Payroll Accounting – Ukraine Payroll Outsourcing

Payroll Outsourcing: Frees Up Your Resources to be More Strategic

The outsourcing of personnel services and payroll administration can be defined as the performance of payroll tasks and management…

Why is payroll outsourcing a good idea?

The outsourcing of personnel services and payroll administration can be defined as the performance of payroll tasks and management of personnel by a third party. This is in order to relieve the workload of human resources and use internal resources more efficiently.

It is true that over time, this type of service has changed greatly. It has been evolving and modernizing to such an extent, that now it’s possible to carry out tasks and procedures that were unthinkable a few years ago.

In the past, these types of services were far more rigid. There was not the automation technology we have today.

Nowadays outsourcing is extremely flexible. Using next-generation cloud technology and artificial intelligence means tasks can be automated and be more efficient.

On the one hand, flexibility allows you to select exactly what jobs to outsource. These can range from inputting workers’ data (registrations, cancellations, changes, etc.) through to payroll calculations.

On the other hand, it means you can improve management processes. That is because we have experts who specialize in this type of service and technology and can significantly improve a company’s management processes. Or, at the very least fine-tune them.

Company Expansion

Today, it is essential to have a management model that can easily adapt to the needs of the business. Companies grow, shrink, merge, demerge, or expand into other countries. So you need a flexible payroll service to support your business.

Being adaptable to business needs is paramount for companies to prosper. If we take a large company for example. If they decided to expand into new markets, they not only had to adjust many of their processes but also hire new employees in these new countries.

This implies a change in the way of outsourcing payroll services. Up until the expansion they were pretty standard and managed locally. So it is a big change to move to a multi-country payroll service with global management.

Through outsourcing, multinationals are able to focus on more strategic tasks that add much more value to their business.

They rely on experts to ensure compliance with current local labor laws in the countries they operate in. And to reduce operational costs, they have access to quality information that means they can be far more analytical in their decision making.

What do I need to consider when choosing an outsourcing service?

Before outsourcing payroll services, a company must analyze its current situation and what it needs in order to find the most appropriate solution. Each company is different and has specific needs according to their industry, geography, and the specific characteristics of their business.

After the analysis and the decision to outsource is made, a review of the company’s management processes must be done also as part of the organization change management.

It is better to not just implement a new payroll management service and continue doing things the same way as previously. We must take advantage of the transition to adapt, improve, or fine-tune Human Resources management processes.

This is why it is important to have change management experts like working with the company and of course that there is mutual trust between the parties. For the project to prosper, trust is vital to prevent the fear of losing control by outsourcing a service.

Our current technology has quality controls and audits done regularly. This ensures our clients have trust in us and are still in control.

This article was curated from Alight
Featured Image Credit: Image by William Iven from Pixabay

Payroll Services in Ukraine

Payroll Outsourcing and HR services are a very sensitive area of accounting because you should be confident that employees get what they have…

Payroll Outsourcing

Payroll Outsourcing and HR services are a very sensitive area of accounting because you should be confident that employees get what they have earned, taxes are calculated and paid correctly, the confidential data are protected.

Following the legislation in Ukraine is more challenging than in western countries, rules and regulations may vary a few times a year and are not available on the internet in English. Sometimes they are not clear and leave room for interpretation. That is why it is better to outsource payroll services from reliable service providers.

Work with well educated, experienced staff and a strong internal control system ensure that a major error is less likely to occur. It should be a trusted payroll company in Ukraine and source for payroll outsourcing, human resource administration, and related services. With a provider of a flexible payroll solution for HR outsourcing and outstaffing services that will meet your business needs, your employees will be accurately paid in time, while you can focus on achieving the main goals of your business.

Standard payroll outsourcing and HR administration services should include (but not limited):

advising on employment and labor legislation;
payroll accounting and payroll taxes calculation;
preparation and submission of obligatory monthly and quarterly reports (management statements, if needed) to statistical offices, tax offices, labor funds;
Arranging timely payment of wages, salaries, and deductions (Income Tax, Military Duty and Social Insurance Contribution);
Administering leave, expense claims, keeping track of personnel’s’ vacations, sick-leaves, etc.;
HR administration, filling in Employment Record Books, dealing with internal orders regarding the company`s employees.

