Salary calculation is one of the most important areas of accounting. The best solution is to entrust the salary calculation task to a knowledgeable and experienced business partner to save time and optimize business costs while ensuring professional, reliable, and accurate calculations.
An external business associate can be a professional accounting services agency or an external bookkeeper.
Below are more details on this topic – why the calculation must be accurate and the advantages of hiring an accounting agency to provide payroll services.
What is Payroll?
Calculating wages is part of the financial tasks performed by the accountant. It is a calculation operation that requires monitoring many regulations, laws, and changes related to the wages of employees.
Only professional and qualified persons can calculate wages because the workers’ salaries are directly related to each company’s business.
The Importance of Correct Salary Calculation
We mentioned that wages should be calculated by a professional and a qualified accountant, whether an external associate or an accountant employed by the company. That person or team will have the task of timely monitoring all legal changes and their implementation.
The obligation refers to many laws and sub-legal acts. These laws need to be followed and applied to payroll processing. Some relevant laws include the Labor Law, the Law on Personal Income Tax, and the Law on Mandatory Social Security Contributions.
Furthermore, accountants are expected to monitor legal changes and other wage-related regulations. These include:
- Minimum wage,
- Gross and net earnings,
- Tax and contribution rates,
- Tax deductions,
- The lowest and highest monthly base amount,
- Tax incentives for hiring new workers, and more.
Salaries are part of operating expenses, and, as such, they represent one of the significant monthly expenses for employers. On the other hand, taxes and contributions serve as the government’s revenue.
For this reason, the calculation of employees’ salaries must be done correctly and by the law, as procedures for determining, calculating, and settling tax liabilities are often subject to tax audits.
Types of Salary Calculation
The method or type of salary calculation depends on the type of income paid to the employee as salary or compensation. In that case, they can be divided into:
- Salary calculation for employees based on the employment relationship.
- Salary calculation for individuals assigned to work in Serbia.
- Calculation based on contracts for work outside of an employment relationship, when the individual is entitled to payment for work (service contract, temporary and occasional jobs contract, additional work, employer’s choice contract for professional training and development, other).
- Calculation based on work engagement without establishing an employment relationship and entitlement to salary or compensation for work (volunteering, contract for professional training and development).
- Calculation of other earnings based on the employment relationship.
What to Take Into Account When Calculating Salaries?
When calculating salaries, it is necessary to consider numerous individual items.
Some of the most important ones are listed below:
- Familiarity with and monitoring of legal regulations, as well as frequent amendments, to ensure timely and accurate calculations.
- Submission of tax returns within the legally prescribed deadline.
- Deductions from employee salaries.
- Salary bonuses and employee benefits.
- Employee sick leaves.
- Non-work-related payments.
- Proper calculation and payment of salaries for employees working from home (due to expenses reimbursement incurred by the employee for using their resources).
- Management of personnel records (employee and salary records, working hours, and days off).
- Personnel administration (types of contracts for engaged workers – employment contract, work contract, temporary and occasional jobs; employee registration for employment; termination and cessation of employment; contract management and retention; other tasks).
- Benefits application if persons with disabilities are employed.
- Compilation of personnel documentation (contracts, addendums, regulations, and general acts).
- Calculation of travel expenses for official trips abroad and within the country.
- Commuting allowances and other work-related compensations for employees.
- Salary calculations during annual leave.
- Compliance with collective agreements.
- Timely submission of reports to relevant institutions.
External Payroll Consultant
Engaging an external payroll consultant or outsourcing payroll and other payments is often the best option for companies.
Here are the most common benefits of hiring a professional accounting agency as an external collaborator for payroll calculations:
Professionalism
When deciding to collaborate with an accounting agency, expertise, quality, and efficiency are crucial parameters. Accounting agencies providing accounting and bookkeeping services consist of a team of experts responsible for monitoring legal regulations and implementing current policies. They will promptly contact and inform their clients about any existing regulatory changes.
Regular Salary Payment
The goal of every employer is to calculate salaries, submit tax returns, and make payments on time and within the legal deadline. On the other hand, employees also aim for timely salary payments. In such cases, engaging an external collaborator for salary calculation can be a good solution to prevent any delays.
Time-Saving
A company that hires an accounting agency as an external partner for salary calculations saves time. The partner will handle tasks such as monitoring legal regulations and procedures, interpretation, alignment with business operations, and all other payroll-related tasks. This way, the employer will have more free time for other business tasks and activities to increase profits.
Cost Optimization
Engaging an agency to provide accounting services results in savings in terms of business expenses. For example, an employer with an employed accountant incurs monthly costs as they must pay them a monthly gross salary. This salary must satisfy the worker but also align with their job title and responsibilities.
Moreover, ensuring the competence and effectiveness of the employed accountant requires ongoing investment in education and training. This includes attending professional events like seminars, workshops, conferences, consultations, and similar gatherings involving additional costs (investment).
Engaging an external collaborator eliminates these costs, as the agreed monthly fee for the accounting agency includes an experienced team of experts who independently invest in the necessary education.
Data Confidentiality
Just like employers, employees want the information about their earned (paid) wages to remain a business secret and confidential.
An external collaborator engaged in salary calculation and other accounting services must ensure discretion and preserve the confidentiality of data regarding salary amounts, records, contracts, and other compensations.
The data may only be accessible and entrusted to the employer (client) and only to specific employees.
External Payroll Provider Has No Ties to Specific Positions
Employees or professionals often leave the companies they work for after a certain period (due to higher wages offered by another employer, career advancement, relocation, etc.).
In such cases, if the company fails to find suitable replacements or ensure adequate substitutes, this shortage will harm current operations, posing a severe problem.
By engaging an external accountant or accounting agency for payroll processing, such problems can be avoided.
Collaborating with an agency that provides accounting services is based on a business relationship and mutual interest rather than being tied to a specific position or employee.
A complete team of experts is hired to diligently and responsibly handle all aspects of payroll processing and other accounting tasks.
Salary Calculation for Foreigners
The Law on Foreigners regulates all issues regarding the employment of foreign nationals. However, calculating wages for employed foreign citizens and returnees from abroad can sometimes be a complex process, considering that there are provisions in the law regarding applying double taxation avoidance agreements.
However, numerous exemptions for employing foreigners can be applied when hiring foreign nationals and calculating their wages.
Furthermore, foreign companies often have specific requirements for calculations related to bonuses, allowances, incentives, employee contributions, and similar matters.
In such cases, automated salary calculation entrusted to a professional accounting agency with experience in wage calculations for foreigners and calculating incentives or other rewards is a good decision.
The Annual Personal Income Tax
Individuals pay the annual personal income tax if their income exceeds three times the average yearly salary. Employees’ earnings are considered income.
According to the Law on Personal Income Tax, other incomes are also considered as such, as we previously discussed in the article about who pays personal income tax.
Taxpayers of personal income tax are tax residents of the Republic of Serbia. All income earned within the state’s territory and payments made abroad are considered when calculating.
Furthermore, taxpayers of personal income tax are also non-residents (foreign citizens, non-residents). In that case, only income earned in Serbia is considered when calculating personal income tax for non-residents.
HLB T&M Consulting, an agency for accounting services, offers its clients external payroll calculation services.
Contact us if you need a professional and experienced team of experts who provide accurate, reliable, and timely payroll calculation services while ensuring discretion and optimizing your business.
We are available for any questions; you can expect a response within the shortest possible time.
