Outstaffing in 2023: Payroll accounting and labor issues

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Due to the fact that failure to comply with any legal requirements, for example, late payment of wages or violation of working hours per week, in relation to employees, is an infringement of their rights. However, the observance of norms in human resources and wage matters is particularly closely monitored not only by the tax services, but also by the social security services, the pension fund and  labor protection authorities. 

The situation may seem particularly complicated to companies that offer outstaffing services. In fact, even the very activities of this kind are not fully regulated by Ukrainian legislation today. On the other hand, it is a very promising form of doing business. 

Outstaffing is a word long known abroad. It is no wonder that many foreign companies want to do business in Ukraine in this way. 

Today, an accountant of Pravova Dopomoga Law Firm will tell about the peculiarities of payroll and personnel accounting of outstaffing company.

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What responsibility does the enterprise bear when conducting personnel and payroll accounting?

We sincerely believe that it is difficult for an outstaffing company to cope without a human resources professional and a salary accountant. It is too easy to miss the important moments of personnel records management, and remember them only during inspections conducted by the labor protection authorities. Now, after the quarantine, this service is the first to conduct inspections of business entities. At the same time, in case of the lack of a timesheet, a fine is imposed in the amount of 1 minimum wage (UAH 4,723 as of 2021) per employee. 

Also, it should be taken into account that from February 2020, a fine in the amount of 1 minimum wage will be imposed for each violation of labor legislation, and this may be:

  • violation of the probationary period and its conditions;
  • non-conformity of the actually performed work with the established profession (e.g. when an employee is specified as a welder in the work order and works as a mason);
  • violation of working time standards (more than 40 hours per week or other standards set by the Labour Code of Ukraine);
  • failure to meet the conditions for working employees with guarantees under the Labour Code (disabled persons, minors, single mothers, etc.).

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The following fines may be imposed:

- Penalties in the amount of 10 minimum wages (as of 2021, 1 minimum wage amounts to UAH 4,743, respectively, the entire amount of fine is UAH 47,430) are imposed for admission to work without an employment agreement or employment for part-time work, when working on a full-time basis. And also for non-payment of taxes when transferring a salary. 

Repeated violation leads to a fine in the amount of 30 minimum wages (UAH 142,290). When choosing the Group 1-3 of the simplified taxation system, the first violation leads to a warning, and the second violation - to the fine of 30 minimum wages (UAH 142,290).

- Penalties in the amount of 2 times the amount of salary for each employee - in case of non-compliance with the minimum wage guarantees (late payment of 2 times per month, failure to comply with wage indexing, failure to comply with the rules of accrual and payment of vacation pay, etc.).

- Penalties in the amount of 3 times the amount of the minimum wage - that is UAH 14,229 - will be accrued in case of non-admission of the inspector to the enterprise in order to determine the working conditions. Penalties in the amount of 6 times (UAH 28,458) - in case of hindrance of inspection for identification of employees off the books.

We would like to note separately the penalties for the violation of salary indexation. According to the law, monthly wages shall be indexed depending on the inflation index. The lack of indexation during the inspection of the Labor Service leads to financial penalties in the amount of 10 minimum wages. At the same time, over-indexation may serve as an excuse to deduct the amount from the expenses of the enterprise, which increases taxable profit and tax.

There are many fines and you can hardly avoid them all, but an experienced accountant will help to warn against them or at least minimise them.

Payroll accounting at the outstaffing company

It would seem that any accountant can do the calculation of wages, but this is not always true. The complexity of the organization of the accounting process of outstaffing company relates, for example, to the calculation of wages in case of a shift schedule, or part-time working week. In addition, our specialists offer not only payroll and accounting services, but also performance of management functions of your company’s employees, i.e. internal staff management, solving current payroll and staff issues, etc.

Salary shall be paid 2 times a month. Today, salary is usually transferred to the employees’ card accounts. Almost any bank opens salary projects, which somewhat save on banking services for the transfer of salaries. In addition, now there is an opportunity to bind an employee’s card to any bank. 

In the presence of a cash register and cash management, wages can also be paid from the cash desk of the enterprise. In this case, taxes shall be transferred on the day of payment.   

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What other payments do you have to keep track of?

In addition to wages, there are a number of other payments that are recorded in the payroll: sick leave, vacation, certain types of material assistance and bonuses, and others. Let’s also mention here some peculiarities of their accounting.

Particular attention should be paid to the calculation and payment of sick leaves - all employees may be sick, but not every accountant can calculate a sick leave properly. You should take into account the correctness of the completion of the sick leave, calculate the length of service, consider all the payments that must be calculated in the sick leave, etc. 

In addition, a sick leave of more than 6 days is paid by the Social Insurance Fund. The same fund also finances other types of sick leaves - for pregnancy and childbirth, for health resort treatment, etc. In order to be reimbursed for the costs of sick lists, you must submit an application with a calculation to the Fund. If an error is detected in the calculation of sick leaves, the Fund imposes a fine in the amount of 50% of the wrongly paid amount. 

As for the calculation of vacation payments, it is important to correctly calculate their amount, take into account all the payments due, and do not forget to pay them 3 business days before the vacation.

The legislation changes regularly, as well as rates and indices do. From July 1, 2020, it is not planned to increase the minimum subsistence level, which is set in the budget annually. Its increase leads to changes in some taxes and benefits, such as an increase in the minimum wage for which the income tax benefit applies. An increase in the minimum wage is also planned for September. 

If you plan to set up an outstaffing company, think in advance about outstaffing accountant services - this will save you money not only on staff accounting, but also on possible penalties.

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Publication date: 13/07/2020

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