Payroll in Ghana: A Complete Guide for Businesses

Ghana is a favorable country for foreign investment due to its developed infrastructure, skilled labor, political stability, large consumer base, large resource pool, and various investor support schemes. The country ranks 68th globally in terms of GDP and 118th in the 2020 Ease of Doing Business Index attracting investors.

Companies aspiring to extend their business in Ghana must be thoroughly familiar with local rules and regulations specified by the Ghana government. This understanding helps manage payroll in Ghana and attract a talented workforce. Moreover, a company must fully align itself to the payroll options, payroll cycle, tax systems, salary structure, social security contributions, entitlement and termination terms, etc.

To set up accurate payroll, you must thoroughly understand payroll tax in Ghana and labor requirements compliance. The following guide explains all the prominent features of payroll in Ghana. 

How Is Payroll Calculated in Ghana?

Payroll policies and procedures in Ghana work on releasing payment and supervising employees’ working hours. You must routinely manage record-keeping to calculate payroll accurately. Also, you should calculate social security contributions and other appropriate deductions conforming to the payroll rules and regulations in Ghana.

Here’s the formula to calculate payroll:

Net Salary = Gross Salary – Gross Deductions

here,

Gross Salary = Basic Salary + HRA + Arrears + Bonus + All types of Allowances + Reimbursements

and

Gross Deductions = Income Tax + Insurance + Professional Tax + Leave adjustments + Loan Reimbursements (if any)

Important Elements of Salary Structure in Ghana

The elements discussed below constitute the salary structure in Ghana:

Cost to Company (CTC)

The CTC refers to the employer’s total amount on hiring and sustaining an employee. It covers the total gross, 13% of employer SSNIT (Social Security and National Insurance Trust) contribution, payroll deductions in Ghana, etc.

Gross salary

Gross salary denotes the total amount an employee gets before the employer calculates deductions and taxes. It includes allowances, bonuses, overtime compensation, health insurance, payroll deductions in Ghana, etc.

Net salary

It represents your take-home pay. It is the amount transferred to an employee’s salary account after subtracting all deductions (like taxes, loans, SSNIT, etc.) from their gross salary.

Basic salary

It shows the amount employees get after the employer calculates all additions (bonus, allowance, overtime compensation, health insurance, etc.) and payroll deductions in Ghana from the annual package. Its amount depends on the employer’s job designation and business activities.

Allowances

The payroll in Ghana provides employees with several allowances like transport, meal, housing allowance, etc., irrespective of the industry and the company. It stipulates all the professional expenses that employers should pay to their employees. Offering allowances helps the employer boost its competitive advantage in the market and helps employees to sustain a decent work-life balance.

Monthly deductions

Each pay period, employers make deductions from employees’ wages either on a voluntary or statutory basis (including Social Security contributions (Tier 1 & 2) and Income Tax (PAYE)).

Provident Fund (PF)

PF 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.

Union Dues

Commonly, union members contribute a part of their gross salary as dues. Union Dues support various activities and programs like the union member’s healthcare, pension, welfare, and safety funds.

How to Set Up a Payroll in Ghana

The Ghana payroll process flow chart below helps businesses set up payroll in Ghana:

• Step 1: Register a business in Ghana with the  Registrar General Department (RGD). This step also authorizes your business name’s validity.
• Step 2: Register the national tax number, company name, and labor and tax registration.
• Step 3: Get a state or local business ID (if required).
• Step 4: Mention each employee’s details, including their full name, date of birth, employment start or termination date, job role, work location, mailing address, and tax filing number. The list should also incorporate their bank details, salary or hourly rate information, compensation details, work certificates from their previous employers, and personal income tax forms. These details assist you in accurately calculating all employee pay amounts in compliance with payroll policies and procedures in Ghana.
• Step 5: Categorize your employees among full-time, part-time, and independent contractors. Next, define the exemption status of each employee.  
• Step 6: Calculate the appropriate income tax from employees’ salaries and file.
• Step 7: Get a Tax Identification Number (TIN) from the Ghana Revenue Authority. You should keep several documents ready for registration with the tax authority. These documents are a Certificate of Incorporation, a Certificate to commence business and a Company’s Regulation.
• Step 8: Register with Social Security and National Insurance Trust (SSNIT). You will require the list of employees, their corresponding salaries, the certificate to commence business, and the company’s certificate of incorporation.
• Step 9: To register for VAT, make sure to obtain a TIN, fill VAT registration form, and attach copies of Business Registration documents. Send the registration forms to the nearest Domestic Tax Revenue Division office.
• Step 10: Open a Ghana bank account with any registered local bank to release payroll-related payments. You will need an identification document (like a passport), TIN, a duly filled account opening form, a postal address and proof of residence, and a work permit.
• Step 11: Calculate payroll amounts and finalize your company’s payroll cycle and method. The available payroll methods are traditional bookkeeping, payroll software, hiring an accountant, or outsourcing to a trustworthy payroll provider.
• Step 12: Pay all employees through a local entity (which allows you to recruit and pay employees compliantly) or use service from an Employer of Record (EOR) platform in Ghana. The supported payment methods are direct bank transfers, pay cards, mobile money transfer services, and money orders.

A Step-by-step Process of Payroll Processing in Ghana

The processing of payroll in Ghana involves three stages. Here are their details.

i. Pre-payroll stage

This phase works on maintaining compliance with Ghana’s legal requirements and defining mandatory business requirements. The below section discusses its statutory components.

Business profile

• You should register your business with the Registrar General Department (RGD) and get a unique business number. 
• You should state this number on all official payroll communications, including reporting and compensation auditing and auditing for payroll tax in Ghana.

