Executive summary

On 20 December 2024, the Mauritian President gave his assent to the Special Allowance Act 2024 (the Act) to implement one of the new regime's goals to grant a fourteenth month remuneration.¹ A special allowance (Special Allowance or Allowance) may only apply to an employee whose monthly basic salary does not exceed Rs50k. The Act provides the eligibility criteria, computation method, payment modality options and consequences for noncompliance with the Allowance. The Act also amends the Industrial Court Act, the Income Tax Act (ITA) and the Social Contribution and Social Benefits Act 2021 (SCSBA).

The Allowance is fully taxable for qualifying employees so that an increase in the disposable income of an individual may not be equivalent to the Allowance.

The financial impact of the Special Allowance varies and generally has not been taken into account by the business community insofar as their financial plans were concerned.

This Alert summarizes the salient provisions of the Act to help employers assess the financial and regulatory obligations. (This Alert does not discuss (a) the Government's decision to implement this measure; (b) the advantages/disadvantages in determining the beneficiaries; or (c) the scope of employers eligible for financial assistance.)

Eligible employees

The Act defines an employee broadly and as expressly encompassing casual work, manual labor and clerical work. Further, the Act specifically includes the following categories of employees:

• A part-time employee
• An atypical employee
• An employee working from home
• A share employee (i.e., an employee with more than one employer)
• A person who is classified as a service provider but performs the same or similar work as a comparable employee in the same enterprise

It is immaterial whether the employee holds a business registration number for this purpose; a substance-over-form approach would be applied to establish whether an individual is considered an employee for the purpose of the Act. The usual factors utilized to distinguish between a "contract of services" and a "contract for services" are relevant for this purpose. Practical challenges may nonetheless arise where an individual may be considered an agent of the employer but not an employee, based on other factors such as the determination of his/her income.

The following categories of individuals are excluded from the definition of employee:

• A job contractor
• A consultant
• A self-employed individual
• A person taking part in a relevant training scheme
• A person whose monthly basic wage exceeds Rs50k (as of the last working day with a previous employer or exceeds Rs50k as of 31 December 2024)
• A public officer, local government officer, employee of a statutory body governed by the Pay Research Bureau report, or employee on terms specified in that report

Foreign nationals are also within the scope of the Act. Although job contractors and self-employed individuals are specifically excluded from the definition of an employee, the Act does not address whether a self-employed individual that is also an employee with a monthly salary of less than Rs50k would benefit from the Allowance. In such cases, it seems logical to consider the overall income of the individual. Another approach could be to consider whether the individual has incurred a loss on his/her other activities and whether such a loss should be considered.

If an employee is remunerated at other than monthly intervals, it would seem appropriate to apply the same methodology, adjusted for the specific circumstances and on a basis consistent with the law.

Computation of the Special Allowance

An employee who has been continuously employed by the same employer for the full calendar year 2024 (the Relevant Year) and is still in employment at the end of the Relevant Year will receive Special Allowance equivalent to one-month's basic salary.

Unlike the computation of the statutory thirteenth-month bonus,² the Allowance is based on the basic salary. The basic salary for the month of December should be used to determine whether an employee is eligible for the Allowance. Hence, if an employee benefitted from a significant pay increase in the month of December 2024, such that his monthly salary exceeds Rs50k as from December 2024, he will not be eligible for the Allowance even if on average his monthly salary was less than Rs50k for the 12 months in the Relevant Year.

If an employee has been in continuous employment with same employer for only part of the Relevant Year, he shall be entitled to a Special Allowance on a time-apportioned basis. The specific cases considered in the Act include:

• He takes up employment subsequent to 1 January 2024.
• His employment is terminated during the year for any specific reason.
• His contract of employment terminates during the Relevant Year.
• He dies during the Relevant Year.
• He retires during the Relevant Year in accordance with any agreement or enactment.
• He resigns during the year after having been in continuous employment for at least eight months.

