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In March 2025, the Government of Tanzania issued the Foreign Exchange Use Regulations, GN No. 198 of 2025. While the Regulations affect a range of commercial activities, one area that deserves immediate attention from business leaders is employment remuneration.

Simply put, employment contracts that provide for salaries, allowances, or benefits denominated in foreign currency now fall within restricted domestic transactions. A one-year transition period was granted, ending in March 2026. After that deadline, continuing to rely on foreign currency clauses in local employment relationships may expose organizations to regulatory sanctions and legal complications.

For many businesses, this change may initially appear administrative. It is not. It touches payroll systems, executive contracts, expatriate arrangements, employee morale, and governance standards. The companies that treat this as a structured compliance exercise will manage it smoothly. Those who postpone action may find themselves navigating unnecessary tension and operational risk.

Why This Regulation Deserves Executive Attention

Foreign currency clauses were not introduced casually. They often served clear and practical objectives. Employers used them to protect employees against exchange rate volatility, stabilize expatriate compensation, benchmark executive pay to international markets, and preserve purchasing power for scarce or specialized skills.

The new regulatory framework does not invalidate those historical business reasons. It simply restricts the continued use of foreign currency in domestic transactions.

The task facing employers, therefore, is not just replacing “foreign currency” with “TZS.” The real task is preserving fairness and competitiveness while complying with the law.

If approached mechanically, organizations risk triggering employee grievances, pay inequities, retention challenges, and reputational damage. This is as much a people issue as it is a compliance issue.

Start with Governance, Not Paperwork

The most common mistake is delegating this entirely to HR as a document-editing exercise. In reality, it requires coordination across HR, Finance, Legal, and Senior Management.

A structured internal task force should oversee the process. HR maps the workforce impact and manages communication. Finance models the conversion implications and payroll adjustments. Legal or Compliance interprets regulatory obligations. Senior management approves policy direction.

Assign timelines. Set milestones. Track progress. Without formal ownership, organizations tend to defer action until the deadline becomes uncomfortably close.

Look Beyond Employment Contracts

Many businesses will review standard employment agreements and assume the job is done. In practice, foreign currency references are often embedded elsewhere.

Offer letters, promotion letters, salary increment notices, commission structures, retention agreements, expatriate packages, housing policies, consultancy arrangements linked to employment, and even staff loan agreements may contain foreign currency references.

A central register should be created to identify every document affected, the employees involved, and the corrective action required. This avoids inconsistencies and ensures no area is overlooked.

One Size Will Not Fit All

Not every employee should be treated identically in the conversion process.

Local employees paid entirely in foreign currency locally may require a straightforward conversion. Employees whose remuneration is indexed to exchange rates require the removal of currency linkage and possibly a redesigned adjustment mechanism. Expatriates with split payroll arrangements require a case-by-case legal and tax review. Senior executives benchmarked internationally may require broader compensation restructuring.

Segmentation is not about complexity for its own sake. It prevents inequity and reduces the risk of disputes later.

The Sensitive Question: How Do You Convert?

The most delicate aspect of this transition is determining the new TZS equivalent.

Employers should define clearly:

• The exchange rate source being used
• The reference date for conversion
• How exchange rate fluctuations are being treated
• Whether economic value preservation is being considered

Some organizations will use a fixed-date conversion. Others may apply an average historical rate. In certain cases, redesigning the compensation structure may better preserve fairness.

Whatever approach is chosen must be documented and applied consistently. Perceived inconsistency is one of the fastest ways to erode employee trust.

Conversion Alone May Not Be Enough

In some cases, direct numerical conversion may distort internal salary bands or create imbalances between roles.

Rather than simply converting base salary, employers may need to review compensation holistically. This could involve adjusting allowances, rebalancing performance-based components, or aligning non-cash benefits.

The objective is long-term stability, not short-term compliance.

Communication Will Determine the Outcome

The technical side of compliance is manageable. The human side requires attention.

Employees must understand that the change is regulatory and mandatory. They must see that the organization has applied a consistent and transparent methodology. Most importantly, they need space to ask questions and receive clear explanations.

A recommended communication flow includes a company-wide announcement explaining the regulatory shift, departmental briefings, individual discussions where necessary, and then formal variation agreements for signature.

Sending amendment letters without prior engagement often creates unnecessary resistance, even when the numbers are reasonable.

Formalize Every Amendment

Each affected employment contract must be formally varied in writing. The variation agreement should reference the regulatory requirement, clearly state the revised TZS remuneration, confirm that other terms remain unchanged, and be signed by both parties.

Payroll adjustments without written amendments are insufficient. Documentation discipline is critical for audit and regulatory review purposes.

Update Systems and Prevent Recurrence

Compliance must extend into operational systems. Payroll configurations, HR templates, recruitment documentation, and internal policy manuals must all be aligned.

Future hires should not receive foreign currency clauses unless legally permissible under specific cross-border arrangements. Correcting existing contracts while continuing to issue new non-compliant ones defeats the purpose.

Special Attention: Expatriates and Cross-Border Roles

Some employment relationships genuinely operate across jurisdictions. Where payments originate offshore, or employment is not purely domestic, treatment may differ.

However, misclassification is risky. Employers should carefully verify the place of employment, source of remuneration, and tax residency implications. Complex arrangements should be reviewed thoroughly before adjustments are made.

The Cost of Waiting

After March 2026, organizations that remain non-compliant may face administrative penalties, enforceability challenges, audit concerns, and potential labour disputes.

More importantly, delayed action often leads to rushed decisions and inconsistent treatment across employees.

Early, structured implementation reduces operational strain and preserves trust.

A Final Reflection

The intent behind the Regulations is to strengthen the use of Tanzanian Shillings in domestic economic activity. Employers are not being instructed to reduce employee value. They are being required to redesign how that value is expressed and administered.

Handled carefully, this transition can strengthen internal governance, improve documentation practices, and reinforce transparency within the employment relationship.

Businesses that begin earlier will move forward with clarity and stability. Those who wait may find themselves managing both compliance pressure and employee anxiety at the same time.

As always, preparation is not only about meeting a deadline. It is about protecting the integrity and sustainability of your organization.