Basics of payroll calculation in Ukraine

There are a few ways employers can determine gross wages and employee’s net pay. It can be done by hand, using an excel table, online payroll calculator, or special accounting software. Alternatively, as mentioned above, they may choose to outsource the entire process by hiring one of the payroll services companies which are present in Ukraine.

The payroll accounting process consists of the following 5 stages:

Determination of an income for time worked (as a rule, it is a wage rate per month);
Income calculation for a nonworking time (a vacation, sick, maternity leave, etc.);
Ukraine payroll taxes / contributions determination;
Salary and related taxes payments processing;
Preparation and submission of payroll-related reports.

Typically, salaried workers are paid fixed monthly wages, which is their gross regular pay. Once gross regular pay is calculated we subtracted salary deductions from it.

Statutory Ukraine payroll taxes are personal income tax (PIT) at 18% and military duty with 1.5% (MD). These are items that employer-determined and paid on behalf of the staff.

Employer, then, has to calculate the amount of Social Security Tax (contribution) to pay. It is a fixed percentage of an employee’s gross pay. The current tax rate for Social Security is 22%%. The maximum amount of wages subject to Social Security tax is 15 minimal wages (or 55,845.00 UAH). An income exceeding 15 minimal wages is excluded from taxation under UST. No Social Security Tax (contribution) is deducted from the workers’ salaries.

The formula for salary calculation is Wage rate – PTI – MD= Net pay.

Wage rate + wage rate* SST = companies expenses

To Illustrate:

If an employee’s gross monthly salary is 10,000 ₴. PIT would be 1,800 ₴ and MD would be 150 ₴. Net pay in this case would be 8,050 ₴. Total company`s expenses related to salary would be 12,200 (wage rate 10,000 ₴ + SST 2,200 ₴).

HR documentation and human resource services in Ukraine

Human resource documentation’s primary recording is obligatory here. Every company regardless of its size, ownership, the legal form shall keep a primary recording of HR documentation. The correct drawing together with keeping human resource documentation is an indicator of transparency in the labor payment sphere. The laws in this sphere differ from the Western one, penalties for labor laws violation can reach several thousand. As a result, HR services are becoming more and more popular in Kyiv.

Human resources services are one of our main activities. HR outsourcing includes:

New employees formalization, submission of notification into the fiscal state bodies;

Staff schedule preparation, vacation, termination, work trips orders;
Management of vacation requests travel expenses reimbursement, inspection for personnel vacations and certificates of work incapacity, etc.;
Administration and keeping of Employment Record Books;
Submission of income certificate to the pension fund, other state bodies, and visa centers.

If you are looking reliable payroll company in Ukraine, or human resource services in Kyiv, please let our certified specialists help you!

This article was curated from Petterson & Bennett
Featured Image Credit: Image by rawpixel.com

Outstaffing in 2020: Payroll Accounting and Labor Issues

Due to the fact that failure to comply with any legal requirements, for example, late payment of wages or violation of working hours per week, in relation to employees, is an infringement of their rights. However, the observance of norms in human resources and wage matters is particularly closely monitored not only by the tax services but also by the social security services, the pension fund, and labor protection authorities.

The situation may seem particularly complicated to companies that offer outstaffing services. In fact, even the very activities of this kind are not fully regulated by Ukrainian legislation today. On the other hand, it is a very promising form of doing business.

Outstaffing is a word long known abroad. It is no wonder that many foreign companies want to do business in Ukraine in this way.

Today, an accountant of Pravova Dopomoga Law Firm will tell about the peculiarities of payroll and personnel accounting of outstaffing company.

What responsibility does the enterprise bear when conducting personnel and payroll accounting?

We sincerely believe that it is difficult for an outstaffing company to cope without human resources professional and a salary accountant. It is too easy to miss the important moments of personnel records management, and remember them only during inspections conducted by the labor protection authorities. Now, after the quarantine, this service is the first to conduct inspections of business entities. At the same time, in case of the lack of a timesheet, a fine is imposed in the amount of 1 minimum wage (UAH 4,723 as of 2020) per employee.

