to deliver the contracted services. The hiring company pays the staffing agency directly, in accordance with the terms of the contract. The contract is, therefore, between the hiring company and the staffing agency, while the agency pays the independent contractor through a separate contractual arrangement. 
• Umbrella company: Independent contractors can also work through an umbrella company. This turns a ‘self-employed’ individual into a legal ‘employee’ of the umbrella company itself. The contractual relationship is between the umbrella company and the client, with the umbrella company running payroll and administration for the independent contractor. The umbrella company invoices the client directly while paying the contractor via PAYE as a standard employee. Umbrella companies levy a fee on the contractor to cover their costs.
• Hiring partner: The hiring company can also work with a hiring partner who helps them vet potential independent contractors, set up contracts, ensure the contractor is properly classified, onboard and manage contractors, and make payments to them. 

Companies hiring independent contractors in Morocco should avoid making payments directly through their payroll system. Beyond these guidelines, there are no specific legal requirements related to paying contractors in Morocco. The contract should stipulate the preferred payment method agreed upon by both parties.

The tax year aligns with the calendar year (1 January to 31 December). Beyond the national income tax system, Morocco has no local or regional income taxes. Employees are subject to a progressive personal income tax rate, ranging from 10% on annual incomes of MAD 30,000-50,000 (USD 2,800-4,700) to 38% for incomes of MAD 180,000 (USD 16,800) and above. Employers deduct employees’ income tax, social security, and public health insurance at source via the PAYE (pay-as-you-earn) system. This means that employees are not typically required to submit any tax forms in relation to their income earned via employment. However, if they have additional sources of income that are not taxed at source, they must file tax returns by 28 February for the preceding tax year.

When paying independent contractors, payers do not withhold taxes or make any other deductions from payments. Independent contractors must file and pay their own income taxes. Contractors operating as an auto-entrepreneur pay 2% tax on income from services sold, and 3% tax on income from products sold, with no VAT required. Income taxes are filed and paid everything three months, either online or at a post office. 

Contractors operating as a registered business are subject to a progressive Corporate Income Tax (CIT) rate. This ranges from 0% on incomes up to MAD 300,000 (USD 28,000) to 31% for incomes of MAD 1 million (USD 93,800) and above. The specific CIT rate can also vary based on the type of business activity. These contractors will typically pay VAT of 20%, and may also pay a Professional Tax on fixed assets. Tax returns must be filed by 31 March for the preceding tax year, and can be paid online via the portal of the General Tax Administration (Direction Générale de Impôts, or DGI). 

For employees, mandatory social security contributions are paid to the National Social Security Fund (alsunduq alwataniu lildaman alaijtimaeii or الصندوق الوطني للضمان الاجتماعي), Morocco’s social security authority. The rate is 6.74% for employees and 21.09% for employers, with contributions being paid monthly. Independent contractors must handle their own social security arrangements and contributions.