The legal regime for the hiring of foreign labor in Mozambique has been increasingly rigorous, taking into account the legal requirements for the hiring of employees of foreign nationality under the applicable regimes, namely, within the quota, work permit (as soon as the applicable quota is exhausted) and short-term (which we will refer to in general terms as "work permits"), but also the requirements imposed by the authorities responsible for handling these processes (extralegal requirements).

One of the reasons for this increasingly narrow access to work permits for citizens of foreign nationality has to do with the protection of the local labor force and the guarantee of employment for Mozambicans. However, we do not intend in this article to speculate on the motivations behind the legislator's decisions.

In view of the constraints faced in hiring foreign labor through the employment relationship, employers and citizens of foreign nationality have been exploiting the most diverse alternatives to ensure the continuity of activities using citizens of foreign nationality.

It should be noted that one of the popular mechanisms for the establishment of the relationship is the constitution, by citizens of foreign nationality, of individual companies. Therewith, this article intends to examine the advantages and risks of the use of this mechanism for the hiring of foreign labor.

Many foreign citizens, especially those who have been in the country for some years and who have been surprised by the legislative evolution regarding the mechanisms for their hiring, as a way of facing the difficulties encountered in access to employment in Mozambique, have opted to set up individual companies or register as sole proprietors and subsequently enter into service provision contracts with the companies which benefit from their activities.

In this way, the company benefiting from the provision of services by foreigners, which in this case becomes the client in this relationship and which we will henceforth refer to as the "contracting party", may, by virtue of the apparently purely business relationship, have the foreign citizen at its service without, however, needing to use his quota or having to organize a work permit. This, in addition to being exhausting, can be extremely time-consuming (considering the time taken to obtain the applicable documents, such as certificates of equivalence, as well as applicable visas, as the case may be).

In addition, employers no longer have the burden of complying with the labor obligations associated with those employees, such as the registration and payment of social security contributions, income taxes, insurance against work accidents, medical care, among others.

In turn, the foreign citizens concerned, i.e. the business owners, can more easily have access to “employment” because they already have an advantage over foreigners who have to be hired as employees and whose legalization of their employment and stay in the country implies the aforementioned burdens for employers.

Attention should be drawn to the fact that, although in principle there is no legal impediment to the setting up of individual companies or registration as sole proprietors by foreigners, nor to the contracting of these companies under service provision regime by the contracting parties, the use of this mechanism with the sole aim of circumventing the legal requirements applicable to the hiring of foreign employees constitutes a departure from the norm, which can be considered an irregularity by the competent authorities.

In fact, service contracts concluded with individual companies or sole proprietors for the performance of activities that may be understood as permanent needs of the employer, in accordance with article 40 of Law no. 23/2007, of 1 August (Labor Law), may be equated with the employment contract, whenever they place the service provider in a situation of economic subordination to the contracting party, under the terms of article 20 of the Labor Law.

In such situations, particularly if the individual company or sole proprietor has only one employee, in this case a foreigner, and if the same has not entered into service provision contracts with other clients and still has to comply with working hours and other obligations of an essentially labor-related nature, the contracting company is exposed to the risk of the service provision contract being treated in the same way as the employment contract and, as a consequence, be considered to be in breach of the rules on the mechanisms for hiring foreign labor, being subject to the applicable sanctions. This risk is even greater if the contracting company has service provision contracts of this nature with several individual companies or sole proprietors.

Thus, it is advisable for companies to avoid resorting to these forms of hiring as a mechanism to circumvent the legal requirements regarding the hiring of foreign labor. Companies must comply with the rules on the hiring of foreign labor and, in case of difficulties, seek professional legal assistance for this purpose.

If the intention is in fact to outsource some activity, the risk factors mentioned above must be considered, and the service provision contracts to be concluded in such situations must be correctly prepared in accordance with applicable legal requirements, as well as in what concerns the way in which it is to be implemented so that the existing business relationship is not treated as an employment relationship, considering the slight separation between the business relationship arising from the provision of services by individuals and the employment relationship.

The article was also published in the SAL & Caldeira Advogados LDA Newsletter No. 39. You can click here to access the article. It is reproduced with permission of SAL & Caldeira Advogados LDA.

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