What payroll?
Payroll refers to the process of calculating and disbursing compensation or wages to employees for their work within an organization. In Ghana, there are specific regulations and procedures that employers must follow when it comes to payroll management. Here's an overview of the key aspects of payroll in Ghana:
Basic Salary: It is the amount of money an employee receives for their work before any additional payments, bonuses, allowances, or deductions are factored in. The basic salary is typically expressed as an annual or monthly figure and is the foundation upon which other components of compensation, such as benefits, bonuses, and allowances, are added or calculated.
Gross salary: It often referred to as "gross pay," is the total amount of money an employee earns before any deductions or taxes are taken out. It represents the entire compensation an employee is entitled to based on their employment agreement, and it includes not only the basic salary but also various other components of income.
Allowances: Are additional forms of compensation or finanacial benefits that employers may provide to employees on top of their basic salary or wages. Eg. transport, meal, housing allowance, etc. Offering allowances helps the employer boost its competitive advantage in the market and helps employees to sustain a decent work-life balance.
Net salary: It often referred to as "take-home pay," is the amount of money an employee receives in their paycheck after all deductions and withholdings have been subtracted from their gross salary.
Other Deductions: There may be other deductions such as union dues, loan repayments, or other voluntary or statutory contributions.
Provident Fund: Is an optional pension scheme. The mutual agreement between the employers and employees determines the amount of PF contribution from the employee’s salary. The employees get tax relief on up to 16.5% of total PF contributions.
Social Security and Pension Contributions: Employers and employees are required to contribute to the Social Security and National Insurance Trust (SSNIT). The contribution rate is set by law and is based on an employee's salary. This is a mandatory retirement savings scheme to help individuals save for their future and promotes social and economic stability by reducing the risk of proverty among retirees and their dependents.
Taxation: Ghana has a progressive income tax system. Employers are required to deduct Pay-As-You-Earn (PAYE) tax from employees' salaries and remit it to the Ghana Revenue Authority (GRA). The tax rates vary depending on income levels.
Please note, It is essential to stay compliant with the labor laws and regulations in Ghana. Non compliance can result in penalties and legal issues.