What consequences do the Corona measures have on payroll processing?

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Written by Sue van Elteren
Posted on 19 Apr 2020 - 3 minutes read

In connection with the outbreak of the COVID-19 virus, governments in the various countries have announced subsidy measures that certain parties -who have been financially affected by the lock-downs and the shutdown of activity and the economy- can make use of. This should include both employees and employers.

The list of subsidy measures can be called quite long and differs per country. In this article we will only discuss the measures that seem to affect your payroll administration.

Certain sectors
First, an important feature is that the announced subsidy measures do not apply to all business sectors. Only the hardest hit sectors can make use of it. And here too we see that the lists of sectors per country differs. When applying for the various subsidies, you can consult the list of sectors and check whether your company belongs to it and whether you are eligible for a subsidy.

We do not use business sectors in Celery. To this extent, Celery cannot determine whether certain measures apply to your payroll, or do not.

Limited duration of the subsidy
For the time being, it has been stated that the announced subsidy scheme will apply from April to June 2020. After that, it will be examined whether an extension is considered necessary based on the circumstances then applicable. The measures mentioned therefore do not affect the period March 2020 and earlier. Your already processed and closed pay runs in March and earlier in 2020 will therefore remain unchanged.

Subsidy 1: Allowances in the employer’s social premium contribution

Various governments have announced that the legally required employer contribution in certain social contributions will lapse over the above-mentioned period. That seems to be a measure that affects your payroll, but on closer examination of this subsidy method, it turns out that this is not the case.

This subsidy has been set up in such a way that parties eligible for this subsidy must process a normal payroll, so as regards to social premiums it must also include the employer’s contribution in social premiums. The periodic Wage Tax returns, as well as the Annual Statements and Summary Wage Statements, must also include both the employer’s and employee’s contribution in the social premiums.

But how does the employer receive this subsidy? The parties involved are also eligible for a government wage costs subsidy. This wage costs subsidy will be paid directly by the government to the employers concerned. As it stands, these employers will, in addition to their wage costs subsidy, also receive a separate payment from the government regarding the employer’s contribution in the social premiums.

To that extent, your payroll administration over the aforementioned period will therefore not differ in terms of social premiums compared to your payrolls processed in the period January to March 2020.

Subsidy 2: Adjustment Basic Discount

Quite early in the announcement of the measures, it was reported for Curaçao that the Basic Discount would be increased retroactively to January 2020. The Basic Discount concerns a discount on the periodic Wage Tax Table to which resident employees are entitled. The consequence of an increased Basic Discount is a higher net wage because less Wage Tax is deducted.

The remarkable thing about this measure is that employees without a salary (and there are at this moment) do not benefit from this. In addition, it is even the case that employees with a salary up to ANG 2,150 gross per month do not benefit from this because they do not yet pay Wage Tax. There would then only be a net benefit for employees who, firstly, still receive a salary, and secondly, who earn far more than the aforementioned gross salary. While the purpose of this increased Basic Discount should be to create a net benefit for the less-earning employees, this arrangement does not have that effect.

It is currently very quiet around this announced increased Basic Discount. And on the date of writing this article, no new amount has been determined and/or communicated yet by the Tax Authorities. It seems that this measure causes any doubts and that it will probably no longer be implemented. We keep a close eye on the developments for you.

For the time being, you can still process your payroll administration in Celery for April and any subsequent months with the already known Basic discount of ANG 2,284 per year, being a discount of ANG 190.33 per month.

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