Question Tag: Overtime Payments

Overtime Payments:

Where an employer makes a payment for overtime work to a qualifying junior employee during a year of assessment, and the payment is up to 50% of the basic salary of the employee for the month, the employer is required to withhold tax at the rate of 5% from the payment. Any excess above the 50% is taxed at 10%.

A junior employee is the one whose qualifying employing income does not exceed eighteen thousand currency points (GH¢18,000.00) per annum.

(2 points @ 1.5 marks = 3 marks)

Bonus Payments:

• Where an employer pays a bonus to an employee during a year of assessment and the sum of the payment during the year does not exceed 15% of the annual basic salary of the employee, the employer is required to withhold tax from the gross amount of the payment at the rate of 5%.
• If the bonus exceeds 15% of the annual basic salary of the employee, the employer shall add any excess above the 15% payments to the employment income of the employee for the year, and withhold tax from the payment in accordance with the income tax rates for resident individuals (i.e., the graduated rates).
• Tax withheld under overtime and bonus is a final tax on the overtime or bonus payment and the payment shall not be included in calculating income derived by the employee from that employment.
• Where an employer makes a payment for overtime to an employee who is not a qualifying junior employee, the payment would be included in calculating the income of that employee from the employment and taxed at the graduated rates.

(4 points @ 1 mark each = 4 marks)