Sri Lanka is becoming a popular place for digital nomads to work from. Maybe you recruited one of these employees, or maybe you employed a native Sri Lankan with extraordinary skill. Whatever the cause, you’ve reached a point when you have to give money to a Sri Lankan citizen.
If you have never done payroll before, it might be difficult to figure out in Sri Lanka. It has certain regulations and tax requirements that must be complied with, just like any other nation.
Don’t be afraid. At Marzuna, our goal is to simplify the procedure. Discover how Marzuna, a payroll provider, can support the expansion of your firm.
To stay current with the payroll process in Sri Lanka, your payroll team must juggle various responsibilities. Even with a proficient team, the process can be overwhelming. Streamlining the payroll process involves breaking it down into three phases:
Pre-Payroll Phase:
In this initial stage, meticulous groundwork is essential.
Setting up the Organization:
Establish your company with the Department of the Registrar of Companies and the Department of Labor. Obtain a company secretary in the country, along with an Employees’ Provident Fund number and an Employees’ Trust Fund number.
Define consistent policies for your organization to ensure fairness and clarity. Address aspects such as business profiles, work locations, leave policies, attendance policies, statutory components, salary components, pay schedules, and the collection of necessary employee information.
Payroll Calculation Phase:
Your payroll team will utilize the information collected in the pre-payroll phase to calculate accurate pay amounts for each employee. This process hinges on the method used for calculations, with the option of employing a payroll system that factors in withholdings, deductions, and taxes.
Post-Payroll Phase:
With the challenging calculations completed, a few additional steps remain.
The primary post-payroll phase involves actual salary payments. Submit your calculations to the bank through a report or leverage payroll software with a direct deposit option.
Maintain a comprehensive record of employees’ salaries for budgeting, tax, and liability purposes.
Transmit the appropriate deductions to the relevant agencies to ensure ongoing compliance and adherence to statutory requirements. This step is crucial for keeping your company in good standing.
Navigating payroll processing for your initial Sri Lankan employee can pose challenges, but it doesn’t have to be a daunting task.
Consider engaging the services of a specialized payroll processing company in Sri Lanka, such as Marzuna, to alleviate the complexities of staying compliant with the country’s labor laws. With our expertise, we can streamline the payroll process in Sri Lanka, making it a seamless and stress-free experience for your business.
In addition to payroll processing companies, there are specialized payroll management services available. These services play a crucial role in maintaining accurate records of your employees and ensuring compliance with the statutory laws in Sri Lanka. The comprehensive records cover various aspects, including incentives, gross and net income of employees, and the issuance of specified pay slips.
Ensuring payroll compliance in Sri Lanka involves adhering to the statutory requirements outlined in the country’s labor laws. This encompasses various elements such as taxes, social security contributions, and employee benefits, among others.
| Compensation | Ten thousand Sri Lankan rupees (LKR) a month is the minimum salary. This is $28 in US dollars. Paying your Sri Lankan workers beyond this minimum wage can help your business stay out of trouble. |
| Working hours | Nine hours a day is the typical full-time schedule in Sri Lanka. This equals forty-five hours a week in total. |
| Overtime laws | According to the rules, if your employee works more than these hours, they will be entitled to overtime compensation. The overtime rate in Sri Lanka is equivalent to 1.5 times the employee’s income. It should be mentioned that workers in Sri Lanka are only permitted to work a maximum of 12 extra hours each week. |
| Social security | There are two different kinds of social security funds in Sri Lanka.
The biggest social security scheme is the Employees’ Provident Fund. It is intended for people without pensions to use as their retirement savings. Employees and employers each contribute a portion of this fund. The Employees’ Trust Fund is an additional option that is accessible to the majority of employees. Employers alone contribute to this fund. These rules require employers to deduct the necessary amount from their employees’ wages in addition to paying their part. You may find these percentages below.
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| Sick leave | Everybody occasionally becomes ill. Sri Lanka mandates that workers be granted seven paid sick days per year as a result. |
| Parental leave | Regretfully, parental leave and paternity are not covered by statute. There is, nonetheless, maternity leave.
Maternity leave for new moms should last for 12 weeks for both their first and second kid. The required maternity leave for each additional kid after that drops to six weeks. |
| Public holidays |
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| Payroll taxes | Every firm has to pay a particular payroll tax rate. These are known as income taxes and corporation taxes in Sri Lanka.
Corporate tax is a requirement for all enterprises in Sri Lanka that generate revenue. Depending on the kind of business, the rate ranges from 28 to 40%. Additionally, employers are required to deduct income tax at the following rates from their workers’ paychecks: 6% (over 180,000 LKR): Maximum 3 million LKR 12% (above 540,000 LKR): LKR 3–6 million 18%: Over 6 million Rupees |
| Other laws | Additionally, Sri Lanka has a few laws that are exclusive to its nation:
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To execute payroll in Sri Lanka, there are several elements that need to be kept under check. To create payroll, you can establish a subsidiary in Sri Lanka, but this would need a significant amount of work.
Alternatively, Marzuna may handle your Sri Lankan employees’ payroll. We’ll make sure you stay in compliance so you can concentrate on expanding your company in the future. Get in touch with Marzuna to arrange a demo and see how we can streamline your payroll procedure.
