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The True Cost of Hiring local Human Ressources in Cabo Verde: Beyond the Salary

When planning to hire employees in Cabo Verde, understanding the full financial picture is crucial. The salary you agree to pay is just the starting point—mandatory social security contributions, insurance premiums, and other obligations significantly increase your actual employment costs. Here's a comprehensive breakdown of what you'll really pay when you bring workers onto your payroll.

Social Security Contributions: The Largest Hidden Cost

The cornerstone of employment costs in Cabo Verde is the mandatory social security system, managed by the Instituto Nacional de Previdência Social (INPS). This system provides comprehensive protection for workers and their families, covering everything from healthcare and maternity leave to disability benefits and retirement pensions.

The Numbers You Need to Know

The total social security contribution rate is 23% to 24.5% of gross salary, split between employer and employee:

  • Employer contribution: 15% to 16% of the employee's gross salary
  • Employee contribution: 8% to 8.5% of gross remuneration

While sources vary slightly on the exact percentages, most references confirm a total contribution of approximately 23-24.5%, with the employer bearing the larger share.

What This Means in Practice

If you hire an employee at the current minimum wage of 17,000 CVE per month (as of January 2025), you're not just paying 17,000 CVE. You'll add approximately 2,550-2,720 CVE in employer social security contributions on top of the base salary. The employee's share (8-8.5%) is deducted from their gross pay, but you're responsible for calculating, withholding, and remitting both portions to the INPS.

Payment Deadlines and Procedures

You must pay the total contribution amount—both your share and the employee's withheld portion—to the INPS by the 15th or 20th of the month following the month to which the contributions relate. Missing this deadline can result in penalties, so maintaining rigorous payroll discipline is essential.

No Contribution Ceiling

Unlike some countries that cap social security contributions at a certain salary level, Cabo Verde generally applies these percentages regardless of how high the salary goes. This means your contribution burden scales directly with compensation—a significant consideration when hiring senior executives or highly skilled professionals.

Mandatory Accident Insurance: Your Safety Net Obligation

Beyond social security, employers must secure mandatory accident and occupational disease insurance for all workers. This separate insurance specifically addresses workplace-related injuries and hazards.

Premium Rates

The premium varies based on the risk classification of the work being performed:

  • Class 1 (low risk): 2% of gross salary
  • Class 3 (higher risk): 6% of gross salary

For businesses in low-risk sectors like office work or retail, the 2% rate applies. However, if you're operating in construction, manufacturing, or other physically demanding industries, expect the higher 6% premium.

The statutory calculation typically applies this rate to gross salaries over 9,000 CVE, and the insurance is generally paid once annually rather than monthly.

Registration Requirements

You can register this insurance with any licensed insurance company in Cabo Verde. While you have flexibility in choosing your insurer, the coverage itself is non-negotiable—it's a legal requirement for all employees.

The Real Cost: A Practical Example

Let's calculate the actual cost of hiring one employee at 25,000 CVE gross monthly salary in a low-risk office environment:

Monthly Costs:

  • Base salary: 25,000 CVE
  • Employer INPS contribution (15%): 3,750 CVE
  • Employee INPS contribution (8%): 2,000 CVE (withheld from salary)
  • Total monthly cost to employer: 28,750 CVE

Annual Additional Costs:

  • Mandatory accident insurance (2%): approximately 6,000 CVE annually (25,000 × 12 × 2%)

Your total annual employment cost: approximately 351,000 CVE, compared to the nominal annual salary of 300,000 CVE—a 17% increase over the base salary alone.

For higher-risk industries using the 6% accident insurance rate, this burden increases further.

INPS Registration: A Mandatory First Step

Before you can hire anyone, you must register your company and your employees with the INPS. Fortunately, this process is relatively straightforward:

  • Cost: Generally free of charge, or approximately 1,000 CVE (about €9)
  • Timeline: Approximately one day
  • Requirements: Commercial registration certificate, identification of legal representative, and a list of workers

This registration is not optional—it's a mandatory step in the company creation process and in onboarding any employee.

What Social Security Covers

Understanding what you're paying for can help put these costs in perspective. The INPS system provides comprehensive coverage:

  • Sickness and illness benefits
  • Maternity, paternity, and adoption leave
  • Disability (invalidity) benefits
  • Death benefits for families
  • Old-age and retirement pensions
  • Survivor pensions
  • Family allowances and subsidies (including funeral and breastfeeding subsidies)
  • Unemployment insurance

This comprehensive safety net, funded jointly by employer and employee contributions, provides significant security for your workforce—though it comes at a substantial cost to your business.

Hiring Incentives: Offsetting Some Costs

The Cabo Verdean government recognizes that employment costs can be burdensome and offers several incentives to encourage job creation:

Youth Employment Exemption

If you hire young workers (up to 35 or 37 years old, depending on the source) for their first employment relationship for a minimum of one year, you can be completely exempt from the employer's social security contribution (the 15-16% share). This exemption can save you thousands of CVE per employee annually and makes hiring young, entry-level workers significantly more affordable.

Other Tax Incentives

Additional benefits available to employers include:

  • Job creation deductions: 26,000-35,000 CVE tax deduction per job created, depending on location and whether the employee has a disability
  • Wage increase incentives: Companies increasing average salaries by at least 4.7% annually can claim enhanced tax deductions (200% instead of 150%) on the salary increase costs
  • Training cost deductions: An additional 50% deduction for expenses related to employee training, internships, and scholarships
  • Long-term unemployed/youth co-payment: State co-payment of 50% of salary (up to 25,000 CVE) for 12 months when hiring from these groups

These incentives can materially reduce your net hiring costs, particularly in your first year of employment and when focusing on youth or disadvantaged populations.

Self-Employed Workers: A Different Calculation

If you're considering working with independent contractors or self-employed individuals rather than direct employees, be aware they face their own contribution obligations:

  • Restricted scheme: 11% contribution rate
  • Extended scheme: 19.5% contribution rate

While this shifts the administrative burden to the contractor, you'll typically need to factor these costs into the rates you negotiate, as self-employed workers will price their services to cover their own social security obligations.

Overall Tax and Contribution Burden

When evaluating the total cost of doing business in Cabo Verde, it's worth noting that the overall tax and contribution rate as a percentage of profit stands at 37.5%, with labor taxes and contributions accounting for 18.7% of that total. These figures place Cabo Verde's employment cost burden in context relative to overall business taxation.

Planning Your Hiring Budget

The bottom line for business owners is straightforward: when budgeting for employees, add approximately 17-22% to the base salary to account for mandatory employer contributions. This percentage covers your INPS contribution (15-16%) and accident insurance (2-6%, depending on risk class).

Additionally, remember that the employee's take-home pay will be reduced by their own INPS contribution (8-8.5%), which, while not a direct cost to you, affects the compensation package you'll need to offer to attract talent.

Start your planning by:

  1. Determining gross salaries needed to attract qualified candidates
  2. Adding 15-16% for INPS employer contributions
  3. Adding 2-6% for mandatory accident insurance
  4. Investigating whether you qualify for any hiring incentives
  5. Ensuring you have systems in place for timely monthly payments to INPS

By understanding these costs upfront and building them into your financial projections, you'll avoid unpleasant surprises and can make informed decisions about your hiring strategy in Cabo Verde's worker-protective regulatory environment.