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Ghana Payroll Outsourcing, Payroll Software and Employer Of Record (EOR) services.

 

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EMPLOYMENT CONTRACTSPAID TIME OFFSTATUTORY EMPLOYEE BENEFITS PRIVATE EMPLOYEE BENEFITSPERSONAL INCOME TAXPAYROLL ELEMENTSPAYROLL TAXES AND EMPLOYER CONTRIBUTIONSADMINISTRATIONLEGISLATIONSTATUTORY BODIESUSEFUL LINKS

Ghana Payroll and Employer of Record: Employment Contracts

Ghana, like every other country, has a set of visas and work permits available to foreign nationals. Citizens of the Economic Community of West African States (ECOWAS) are not required to obtain a visa to visit Ghana. All other foreign nationals must apply for a visa at the Ghanaian embassy in their home country. 

Visas and permits come in a variety of forms, including: 

  • Single-entry:

Visas allow visitors to cross the Ghanaian border only once and stay for up to three months. 

  • Resident and work permit:

To live and work in Ghana, international citizens will require a resident permit and a work permit in addition to an admission visa. A work permit is a document issued by the Ghana Immigration Service (GIS) that authorizes the employment of foreign nationals and specifies the quantity and type of people who are allowed to work. A Ghana work permit is normally valid for one year, with rare exceptions of up to six months. The work permit includes the name of the employer as well as a statement that the holder is only allowed to engage in the specific employment, business, or professional occupation listed on the work permit. A residence permit is normally sought after when a work permit has been granted. On behalf of the employee, a formal application to the Ghana Immigration Service is required.

Probation Periods

There is no explicit provision in the Labor Act about maximum duration of probation period.

 

Notice Periods

In Ghana, the notice period is as follows: 

One month’s notice or compensation in lieu of notice for contracts of three years or more. Two weeks’ notice or two weeks’ salary in lieu of notice is required for employment contracts of less than three years. In the case of a week-to-week contract, seven days’ notice is required. A contract that is determinable at will by any party may be terminated without notice at the end of the day.

Minimum Wage

Ghana’s daily minimum wage is 13.53 GHS per day.

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Working Hours

In Ghana, a conventional workweek is 40 hours long and is often split down into 8 hours per day for a five-day workweek. In some industries, the workweek can be extended to 48 hours.

Overtime

Overtime is defined as work performed in excess of the usual weekly work hours and is governed by the employment contract or collective agreements. When an employee is asked to work overtime or on holidays, there are limits on the amount of hours that can be worked. The weekly maximums are 48 hours. Minors have different maximum working hours than adults. Overtime compensation is paid at 150 percent of the regular pay rate for hours worked in excess of 40 per week.

Non Compete

Employee competition during employment is not covered by Ghana’s Labour Act 2003 (Act 651) or the Labour Regulations 2007 (L.I. 1833). Employers can impose restrictions on employees through non-compete agreements or a clear condition in the employment contract. Such limitations must be reasonable and for a specific period of time. 

Under Act 651, the employee’s primary responsibility is to safeguard the employer’s interests. Employees have implicit duties of secrecy, loyalty, and fiduciary duty to their employers. Employees in higher positions of employment have a higher level of fiduciary responsibility. Once clear provisions are established in the non-compete agreement or the employment agreement between the parties, the extent of the employee’s responsibilities will be known.

Severance

Individual dismissals are not entitled to severance pay (for non-economic reasons). Compensation is negotiated between the company and the employee when the termination is due to redundancy.  An employee may submit a complaint with the labour commission if they are fired unfairly. If the labour commission determines that the termination was unjust, the employer may be ordered to reinstate the employee from the date of termination. On the same terms and conditions as before, the employee may be restored to the same position or a substantially suitable role. The labour commission could also order the employer to compensate the employee.

Termination

  • The process for terminating an employee or a collective bargaining agreement differs depending on the type of contract and the cause for termination. 
  • The employment contract can be terminated at any time by either the employee or the employer. A written notice is required. 
  • If the termination is ruled unjust, the employee has the right to file a claim with the labor court and, in some situations, have their job reinstated. 
  • If the job is deemed ‘at-will,’ either the employer or the employee has the right to terminate the employment at any time without warning at the conclusion of the day. 
  • It is possible to pay the employee in place of notice if the employment contract does not contain an “at will” clause.

