Sri Lanka Payroll System Guide – 7 Key Factors Which Need To Be Included On Pay Sheet Format Sri Lanka
Many young entrepreneurs in Sri Lanka are having trouble making a decent payslip. They need to be aware of how to make payslips under the government payroll system of Sri Lanka. Every employer must follow the labor acts and regulations to protect employee rights & run a successful business.
This guide will help them to create payslips on their own. Payroll Management processes are pretty complicated. Too many small & medium businesses have been wasting time and resources without knowing proper instructions. Sometimes it will become a tremendous headache to business owners and they can’t focus on other important matters.
Anyone can create a fully detailed Sri Lankan payslips when they have answers for these 8 questions.
- What does a Sri Lanka Payslip look like?
- What does Basic Pay mean?
- What do you mean by Allowances?
- How Overtime has been calculated?
- What is Salary Advances?
- What are Incentives?
- How has Personal Income Tax Sri Lanka (PIT) been calculated?
- Calculation of Unpaid Leave?
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Back to topic…. Let’s learn how the payroll system Sri Lanka works step by step.
What Does A Sri Lanka Payslip Look Like?
According to the Sri Lanka government, a salary slip should consist of these basic informations.
- Name Of The Employer (Company).
- Full Name Of The Employee.
- Employee ID.
- Employee Job Role.
- EPF Number.
- Employee NIC Number (Optional).
- Salary Details – Base Pay, Allowances, Bonuses, No Pay (Unpaid leave), Advances, Loan, Social security, PAYE/APIT).
- Social Security – Employer & Employee EPF, ETF contributions.
- Verification with signature of the employee.
What Does Basic Pay Mean?
Basic Pay, also called Base Salary, is the constant amount of money earned by an employee before any additions or deductions. This base salary does not change regularly, unless there is a promotion or increment. The amount usually comes up with both an employer & employee mutual agreement. Overtime & No Pay leaves are calculated based on this Basic Pay.
What Do You Mean By Allowances?
A sum of money paid to an employee to meet needs or expenses. Some allowances will be constant and some will vary. There are some usual allowances included in Sri Lankan salaries – travel allowances, data/mobile allowances, accommodation allowances, child allowances, festival allowances, and so forth. Allowances can be negotiated into an employment contract and it changes according to an employee designation and service years.
How Overtime Has Been Calculated?
According to the Shop and Office Employees Act (19 of 1954) Sri Lanka, employees no need to work extra to agreed working hours, until he/she paid separately for such overtime work. An employer must pay 1.5 times (minimum) the hourly rate of his/her basic hourly pay. Employers can pay an increased rate for employees if they want. And overtime shouldn’t exceed an aggregate of 12 hrs in any one week.
Example OT calculation Sri Lanka
If an employee earns Rs 40000 as a basic salary (40 hrs monthly) his/her hourly pay will be Rs 1000. Let’s say the minimum OT rate is 1.5 times, then an employer needs to pay Rs 2500 for an hour of overtime work.
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What’s Salary Advances Means?
As per the name, Salary Advances means getting a portion of the salary in advance to the actual pay date and it will be deducted monthly or at-once in the paysheet. It will differ according to the organization’s policy and service years.
Salary Advance Example
Let’s say an employee takes a salary advance of Rs 50,000 of his/her salary in January. If the employer agreed to deduct monthly, then it will deduct in your monthly gross salary Rs. 5000 (vary); Sometime the employer might deduct the whole advance at-once.
What are Incentives?
Incentives are commissions, treats, gifts or anything that motivates an employee’s hard work. Monetary incentives will be listed in monthly payslips. Incentives might increase according to last month’s performance or it will increase the basic pay for a continuous performance. Some enterprises provide instantly for the sales performance in percentage and some will provide for the KPIs.
How Has Personal Income Tax Sri Lanka 2023 (PIT) Been Calculated?
Citizens and residents of Sri Lanka are entitled to the personal income tax (PIT) according to the Inland Revenue Department, Sri Lanka. All citizens and residents of Sri Lanka can have a Rs 1.2 Million of tax free allowances. Every company (employer) must deduct income tax from the gross salary for every pay period of every employee who is liable to income tax Sri Lanka, at the time such remuneration is paid or credited. Personal income tax rates will be calculated as per the following table.
|Taxable Income Per Annum||Rate (%)|
|First Rs 500, 000||6%|
|Next Rs 500, 000||12%|
|Next Rs 500, 000||18%|
|Next Rs 500, 000||24%|
|Next Rs 500, 000||30%|
PIT Sri Lanka Calculation Example
Let’s say if an employee earns Rs 80000 as his/her gross monthly salary, then no need to pay the income tax. If he/she earns Rs 110, 000 needs to pay 6% × Rs 10, 000 = Rs 600 as PIT.
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How To Calculate No Pay?
No Pay Leave means if an employee takes a no pay leave, he/she won’t get paid for that particular day. At the end of the payroll period, No Pay Leaves will be deducted from salary slip.
Usually per day payment is the deductible amount for unpaid leave. Basic salary / Monthly working days and it will be multiplied by total unpaid leave taken in the month.
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