Also, it should be taken into account that from February 2020, a fine in the amount of 1 minimum wage will be imposed for each violation of labor legislation, and this may be:

violation of the probationary period and its conditions;
non-conformity of the actually performed work with the established profession (e.g. when an employee is specified as a welder in the work order and works as a mason);
violation of working time standards (more than 40 hours per week or other standards set by the Labour Code of Ukraine);
failure to meet the conditions for working employees with guarantees under the Labour Code (disabled persons, minors, single mothers, etc.).

The following fines may be imposed:

- Penalties in the amount of 10 minimum wages (as of 2020, 1 minimum wage amounts to UAH 4,743, respectively, the entire amount of fine is UAH 47,430) are imposed for admission to work without an employment agreement or employment for part-time work, when working on a full-time basis. And also for non-payment of taxes when transferring a salary.

Repeated violation leads to a fine in the amount of 30 minimum wages (UAH 142,290). When choosing the Group 1-3 of the simplified taxation system, the first violation leads to a warning, and the second violation – to the fine of 30 minimum wages (UAH 142,290).

Penalties in the amount of 2 times the amount of salary for each employee – in case of non-compliance with the minimum wage guarantees (late payment of 2 times per month, failure to comply with wage indexing, failure to comply with the rules of accrual and payment of vacation pay, etc.).

Penalties in the amount of 3 times the amount of the minimum wage – that is UAH 14,229 – will be accrued in case of non-admission of the inspector to the enterprise in order to determine the working conditions. Penalties in the amount of 6 times (UAH 28,458) – in case of hindrance of inspection for identification of employees off the books.

We would like to note separately the penalties for the violation of salary indexation. According to the law, monthly wages shall be indexed depending on the inflation index. The lack of indexation during the inspection of the Labor Service leads to financial penalties in the amount of 10 minimum wages. At the same time, over-indexation may serve as an excuse to deduct the amount from the expenses of the enterprise, which increases taxable profit and tax.

There are many fines and you can hardly avoid them all, but an experienced accountant will help to warn against them or at least minimise them.

Payroll accounting at the outstaffing company

It would seem that any accountant can do the calculation of wages, but this is not always true. The complexity of the organization of the accounting process of outstaffing company relates, for example, to the calculation of wages in case of a shift schedule, or part-time working week. In addition, our specialists offer not only payroll and accounting services, but also performance of management functions of your company’s employees, i.e. internal staff management, solving current payroll and staff issues, etc.

Salary shall be paid 2 times a month. Today, salary is usually transferred to the employees’ card accounts. Almost any bank opens salary projects, which somewhat save on banking services for the transfer of salaries. In addition, now there is an opportunity to bind an employee’s card to any bank.
In the presence of a cash register and cash management, wages can also be paid from the cash desk of the enterprise. In this case, taxes shall be transferred on the day of payment.

What other payments do you have to keep track of?

In addition to wages, there are a number of other payments that are recorded in the payroll: sick leave, vacation, certain types of material assistance and bonuses, and others. Let’s also mention here some peculiarities of their accounting.

Particular attention should be paid to the calculation and payment of sick leaves – all employees may be sick, but not every accountant can calculate a sick leave properly. You should take into account the correctness of the completion of the sick leave, calculate the length of service, consider all the payments that must be calculated in the sick leave, etc.

In addition, a sick leave of more than 6 days is paid by the Social Insurance Fund. The same fund also finances other types of sick leaves – for pregnancy and childbirth, for health resort treatment, etc. In order to be reimbursed for the costs of sick lists, you must submit an application with a calculation to the Fund. If an error is detected in the calculation of sick leaves, the Fund imposes a fine in the amount of 50% of the wrongly paid amount.

As for the calculation of vacation payments, it is important to correctly calculate their amount, take into account all the payments due, and do not forget to pay them 3 business days before the vacation.

The legislation changes regularly, as well as rates and indices do. From July 1, 2020, it is not planned to increase the minimum subsistence level, which is set in the budget annually. Its increase leads to changes in some taxes and benefits, such as an increase in the minimum wage for which the income tax benefit applies. An increase in the minimum wage is also planned for September.

If you plan to set up an outstaffing company, think in advance about outstaffing accountant services – this will save you money not only on staff accounting, but also on possible penalties.

This article was curated from Pravova Dopomoga Law Firm.