Collective Bargaining

Unless the latter is more favorable to the worker, the provisions of an established collective bargaining agreement take precedence over the terms of any contract, and it makes no difference whether the contract was concluded before the collective bargaining agreement. Collective bargaining agreements must be for a period of at least one year, and they must include a provision for a final and conclusive resolution of any disputes between persons to whom the agreement applies, utilizing the provisions of the Labor Act. 

Hours of work, earnings and salaries, rest intervals, overtime work and compensation, dispute resolution methods, promotion and training, holidays, punishment, dismissal and termination procedures, and many other employment-related concerns are all included in a typical collective agreement.

 

Enforcement

The Ghanaian Judiciary is split into two sections: Superior Courts of Judicature and lower-level courts or tribunals. The Superior Courts of Judicature are defined in the Ghanaian Constitution as the Supreme Court, the Court of Appeal, the High Court, and Regional Tribunals.

STATUTORY EMPLOYEE BENEFITS

Unemployment

Unemployment insurance and benefits are not covered by the law.

Workers Compensation

  • The Workmen’s Compensation Act of 1987 requires all employers of labour to set aside money to compensate any employee who is injured on the job, whether or not the employer is at fault. 
  • The act’s definition of a worker has been broadened to encompass anybody who earns a salary or wages, with the exception of outworkers, tributaries, and family members of the employer who live with the latter, or if the law bans them from working.

Social Security

  • The Social Security and National Insurance Trust (SSNIT) is a statutory public trust responsible for administering Ghana’s Basic National Social Security Scheme under the National Pensions Act, 2008 Act 766. Its mission is to serve the First Tier of the Three-Tier Pension Plan. Currently, the Trust is Ghana’s largest non-bank financial institution. 
  • The Trust’s major mission is to replace a portion of workers’ lost income in Ghana owing to old age, invalidity, or death of a member, with dependents receiving a lump sum pay-out. It is also in charge of paying an Emigration benefit to a non-Ghanaian member who is permanently departing Ghana. 
  • SSNIT administers the Pension Scheme, which has over 1.6 million active participants.

Retirement

Both full and partial pensions are available under the National Pension Act. A worker must be at least 60 years old (55 years if working in hazardous conditions) and have contributed for at least 180 months (15 years) to be eligible for a full pension. Workers over the age of 55 who have contributed for at least 180 months (15 years) are eligible for an early pension. 

 

The average wage of a worker’s best three years is used to calculate pensions under the 2014 change. For each month of contributions surpassing 180 months, 37.5 percent of the insured’s average annual earnings in the three best years of earnings is paid, plus 0.09375 percent of the insured’s average annual earnings in the three best years of earnings. If you have more than the required number of contribution years, your pension will be enhanced by 1.125 percent for each additional year.

Health

Medical Aid is a private option and is based on an employee’s voluntary basis to sign up or for the employer to offer it.

 

PRIVATE EMPLOYEE BENEFITS

Workers Compensation

Private workers compensation is available in Ghana.

Retirement

Private retirement/pension schemes are available in Ghana.

Health

Private healthcare is available in Ghana.

Insurance

Private life insurance is available in Ghana.

PERSONAL INCOME TAX

Tax Year

Tax year runs from January 1st to December 31st.

Tax Tables

Residents are subject to tax at rates ranging from 0% to 35%.

Non-residents pay a flat rate of 25% on their taxes.

 

Taxation Method

Taxes are levied on income earned during the calendar year. The tax will be assessed on the income received for the year in the case of irregular income. Anyone earning money in Ghana must either go to the local GRA DTRD office to declare and pay income tax, or file and pay taxes online.

Double Taxation

Ghana has multiple double taxation agreements.

Residence Requirements

In the event of a citizen, the money earned during the year from each job, business, or investment, regardless of whether the source of income has ceased. Income from all businesses, investments, and jobs, both Ghanaian and non-Ghanaian, is taxable. Regardless, income earned by a citizen in a foreign country/jurisdiction with a non-resident employer or a resident employer when the individual is present in the foreign country/jurisdiction for 183 days or more is tax-free.

 

If a person meets the following criteria, he or she is considered a resident for the evaluation for a year: 

  • A Ghanaian citizen (other than one who has a permanent residency outside of Ghana for the whole assessment year) who is present in Ghana for a period or periods totalling 183 days or more in any 12-month period that begins or ends during the assessment year. 
  • On assignment overseas, a Ghanaian government employee or official. 
  • A Ghanaian citizen who has been out of the country for less than 365 days (where the individual has a permanent home in Ghana).

Payroll Calendars

  • Employees are not required to be paid on a set schedule. 
  • Payrolls can be done weekly, biweekly, fortnightly, or monthly.

Rebates & Tax Credits

There is a tax credit against their tax payable for both residents and non-residents who have had tax withheld from any income earned in Ghana (for which the tax is not a final tax) up to the entire amount of any such tax withheld.  In addition, an instalment payer is entitled to a tax credit for a year of assessment equal to the amount of tax paid in instalments for the year.

Health Insurance

The National Health Insurance Scheme (NHIS) is a government-sponsored social intervention program that aims to give people of Ghana financial access to high-quality health care. The NHIS is primarily supported by: 

  • The National Health Insurance Fee (NHIL), a 2.5 percent levy on goods and services collected through the Value Added Tax (VAT) (VAT). 
  • Monthly contributions to the Social Security and National Insurance Trust (SSNIT) are 2.5 percentage points. 
  • Investments in the National Health Insurance Fund (NHIF) have yielded a positive return. 
  • Subscribers in the informal sector pay a premium. 
  • The scheme’s funding is supplemented by a government allocation.

Unemployment

Unemployment insurance and benefits are not covered by the law.

Social Security

Every employer is obligated to contribute 18.5 percent of each employee’s basic income to a mandated Social Security plan on or before the 14th day of the month following the month in which the deductions are made under the National Pensions Act 2008 (Act 766). 13 percent comes from the company, and 5.5 percent comes from the employee, for a total of 18.5 percent. These contributions are further divided into payments to the “Tier 1” and “Tier 2” schemes of the Social Security and National Insurance Scheme (SSNIT). SSNIT receives 13.5 percent of the donations and keeps 11 percent while remitting 2.5 percent to the National Health Insurance Authority as National Health Insurance Levy. The remaining 5% is sent to Tier 2, which is managed privately by a Fund Manager. 

 

Additionally, the law allows for a voluntary contribution to a “Tier 3” Scheme by either the employer or the employee alone, or both, up to a maximum of 16.5 percent of the employee’s basic income. In the hands of both employees and employers, the total of all of these payments (35 percent of the employees’ base pay – both mandatory and voluntary contributions) is authorized for tax deduction reasons.

PAYROLL ELEMENTS

Income

Salary, earnings, bonuses, overtime pay, taxable benefits, allowances, and certain lump sum perks are examples of remuneration (revenue from employment). Profits or losses made by a company or trade. Income or profits derived from an individual’s status as a trust beneficiary.

Bonuses

  • Bonuses are added to an individual’s monthly income. Gratuities paid as a result of a termination, severance, settlement, or mutual agreement must be taxed at a rate determined by the authority in accordance with a tax directive.
  • Total incentive payments made by employers to their employees in a given year are taxed at a rate ranging from 5% to 15% of the employee’s yearly basic salary. 
  • If the bonus payment exceeds 15%, the remaining amount will be added to the employee’s employment income and taxed at the progressive tax rate.

Allowances

Before computing PAYE, these elements are deducted from an employee’s income: 

  • 5.5 percent of base pay for Social Security and National Insurance Trust (SSNIT). 
  • Mortgage During the employee’s lifetime, interest is paid on only one residential property. 
  • Employer, employee, or both may contribute up to 16.5 percent of your base pay to a provident fund. 
  • Donations and contributions to a worthy cause. 
  • Transport allowance and Rent (Accommodation) allowance are some of the allowances that will be added to your income for PAYE reasons. 
  • Risk allowance, Night duty allowance, Responsibility allowance, Child Education allowance, House help allowance, Cook allowance, Garden boy allowance, and more allowances are available. 
  • The remuneration is increased by monetary allowances.

Benefits in Kind

Income Tax Exemptions are amounts that are subtracted from or subtracted from income because they are not subject to taxation. These exemptions must be specified during the filing process.

The following amounts are exempt:

  • President’s salary, allowances, benefits, pension, and gratuity;
  • Income derived directly from the activity of the government or municipal governments;
  • Profits of a non-profit public corporation;
  • Pension
  • Other types of income that are tax-free include:

 

Gaining from life insurance proceeds when they are paid by a local insurer;

  • If the Commissioner-General is satisfied that a comparable exemption is provided to persons residing in Ghana by a non-resident person’s country of residence, the income of a non-resident person from a business that operates ships or planes;
  • When a resident company receives a dividend from another resident company, the company receiving the dividend has at least 25% voting power in the firm paying the dividend. Certain particular industries are exempt from this exception.

 

Other types of income tax exemptions:

  • Interest or dividends on an investment paid or credited to a unit trust scheme or mutual fund holder or member;
  • Interest and gains realized by a non-resident on bonds issued by the Ghanaian government;
  • Profits from the sale of GSE-listed securities;
  • Income from a unit trust or mutual fund that has been approved; and
  • Income from a Real Estate Investment Trust that has been approved.
  • Any other exemption authorized by law.

Investment Income

  • Residents and non-residents alike are liable to a final withholding tax (WHT) of 8% on dividends. Non-residents will be subject to the provisions of any existing double tax treaties (DTTs). 
  • A resident financial institution’s interest income to people is tax-free. Similarly, the payment of interest to people on government bonds, including interest on Treasury bills, is tax deductible.

Retirement Funding

  • The National Pensions Act, Act 766, established the new National Pension Scheme, which assures that every Ghanaian worker receives retirement payments on time. 
  • Act 766, passed on December 12th, 2008, ordered the creation of a new contributory Three-Tier Pension Scheme, with the National Pensions Regulatory Authority (NPRA) overseeing the composite pension scheme’s effective administration.
  • The New Pension Scheme was introduced on September 16, 2009, and it went into effect in January 2010.
  • The Basic National Social Security Scheme, which covers all Ghanaian workers, is the first tier. It’s a defined benefit plan that requires employees to make 13.5 percent payments on their behalf. SSNIT is in charge of the contribution. 
  • The Second Tier is an obligatory defined contribution Occupational Pension Scheme for workers, with a 5% contribution made on their behalf. The contribution is administered privately by Trustees who have been authorized. 
  • The Third Tier is a voluntary system that covers all Provident Funds and other Pension Funds outside of Tiers I and II.

Health Insurance

  • The National Health Insurance Scheme (NHIS) is a government-sponsored social intervention program that aims to give people of Ghana with financial access to high-quality health care. The National Health Insurance Fee (NHIL), a 2.5 percent levy on products and services collected under the Value Added Tax, is a major source of funding for the NHIS (VAT). 
  • The return on the National Health Insurance Fund (NHIF) investments premium paid by informal sector subscribers is 2.5 percentage points of Social Security and National Insurance Trust (SSNIT) contributions every month. 
  • The scheme’s funding is supplemented by a government allocation.

Risk Insurance

N/A

Taxable Income

The following are examples of taxable income from job, business, and investment for a resident: 

  • Gains and profits from any employment, including any allowances and benefits paid in cash or in kind to or on behalf of an employee, excluding reimbursement of an employee’s expense incurred in connection with the employment, medical or dental costs, or any passage from or to Ghana, and redundancy pay. 
  • Profits or gains derived from a trade, business, profession, or vocation. 
  • Gains resulting from the sale of assets and liabilities. 
  • Gifts. 
  • Dividends. 
  • Any kind of fee or annuity.
  • Royalties, premiums, and any other property earnings are all examples of royalties. 
  • Receipts of any type, including royalties or periodic or deferred payments, obtained from any transaction, wherever and whenever made, impacting directly or indirectly, and/or from any natural resources in Ghana, whether paid within or outside Ghana.

Allowable Deductions

  • Aside from social security contributions, qualifying insurance premiums, and charitable contributions, no non-business expenses or standard deductions are allowed.
  • Employees who provide their employers with Tax Relief Cards obtained from the Commissioner General can take advantage of this incentive.

Private or domestic expenses are often not tax deductible. All outgoings and expenses incurred totally, entirely, and necessarily in the production of taxable income are deductible for all individuals other than employees. The following are some of them: 

  • Interest on money borrowed and utilized to purchase assets throughout the year, as well as debt incurred in the production of income. 
  • An allowance is determined in a certain way for the business’s trading stock. 
  • Rent is paid on property or buildings that are occupied for the purpose of generating income. 
  • Repair and maintenance costs for depreciable assets incurred in the generating of income are deductible. 
  • Expenses for research and development (R&D), regardless of whether the expense is of a capital kind.
  • Capital allowances.

PAYROLL TAXES AND EMPLOYER CONTRIBUTIONS

Payroll Taxes

  • Rates of Contribution to the Social Security System ( Tier 1) 
  • Employer: 13.0% of worker’s basic salary; employee: 5.5 percent of worker’s basic salary; total: 18.5 percent 
  • The employer remits 13.5 percent of the 18.5 percent to SSNIT within 14 days of the next month. The Second-Tier Mandatory Occupational Scheme receives 5% of the proceeds. 
  • SSNIT then pays 2.5 percent of the 13.5 percent to the National Health Insurance Authority (NHIA) for the members’ health insurance.

Unemployment

Unemployment insurance and benefits are not covered by the law.

Social Security

Every employer is obligated to contribute 18.5 percent of each employee’s basic income to a mandated Social Security plan on or before the 14th day of the month following the month in which the deductions are made under the National Pensions Act 2008 (Act 766). 13 percent comes from the company, and 5.5 percent comes from the employee, for a total of 18.5 percent. These contributions are further divided into payments to the “Tier 1” and “Tier 2” schemes of the Social Security and National Insurance Scheme (SSNIT). SSNIT receives 13.5 percent of the donations and keeps 11 percent while remitting 2.5 percent to the National Health Insurance Authority as National Health Insurance Levy. The remaining 5% is sent to Tier 2, which is managed privately by a Fund Manager. 

 

Additionally, the law allows for a voluntary contribution to a “Tier 3” Scheme by either the employer or the employee alone, or both, up to a maximum of 16.5 percent of the employee’s basic income. In the hands of both employees and employers, the total of all of these payments (35 percent of the employees’ base pay – both mandatory and voluntary contributions) is authorized for tax deduction reasons.

Workers Compensation

The Workmen’s Compensation Act of 1987 requires all employers of labour to set aside money to compensate any employee who is injured on the job, whether or not the employer is at fault. The act’s definition of a worker has been broadened to encompass anybody who earns a salary or wages, with the exception of outworkers, tributaries, and family members of the employer who live with the latter, or if the law bans them from working. 

ADMINISTRATION

Income

Monthly pay-as-you-earn (PAYE) returns must be filed by employers within 15 days after the end of the month.  Employers must file a return of income for all of their workers who work in Ghana by the 31st of March following the end of each assessment year. Within four months at the conclusion of a person’s base period, a return of income shall be lodged with the Ghana Revenue Authority (GRA). The payment of CIT is required on the same date as the filing of the return. The tax is paid in four equal installments at the end of each quarter (March, June, September, and December) in each assessment year, although these payments are not considered to represent the real tax due.  All taxpayers must file final tax returns and pay any unpaid taxes at the end of the year. Within four months of the financial year’s conclusion, the final return and tax are due. 

 

Penalties 

If tax is not paid by the due date, a penalty of 125 percent of the statutory rate is applied to the amount owed at the start of the term, compounded monthly.

Payroll Taxes

SSNIT (of which 2.5% is paid to NHIA)  is paid when paying employee income tax.

Unemployment

Unemployment insurance and benefits are not covered by the law.

Social Security

SSNIT (of which 2.5% is paid to NHIA)  is paid when paying employee income tax.

Workers Compensation

The Workmen’s Compensation Act of 1987 requires all employers of labour to set aside money to compensate any employee who is injured on the job, whether or not the employer is at fault. 

Statutory Benefits

Ghana currently has a national health insurance program that covers all citizens’ essential basic health needs. Employers could, however, provide additional health benefits or provide employees with a monthly stipend to help them obtain their own health care.

Employee Benefits

The country observes 12 national holidays, and employees should be entitled to paid time off on those holidays. In most cases, all employees are entitled to at least 15 days of paid yearly leave.  In Ghana, most female employees are entitled to at least 12 weeks of paid maternity leave. Currently, no paternity leave is required, but the government is seeking to establish legislation requiring five days of paid paternity leave.

LEGISLATION

Labor Act

STATUTORY BODIES

-The National Labour Commission

-Public Utilities and Regulatory Commission

-The Securities and Exchange Commission

-The National Commission on Culture

-The National Petroleum Authority

-Ghana Revenue Authority

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This information is provided solely for informational purposes and should not be used as a substitute for professional advice in any jurisdiction. You should hire your own legal, tax, and accounting professionals as part of your worldwide payroll needs.

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