Morocco approves wage hikes and income tax cuts in public and private sectors
Morocco's government has approved wage hikes for the public and private sectors after reaching an agreement with trade unions and employers to increase employees' salaries by almost 100 dollars a month and revise downwards the income tax in exchange for a pension reform, a strike law and the revision of labour legislation.
The Moroccan government led by Aziz Akhannouch, the main trade union confederations, the Moroccan Confederation of Agriculture and Rural Development (CMEDR) and the General Confederation of Moroccan Enterprises (CGEM) initialled this final agreement to increase wages and revise income tax, in exchange for pension reform, a strike law and a revision of labour legislation.
This decision represents a major social détente in the face of the tensions generated by the demands of various labour sectors, such as education, which were demanding improvements in their pay and working conditions. This follows the rounds of social dialogue held in April.
This new improvement in the situation has to do with the increase in wages, the reduction in income tax (which means a lower tax burden for workers as they have to pay less tax) and the increase in the minimum wage, which is also part of this agreement.
The head of the Moroccan government, Aziz Akhannouch, explained this wage increase of 1,000 dirhams, almost 100 dollars net per month, which is divided into two instalments, one next July and the second in July 2025, and also noted that "the agreement provides for a reduction in income tax for employees and salaried workers with a monthly impact of up to 400 dirhams (39.48 dollars) for middle-income groups, and an increase in the guaranteed minimum wage by a further 10% in this round".
"As part of the new round of social dialogue, the government has been able to take a number of measures to improve the incomes of private sector employees and public sector employees," explained Aziz Akhannouch, as reported by Al-Arab media.
This agreement, according to an official statement from the Moroccan government, is "the fruit of the efforts made by all parties, through the proposals and approaches presented to reach acceptable solutions to the demand files to improve the conditions of workers and maintain the competitiveness of national companies and their social obligations, as well as a continuation of the implementation of the commitments contained in the agreement of 30 April 2022, which laid the foundations for social dialogue."
Details of the agreement
The wage increase implemented is almost 100 dollars net per month.
Negotiators agreed to approve a 10% increase in the minimum wage in non-agricultural activities in the private sector.
It was also agreed to revise the income tax system as of 1 January next, for wage earners, by adopting special measures aimed at improving the incomes of the middle class, while maintaining the current situation for professionals.
The income tax exemption bracket will be raised from 3,000 to 4,000 dollars, and the rest of the income tax table will be revised to extend the reduction in the rate applied to middle class incomes, allowing them to benefit from the reduction in tax rates by approximately 50%, while reducing the highest tax rate from 38% to 37%.
It was decided to increase the amount of the deduction from the annual tax amount of the family charge levied by the taxable person for each dependent from 36 to 50 dollars per month.
It was also agreed to reform pensions by creating a system in the form of two sectors, public and private, the details of which will be agreed upon, with a view to reaching a unified vision and presenting it to the social dialogue round next September, to be presented to Parliament in October, as reported by Al-Arab media.
In addition, the drafting of the law regulating strike action was approved, and it was agreed to gradually revise some of the provisions of the labour law, with the aim of striking a balance between companies' productivity and maintaining their competitiveness and the struggle for stable employment and the promotion of investment.
The Moroccan government and employers in the North African country welcomed wage increases and tax cuts linked to an improvement in pension legislation, labour law and strike law.
This follows recent lobbying by trade unions over the option of strikes, which will ultimately be governed by new legislation to regulate them.
In addition, the government is also trying to reform the pension system in Morocco, after several studies and analyses have been raised on the issue.
The trade unions are not only concerned about the strike and retirement law, but also face a demand on the table that the General Confederation of Moroccan Enterprises (CGEM), which represents the interests of employers, has always considered a priority among its expectations, namely the reform of the labour law, as they intend to make the law more flexible, allowing for dismissals in the face of economic hardship.
Flexibility is understood as an attempt by employers to have room for manoeuvre to reduce the number of employees when their companies face difficulties, so that when the employer finds himself in a business-related problem, he is guaranteed means of financing, unemployment or partial activity in the period of crisis and subsequent return.
However, trade unions fear that the labour law reform will entrench the vulnerability of private sector workers, in a context characterised by last year's high unemployment rate of 13% and the prevalence of officially undeclared work and unpaid work.