The apportionment basis is based on a completed month and the final basic wage of the qualifying employee. An employee who resigns will only benefit from the Allowance if he has been in employment for at least eight months.

The Act defines continuous employment as the employment of an employee under an agreement or under more than one agreement where the interval between one agreement and the next agreement does not exceed 28 days.

When two employers jointly pay an employee (e.g., for part-time work), each employer must pay the Special Allowance in accordance with its proportionate share of the basic salary.

Payment of the Special Allowance

Employers that have eligible employees shall pay the Special Allowance in two equal installments, with the first installment to be paid by the last working day of December 2024 and the second installment by the last working day of January 2025 (both of these days fall within the traditional working week). Employers may choose to pay the Allowance in December for practical purposes.

If the employer and the employee agree, the employer may pay the Special Allowances in four equal installments, provided that the first installment is paid by the last working day of December 2024. If the parties do not agree on the dates of the three installments after December 2024, the payments will be in the three subsequent months so that the last payment will have to be made in March 2025. Such an arrangement should be carefully considered to mitigate potential litigation hazards.

Offenses

An employer will be liable for a fine (not exceeding Rs5k) for failure to pay the Special Allowance to its employees or for not cooperating and providing relevant information to the authorized officers upon request.

Financial assistance for certain employers

Certain employers (referred to "eligible employers") are entitled to the financial assistance from the Mauritius Revenue Authority (MRA). Eligible employers include:

• An export enterprise having the same meaning as in the Export Enterprises (Remuneration) Regulations 2019
• An SME whose turnover for the year of assessment 2023—2024 did not exceed Rs100m
• Other employers as may be prescribed

Other employers do not benefit from any financial assistance, irrespective of whether they have significant losses and do not have the required cash to pay the Allowance.

Eligible employers would be able to claim full Allowance from the MRA if, for the year of assessment 2023—2024, if the employer had:

• An accounting loss computed in accordance with International Financial Reporting Standards
• An accounting profit that would be reduced by more than 50% if the
• Additional remuneration for 2024, the increase in National Minimum wage payable as from January 2024 and the Special Allowance payable for the year 2024 to its employees is deducted from that accounting profit
• The financial assistance payable to the employer under section 150EB of the ITA were added to that accounting profit

Section 150EB of the ITA was introduced to provide financial assistance to certain employers in the context of the national minimum wage and salary compensation 2024.

Eligible employers would be able to claim 50% Allowance from the MRA if, for the year of assessment 2023—2024, both of the following occur:

1. Their accounting profit would be reduced by more than 10% if the additional remuneration for 2024, the increase in National Minimum wage payable as from January 2024 and the Special Allowance payable for the year 2024 to employees is deducted from that accounting profit
2. The financial assistance payable to the employer under section 150EB of the ITA were added to that accounting profit

Implementation challenges

The new Act could present several implementation challenges. For example, employers that are in a loss position might not be able to comply with the Act for reasons beyond their control. Consider too that an employer with an accounting profit might not be able to comply with the Act because of other financial obligations that cannot be deferred.

Cases in which a self-employed individual also has employment income will need to be addressed, particularly cases where the individual has an overall loss.

The Act is silent on how the Allowance applies to individuals working outside of Mauritius, particularly where the arrangement may be governed by the employment laws of a country other than Mauritius.

The total monthly basic salary of a part-time employee might exceed Rs50k, while the employee's yearly salary could be significantly lower than Rs50k. Logically such an employee should not be entitled to the Allowance. An appropriate mechanism is needed to address such cases, however. It would not be appropriate for an employer to pay the Allowance in such cases. Employees in such cases should provide an undertaking (i.e., similar to a guarantee) to their respective employers.

Where an individual is no longer in employment, the former employer could encounter practical challenges to complying with the Act if the individual's bank details have changed. It would be helpful to have a mechanism through which employers could demonstrate that they have exhausted all possible means to comply with the Act in good faith.

Employers required to pay a Special Allowance for a deceased employee could also face challenges if the relevant details on the beneficiary are not readily available.