Attendance policy

• A flexible, accurate, and transparent attendance policy is crucial regardless of how you record attendance. 
• The attendance policy must conform to compliance and regulatory requirements according to payroll policies and procedures in Ghana. 
• You must consider factors like half-days, overtime compensation, and more in your attendance policy. 
• The policy helps you calculate standard and special attendance and permissions. Hence, the policy streamlines payroll calculation.

Leave policy

• The leave policy enhances employees’ performance and may facilitate promotion. 
• It helps you calculate payroll and comply with different leaves (like maternal, paternal, sick, childcare leave, etc.). 
• The types of leaves and their pay rates influence the payroll computation. So, make sure the leave policies are transparent for employees.

Statutory components

• Ghana’s statutory labor laws and regulations specify the existing and new statutory compensation laws and regulations supporting employees with salary and leave entitlements. 

Salary components

• Outlining the mandatory salary components helps fulfill employees’ personal and professional requirements.
• It considers different factors affecting salary calculation, i.e., allowances, deductions, leave types and supplementary benefits. 

Payment schedule

• Companies should have a fixed schedule to prevent payment delays. 
• Making specific components of the payment schedule (like bonuses and increments) makes payroll policy more flexible and helps attract and sustain a skilled workforce. 

ii. Payroll calculation stage

In this stage of the payroll compliance checklist in Ghana, you should upload the collected data from the previous stage into the payroll system. Check working hours, deductions and taxes and calculate employees’ net salaries.

Ensure you calculate and maintain payroll records either automatically or manually. It leads to timely payment processing and fulfills the payroll policies and procedures in Ghana.

iii. Post-payroll stage

The components in this stage of the Ghana payroll compliance checklist help you to conclude the payroll process.

Statutory compliance

• The payroll manager must rigorously conform to statutory compliances while processing payroll in Ghana. 
• Consider deductions like income tax, social security, insurance premiums, and more from the employee’s payroll. 
• The employers must transfer these deductions to the respective authorities.

Payroll accounting

• Payroll accounting focuses on controlling a company’s expenses. 
• It also tracks payments and payroll-related expenses through which you can fulfill compliance and reporting requirements. 
• You can use internal payroll accounting (to decrease expenses) or outsource it to a trustworthy external auditing service.

Payroll reporting and compliance

• You should keep all statutory reporting and compliance forms ready to send to local regulatory authorities. 

Payroll Contributions

As per the salary, the employers and employees must contribute to social security in Ghana to abide by the Ghana payroll requirements.

Payroll Cycle

In Ghana, the payroll cycle is monthly, with payments disbursed on or before the last working day of each month. However, some employers can choose a bi-weekly pay cycle.

Ghana Payroll Options for Companies

The Ghana payroll guide incorporates different options depending on the budget and requirements. Here are the details of different HR payroll in Ghana.

• Internal payroll: Large corporations that sign long-term agreements with Ghana can incorporate internal payroll. This option of the Ghana payroll guide specifies that the company should hire a skilled workforce to set up payroll flawlessly.
• Remote payroll: This HR payroll in Ghana option emphasizes using remote payroll with your company. It is an economical option in the Ghana payroll guide; however, the company should know different labor laws to process payroll accurately.
• Ghana payroll processing company: You must extensively research the market if you want to use this option of the Ghana payroll guide. It involves finding an authentic payroll processing company experienced enough at establishing payroll and payroll rules and regulations in Ghana.
• Ghana payroll outsourcing: This option in the Ghana payroll guide denotes a flexible, simple, and economical approach to administering HR payroll in Ghana. It assures compliance with the Ghana payroll requirements and administers all the payroll elements.

Entitlement and Termination Terms

Entitlement terms in Ghana

Employees are eligible for the following benefits per the payroll rules and regulations in Ghana.

Paid time off

Full-time employees who have worked for at least one year are eligible for annual paid leave of 15 working days.

 Sick leave

The sick leave entitlement is not mandatory in Ghana.

Employers can provide sick leave benefits based on mutual agreement with their employees.

 Maternity leave

Female employees receive 12 weeks of paid maternity leave.

It increases to 14 weeks in the case of complicated or multiple births.

Its compensation is 100% of the employee’s standard salary.

After completing the maternity leave, the female employee gets one hour’s leave during working hours to nurse the baby (until the baby’s age of one year).

Public holidays

  Employees in Ghana get 15 public holidays per year.

Termination terms in Ghana

• The termination process in Ghana depends on the employment agreement or collective bargaining agreement, the reason for termination, and the type of contract.
• The termination needs a written notice.
• The employee or employer can decide to terminate the employment contract at any time.
• The notice period for a permanent or temporary employee in Ghana depends on the length of the employment contract. The following table shows the corresponding details.

 Severance pay

• No severance pay is available in the case of individual dismissals (due to non-economic reasons).
• If the termination happens due to redundancy, compensation depends on the negotiation between the employee and employer.

Ghana Payroll Processing Company

Foreign investors should wholly understand local tax, employment, and compensation requirements and reporting if they intend to manage timely, accurate, and compliant payroll in Ghana. They must also know the compliance with Ghana labor and local employment laws before creating payroll in Ghana. To gain the top benefits of payroll rules and regulations in Ghana, you can utilize services from a global PEO company like Multiplier.

How Multiplier Can Help with Global Payroll

Companies can partner with global PEO platforms like Multiplier to employ a compliant Ghana payroll process.

Multiplier is prestigious for offering EOR solutions to international firms, allowing them to test 150+ economies. Our skillful team works on payroll calculation, the Ghana payroll process, contributions, employee recruitment, entitlement and termination terms, and other related tasks. Also, our SaaS-based PEO services ensure that payroll processing operates proficiently in the country.