How Your Net Salary is Calculated in Ghana

 

The first figure people look out for on their pay slip is their net salary, also known as take home pay. The net salary is of much interest because that is the amount that will hit the person’s account. Besides this, most people pay little or no attention to the other details of the pay slip, let alone how the net salary was arrived at. If you happen to be one of them, don’t worry; this article is for you.

“Why should I care about the other details?” One will ask. First, the worker needs to confirm whether the payroll calculation is done correctly. Imagine receiving wrong salaries for years because there was a mistake in the calculation. Of course, if the mistake results in receiving higher salary for years, I guess it will call for celebration. What about receiving lower salaries for years because of wrong calculation? I can imagine the pains and the anger. Secondly, the employee needs to confirm whether the employer is paying the correct Social Security Contribution on their behalf.

The pay slip is a document showing the total remuneration a worker earned in a period. The total remuneration earned in a period is called gross or basic salary. Of course, the worker is not going to receive the full gross salary because some amounts will be deducted. The deductions can be categorized into statutory deductions, company policy deductions, loan deductions and other deductions.

The statutory deductions are compulsory deduction required by law. These are the Social Security Contribution and Employee Tax (Pay As You Earn). The statutory deductions are the same across all companies. Company policy deductions are internal deductions specific to a company. For example, some companies deduct staff welfare. But not all companies deduct staff welfare. Loan deduction relates to employees who have gone for loan from a bank or from their employer and are required to make monthly installment payment. The other deduction refers to any other deduction agreed between the employer and the employee.

With respect to Social Security Contribution, employee contributes 5.5% of basic salary whilst the employer contributes 13% of basic salary. For example, if an employee’s basic salary is GHS 3,000.00 the employee Social Security Contribution will be GHS 3,000.00 X 5.5% = GHS 165.00. Employee Tax is calculated using a schedule provided by Ghana Revenue Authority(GRA). The monthly Schedule can be found below:

Let look at an example. Mr. Kingson works at ADB Company Limited. His monthly basic salary is GHS 2,500. He doesn’t have any loan, neither does he contributes staff welfare. Calculate his take home pay.

First let determine his deductions. Mr. Kingson deductions will be Social Security Contribution and Employee Tax (P.A.Y.E). Social Security Contribution will be GHS 2,500 X 5.5% = GHS 137.50. His Employee Tax is calculated as follows:

Chargeable Income	Rate %	Tax Payable (GHS)	Balance
First GHS 365	0%	0.00	1997.5
Next GHS 110	5%	5.50	1887.5
Next GHS 130	10%	13.00	1757.5
Next GHS 1895	17.50%	307.56	0
	Tax Payable:	326.06

 

 

The net salary is calculated as follows:

                                                             GHS

Basic Salary	2,500.00
Less:
Social Security Contribution	(137.50)
Employee Tax	(326.06)
Net Salary	2,036.44

 

So, the next time you receive your pay slip, check to see whether everything is correct.