Understanding how to process payroll in Georgia is essential, especially when employing talent from a developing country. With a workforce known for their contributions and skills in the services, tourism, and manufacturing industries, Georgia is also known for its highly educated workforce.
With businesses globally employing from Georgia, it is important to ensure that the payroll calculations are accurately done, salaries are processed on time, and employers offer a competitive compensation and benefits package.
Therefore, it is important to understand Georgian payroll policies and procedures to avoid employee turnover and dissatisfaction.
This article covers everything you need to know about payroll in Georgia.
How Is Payroll Calculated in Georgia?
Compensation in Georgia is decided through negotiations between the employer and the employee through collective bargaining agreement. However, it is important for all employers to clearly outline the salary, statutory deductions, voluntary deductions, leaves, overtime pay, and benefits through an employment contract.
The salaries offered to employees must be above Georgia’s national minimum wage as laid down by the labor laws. The national minimum wage in Georgia is ₾20 (US$8).
Contributions to the Georgian social security are mandatory by both the employer and the employee. The contributions toward the social security fund include 2% of an employee’s gross salary toward the pension fund. Employers must ensure that the contributions toward the pension fund are deducted as a part of the payroll process.
The employer must also contribute an equal amount of 2% toward the Georgian social security.
The work hours laid out in Georgia’s payroll rules and regulations is forty hours a week. Any additional hours requested by businesses are considered overtime and must be compensated. The overtime pay in Georgia is 150% of an employee’s gross salary.
The payroll taxes in Georgia are at a flat rate of 20% and must be deducted from the employee’s gross salary. The standard income tax rate of 20% applies to all income regardless of the income earned by employees residing in Georgia.
Important Elements of Salary Structure in Georgia
When processing payroll in Georgia, there are a few essential elements of salary structure in Georgia that an employer must include:
- Basic pay
- Gross pay
- Income tax deductions
- Social security contribution
- Net pay
- Tax credits
Important elements of salary structure in Georgia also include:
- Personal information, which includes an employee’s name, address, bank account details, social security number, and contact information
- Employer’s name and registration number
- Cumulative pay of an employee (alternatively known as the gross salary)
- Tax credits
All employers must provide payslips to their employees residing in Georgia as a part of the payroll process. Payslips include all the information mentioned above and document both parties commonly use as a point of reference. With the technological advancements, employers provide payslips monthly through online payroll platforms.
How to Set Up a Payroll in Georgia
International businesses must establish a legal entity such as a subsidiary to set up payroll in Georgia. Starting a business in Georgia can take several weeks to months, given the subsidiary laws and other necessary regulations.
Outsourcing HR responsibilities to a PEO and EOR platform such as Multiplier can help you process payroll in Georgia compliantly. This helps in focusing on your business operations.
A Step-by-step Process of Payroll Processing in Georgia
Hiring and managing employees is made easy due to simplified Georgian payroll requirements. However, there are certain non-negotiable steps that an employer must take care of when processing payroll in Georgia.
Processing payroll in Georgia is a six-step process:
1. Clearly define the payroll policies
All employers must have policies that stipulate when they will pay the employees, how much they must be paid (the benchmark salary for every level), and the benefits employees are entitled to. Clearly defining such policies will help a smoother payroll process and help avoid unnecessary employee disputes.
2. Calculate employee pay
Ensuring that businesses offer the right salary for employees is important. This is because employees’ gross salary differs from their net salary. Gross salary is an amount that an employee is entitled to before all statutory and voluntary deductions.
Therefore, it is important to ensure that an employee receives the right gross salary and that employers ensure that they accurately calculate net pay and accurate Georgian employer payroll taxes.
3. Determine the overtime pay
Employers must offer overtime pay if employees are required to work additional hours. The standard working hours in Georgia are forty hours a week. Any additional hours over forty hours workweek is overtime.
Employers must pay 150% of an employee’s gross salary for every additional hour of overtime.
Therefore, the third step in the Georgian payroll process is accurately determining overtime hours and paying all employees.
4. Pay schedule
The Georgian employment law mandates all employers to process employee pay and deductions monthly.
Therefore, the next step for employers is to determine and fix a payment date when they will pay the employees. For example, some employers pay their employers on the last day of each month, while certain employers pay on the first day of every month.
5. Process payroll taxes
The Georgian payroll tax rate is a flat 20% for all individuals (including foreign nationals and non-resident employees).
Employers must ensure that they deduct the income taxes and make tax payments to the Georgian Tax Authorities. Paying payroll taxes on time is important as late payments will attract fines and penalties.
6. Maintain payroll data
The last step is to keep detailed and accurate payroll records. Maintaining detailed payroll data protects businesses from any legal repercussions. Keeping payroll records applies to both domestic and international payroll.
Payroll records include maintaining a record of tax deductions, monthly salaries, employee benefits, and other necessary payroll information for all employees.
All employers and employees must contribute to Georgian social security. The contributions toward the social security fund include –
The employee contribution is deducted from the paycheck as a part of payroll deductions in Georgia.
The scope of social security contributions applies to resident and expatriate employees.
Georgian employers follow a monthly payroll cycle. The salary payments and necessary deductions must be made on the first of every month and no later than the last working day of the month.
As laid down by the payroll policies and procedures in Georgia, it is also mandatory for all employers to provide a payslip stating the salary payment, the necessary deductions, and the date when the salary was paid.
Georgian Payroll Options for Companies
There are a few payroll options in Georgia that businesses can choose from, including –
In-house payroll processing
Companies can process payroll for their Georgian employees as a separate department. This includes an in-house payroll team that ensures all employees receive their paychecks on time, necessary deductions are made, and necessary government regulations are complied with.
Businesses commonly outsource payroll for their Georgian employees to local payroll companies. Outsourcing the payroll process in countries such as Georgia ensures that the payroll is processed faster and reduces the burden of constantly keeping track of the Georgian payroll requirements.
Partnering with a global Employer of Record (EOR)
Partnering with a global Employer of Record (EOR) platform such as Multiplier helps compliantly, accurately, and more effectively process payroll. Our team of professionals helps in compliantly processing payroll in Georgia.
Entitlement and Termination Terms
There are certain benefits that a Georgian employee is entitled to, which include:
- Contributions toward the pension savings scheme offered by the Georgian social security are mandatory. The state, employer, and employee contribute 2% each toward the pension funds.
- The working hours in Georgia are 40 hours per week, and a standard workweek commonly followed by employers is 5 days. Employers requesting additional work hours must offer overtime pay. The overtime pay in Georgia is 150% of an employee’s gross salary. Employers must also pay overtime if employees work on public holidays and weekends. The overtime pay in Georgia is 150% of an employee’s gross salary. Overtime pay must also be offered if employees work on public holidays and weekends.
- The statutory leaves as laid out in the Georgian payroll requirements are:
- 24 days of paid annual leave
- 17 public holidays
- 30 days of paid sick leave
- 126 days to 143 days of paid maternity leaves
- 57 days of paid parental leaves
- Contributions toward state healthcare are mandatory.
- The maximum probationary period in Georgia is six months. However, it must be clearly outlined in the employment contract.
- The statutory notice period in Georgia upon the termination of the employment contract is four calendar weeks. An employer must offer severance pay in cases.
- If an employer wishes to terminate the employment without a notice period, the employee must be paid severance pay.
Employers also should ensure that they comply with the termination terms when employing Georgian employees:
Businesses employing Georgian employees are entitled to terminate a fixed-term contract for the reasons below –
- Personal reasons
- Business reasons
- The gross misconduct of an employee
Termination of employment must be in writing with a valid explanation. However, an employer can also offer a warning for an incident to ensure the employee provides a reasonable explanation.
In cases of termination of employment, the employer and employee must give a notice of termination for at least 30 days.
If an employer is terminating the employment, the employee is entitled to 1 month’s pay, alternatively known as severance pay. The severance pay must be processed within 30 days of termination.
Georgian Payroll Processing Company
Given multiple Georgian payroll rules and regulations, an easy way of processing payroll for your Georgian employees is by partnering with a global EOR platform such as Multiplier. Our team of experts helps you compliantly pay your employees while ensuring that all statutory deductions are made.
Multiplier’s global EOR solution ensures you compliantly process payroll in Georgia. Get in touch with us to learn more about the Georgian payroll process by contacting us.
How Can Multiplier Help With Global Payroll?
Due to the country’s payroll requirements, processing payroll in Georgia can be a fairly complex process.
You can now easily process payroll for your Georgian employees through a global EOR such as Multiplier in just a few clicks!
Multiplier offers global payroll solutions in 150+ countries. You can onboard employees globally, make payments in local currency without setting up a new legal entity, and process payroll deductions.