Mandatory Payroll Administration System: Types of Company Employee Salary Deductions
When calculating payrolls, there are several factors to take into account, including hourly pay rates, overtime pay, taxes, bank information, and more. Everyone wants to be certain that the figures on their paycheck are accurate.
It can be challenging to remember every calculation given the variety of a person's employment. But with a little practice, you'll be able to do payrolls with ease! We'll also go through various payroll calculation techniques so you may pick the one that works best for your employees and your company.
It is important for staff to understand that the corporation does not just reduce or deduct compensation. The deductions are made up of a number of parts, with each of them being governed by Indonesian laws, of course. So what kinds of pay deductions for employees are legal in Indonesia? Learn more here:
Components of Different Company Employee Salary Deduction Types
A company may include any of the following types of employee salary deductions:
- Article 21 Income Tax
Income tax (also known as Article 21 or PPh 21), which is a tax that must be applied on both individuals and companies that have income, is one of the primary factors that lowers employee compensation.
Both Law Number 36 of 2008 and Director General of Taxes Regulation Number Per-32/PJ/2015 contain regulations pertaining to Income Tax 21. Several factors that are taken into account in the final tax computation and affect the tax rate include the base wage, benefits, non-taxable income, and others.
- BPJS for Employment Health
Another deduction for employees is for BPJS health benefits. According to Presidential Regulation Number 75 of 2019, the BPJS Health Premium for employees is equal to 5% of their monthly wage. Of this 5%, 4% will be covered by the company, and the final 1% will be covered via a salary reduction.
- BPJS Employment “JKK” and “JKM”
Additionally, "BPJS Ketenagakerjaan" provides programs for workers' compensation, death caused by accidents at work (JKM) and work accident insurance (JKK). The deductions, which total about 0.24% of employee pay for JKK and 0.3% for JKM, are quite small.
- BPJS for Employment: Pension Guarantee
An additional deduction, the Pension Guarantee, is still a part of the Employment BPJS program. The contribution itself only accounts for 3% of the employee's income, of which 2% is covered by the employer and 1% is taken out of the employee's pay.
- BPJS Employment, for Old Age Security
All employees are required to participate in BPJS Employment, a government program that includes Old Age Security. The amount itself represents about 3.7 percent of the earnings that are covered by the employer. While the final 2% is taken out of the employee's pay each month.
Components of Other Employee Salary Deductions
The aforementioned salary reduction elements are an example of monthly obligatory deductions. These deductions must be accurately understood before making employee pay slips in print or online.
The following reductions, however, will only take place under specific circumstances. Here are a few examples:
- Overpaid Salary
If an employee is paid more than they should, their salary will typically be reduced the following month to reflect the overpayment.
- Corporate Compensation
Every employee is required to abide by the rules that are in place at the organization. This is also spelled forth in the labor agreement that the employee agrees to. The agreement also specifies penalties for errors that staff members may commit. Because of these fines, employee wage reductions may also be implemented. However, the business must establish more specific guidelines for this deduction.
What is the cause, for instance, and how much is the deduction? The maximum deduction may not exceed 50% of an employee's wage, as stated in Article 58 PP 78/2015 about Remuneration.
- Discounts for unpaid time off
Companies are familiar with the term "unpaid leave," in which workers who take time off beyond their paid leave entitlement would see a reduction in pay. Employees are paid a nominal daily wage, which is determined by dividing the monthly income by the number of hours worked.
As a result, a salary deduction will be made depending on how many days of unpaid leave they take.
Use Moores Rowland's superior payroll service to calculate employee wages more precisely.
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Particularly for the administration of tax and social contribution (BPJS) duties associated with payrolls, outsourcing frees up the HR department to focus on more beneficial people management tasks. Outsourcing boosts the productivity of HR department and streamlines the payroll procedure to ensure timely payroll payments and compliance with payroll-related legal requirements. It also takes the pain and work out of maintaining internal payroll software, which must be done on a regular basis, especially with regard to regulatory tax calculations.
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**By: Stefani W. Anggraeni — Marketing Communications & Social Media Specialist