On 1 September 2026, the Council of Ministers, presided over by Prime Minister Manuel Osa Nsue, approved a policy measure to reduce the employer social security contribution rate for newly hired employees. This initiative forms part of a broader labor market reform agenda aimed at lowering the cost of formal employment, encouraging private sector hiring, and reducing informality. The measure is expected to be formalized through a presidential decree amending the General Social Security Law and the General Labor Law (recently modified by Law 6/2026 of 10 April 2026). The reduction applies specifically to new contracts signed after the effective date, with a duration likely capped at 12–24 months per employee.
Key Takeaways
- Targeted Payroll Cost Reduction: Employers will benefit from a temporary exemption or significant reduction (potentially 50–100%) of the standard employer contribution to the National Social Security Institute (INSESO) for each new hire. This directly lowers the effective labor cost, making formal employment more competitive relative to informal arrangements.
- Conditionality and Anti-Abuse Provisions: To prevent displacement of existing workers, the incentive is restricted to net increases in headcount. Companies must maintain overall employment levels and comply with reporting obligations to the Ministry of Labor and INSESO. Clawback mechanisms may apply if employees are terminated within a protected period.
- Fiscal Impact and Budgetary Offsets: The revenue loss to the social security fund will be offset by treasury transfers, reflecting the government’s prioritization of job creation over short-term fiscal consolidation. Businesses should update payroll systems and factor the reduced contributions into 2026–2027 workforce planning and tax provisioning.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement