There is a lot of careful planning involved in processing payroll.
Changes to social security and other laws need to be monitored constantly, other ongoing tasks also need monitoring.
Processing payroll can be split into 3 steps done yearly:
Processes that must be done before payroll period
Before you onboard an employee, you have to get his/her personal information input and be aware of related law in order to proceed and allocate appropriately.
Gathering these inputs means interacting with different divisions and personal in a company. This is not usually an issue for smaller companies and businesses; they have fewer divisions and teams, so gathering inputs is easier.
In larger companies gathering information can be hard and overwhelming as there are multiple divisions and personnel in different branches. This can be made easier if the company is using payroll software which will be discussed further below.
– Personal Information
You have to get a copy of his ID card (for a Thai) or a copy of Passport (including Visa and Work Permit page) and the Tax ID (for foreigners) to ensure that he/she is eligible to work and pay tax in Thailand.
If the foreigner has no visa and work permit, you have to obtain them (we take care of it).
In case the employee joins you during the year, it would be better to get the “50Tawi” (Personal withholding tax summary) from his/her previous employer to ensure that the tax will be deducted correctly.
– Payment information
The company has to get the personal and bank information of the employee in order to make payments.
– Salary and Employment information
The company must keep all information of the employee position, start date, and any bonus obligation to the employee to make it easy to cross-check and avoid any error.
In Thailand, the minimum wage paid for Thais is 313 to 336THB per day depending on the services provided; in Bangkok minimum salary is 331THB. For technical positions, the minimum wage depends on the employee’s area of expertise.
See HERE for more details
For foreign staff, the minimum wage depends on nationality.
Processes that must be done during payroll period
After gathering basic inputs, it is time to calculate the wage of each month and finalize it into the HR system for calculation. The result of the calculation is the employee’s net pay after all the appropriate deductions have been made.
To calculate the payment, you have to take into account:
– Overtime Payment
In case you ask your employees to work outside of normal working hours, you are subject to pay overtime to your employee an amount of 1.5-3 times their normal wage depending on when you ask your employee to work overtime. There are some exceptions that allow you to not pay overtime.
To get more detail on this matter, please ask us about labour laws.
– Additional payment for resignation or termination
When your employees resign or you terminate the employment contract, you may need to pay extras such as accumulated untaken annual leaves, in-lieu payment, severance, or compensation. To pay this wisely, you are welcome to consult us.
– Wages Deductions
In Thailand, it is illegal for employers to make deductions from employee’s wages except for a few cases that allow you to do so, which need a consultation before performing such actions.
– Withholding tax
It is one of the legally allowed deductions according to tax law. This will be deducted depending on the employees’ annual salary, ranging from 5% to 30%. The company has to summarize and pay it to the government monthly.
– Social security
Another allowed deduction according to labour law. An amount of 83 to 750 THB per month depending on their salary will be deducted from the employees’ salary. This amount needs to be paid to the government office, along with the company’s contribution which should equal the amount the employee paid.
The next step after gathering these payment inputs is to validate them. This entails making sure the inputs correspond with the company policy and legal policies. Another thing to do is to check if the staff is properly listed to prevent payment errors.
The three main methods companies pay their employees are by cheque, cash, or transferring it to their bank accounts. In companies, employees usually provide their bank account details to the company so that they can be paid when the time comes. After payment, employees should be provided a payment slip with details of payment e.g., account paid into and amount paid. If it was a smart payroll software then the employees will be able to log in and get their payslips online.
Processes that must be done after payroll period
Now that the net values have been gotten, the first thing to do is to validate and ensure that your values are accurate to avoid errors.
By the next February of the upcoming year after payment, you have to summarize the number of employees and send a withholding tax summary to the Social Security Office and Revenue Department
– Withholding tax summary
The company is required to summarize the Withholding tax amount to the government within February of each year
– Workmen compensation fund
This is a fund paid to the employees by the employer for any accident or injury incurred during employment. You have to count the number of employees and calculate payment to the social security office. This payment must be paid on your behalf, you cannot deduct it from your employee.
– Withholding certificate (50 Tawi)
This is a certificate that the employer has to give the employees during February of the next year. It shows how much tax has been deducted from the employee’s salary.
Keeping records is a very important and key part of any company. If salaries paid are not properly recorded it could cause financial problems for a company, making it one of the most important payments to record.
Challenges affecting Payroll processing
As payroll processing is one of the major processes done in any company or business, it comes with its challenges; some of the major challenges affecting Payroll processing are :
Multiple input sources
To process payroll, you have to gather input from different sources in the company, making it very difficult for large companies. This is especially difficult for companies using Excel as it has problems of its own like complexity and sometimes mathematical errors when doing much calculation. This problem is removed for companies using smart payroll software or outsourcing their payroll.
Legal policy and Labour laws
Failing to comply with the labour laws and Legal policies can incur legal problems like fines, imprisonment penalty, compensation, and sometimes the shut down of the entire company. This is why it is necessary to stay up-to-date on all the laws and legal policy to avoid problems making it harder to process payroll.
ATa Outsourcing provides accurate Payroll Outsourcing Services, this includes monthly reports to clearly show you your current financial situation allowing you to track your progress and make any changes in your strategy if needed to help your business.