Payroll Calculation for Employees in Belarus

As in other countries, specific rules and regulations govern the formation and use of the payroll fund in Belarus. This article will examine the peculiarities of payroll calculation for Belarusian companies.

The topic of payroll calculation is relevant because companies need to ensure effective human resource management and optimize personnel costs. Understanding the basic principles of payroll calculation will enable informed decision-making in human resources management and finance.

What is the Payroll Fund?

The payroll fund is a planned indicator. Payroll planning is an integral part of company planning. Planning payroll expenses helps to compile, plan, and timely adjust the company’s budget in terms of costs. Usually, the payroll fund is scheduled for a year. But it can also be planned for shorter periods. Correct payroll planning helps to maintain the company’s profitability, motivate effective employees, and prevent overpayments of wages. Payroll is usually planned jointly by company managers, the HR director, and sometimes the company owners.  

How is the Payroll Fund Calculated?

The payroll fund typically consists of salary and bonus components. The salary component consists of employees’ wages, and the bonus component consists of employee bonuses and allowances. However, not all companies plan this way; in some, the payroll fund has no bonus component. In this case, the payroll fund consists only of the salary component, and bonuses are planned operatively – on a case-by-case basis. To prepare the payroll fund for the next year, the wage fund (WF) indicators in the current year are usually used. Such indicators are reflected in various labor statistics reports that companies submit to the subdivisions of the National Statistical Committee. There are several approaches to calculating the payroll fund based on data on employee payments for the previous period.

• Based on average wage values: To plan the payroll fund in this case, it is necessary to determine the average number of employees in the company and their average wage. For this, the wages of all employees for a month are divided by the number of employees in that month. The resulting average monthly salary is multiplied by the average number of employees and by 12. This gives an annual indicator of wage costs. It is possible to forecast costs when hiring new employees and expanding the company from this amount of costs.
• Based on company profit data: In this approach, the company’s planned profit is calculated, from which taxes and other planned expenses are subtracted. The remaining amount allows for planning expenses for employee wages. A large remaining amount makes planning wage increases and staff expansion possible.

What is the Company’s Wage Fund?

Unlike the payroll fund, the wage fund (WF) is the sum of all expenses on employee wages. This refers to the amounts actually accrued to employees before deducting “wage” taxes from these amounts. The company pays taxes, social insurance contributions, and insurance premiums from the wage fund to Belgosstrakh. The wage fund also helps calculate the company’s average earnings before tax. The wage fund is an important indicator that reflects the company’s personnel expenses and allows us to assess the efficiency of using labor resources. The amount of wages paid in the company can be found after deducting all mandatory payments – taxes and fees – from the wage fund.

What payments are included in the wage fund?

The wage fund includes the following payments:

1. Wages for work performed and time worked.
2. Incentive payments: bonuses, travel allowances, meals, and wage supplements for various indicators.
3. One-time incentive payments include material assistance, rewards for anniversaries, the value of shares with which employees are encouraged, and amounts of company profit distributed among employees.
4. Compensation amounts: surcharges for irregular working hours, for night work, on holidays and weekends, for unused vacation, and other compensations that companies pay to employees.
5. Payment for time did not work: payment for labor and social leave, payment for sick leave over the number of temporary disability benefits, and other payments for time not worked.
6. Other payments to employees include payment for meals and housing, fuel compensation, the cost of goods provided at reduced prices or free of charge (except in cases of payment in kind), and the cost of travel passes for employees.

What payments are not included in the wage fund?

The wage fund does not include, in particular, the following payments:

• Supplements to pensions of former employees that the company makes at its own expense.
• Severance pay (compensation) upon termination of the employment contract.  
• Rewards are material assistance paid to an employee in connection with retirement.
• Author’s remuneration.
• The cost of gifts and material assistance for anniversaries and significant events in employees’ lives.
• Travel expenses.
• The cost of expenses for company corporate parties.

Features of calculating the wage fund

The wage fund is determined for a calendar month since wages are paid to employees monthly. In this regard, the wage fund includes amounts related to a specific month. When distributing the company’s profit among employees, the wage fund consists of the earnings credited to the employees’ accounts. Sometimes, the employees’ vacations begin in one month and end in another. In this case, part of the vacation pay is included in the wage fund for one month, and part of the vacation pay is included in the wage fund for the next month.

How is the wage fund calculated?

All payments included in the fund are summed up to calculate the wage fund. The wage fund consists of fixed payments (for example, wages) and variable payments (for example, bonuses and compensations). Such payments are reflected in periodic reporting submitted to the National Statistical Committee. Calculating the wage fund helps to analyze the structure of the company’s expenses and the effectiveness of payroll budget planning.

How is the payroll fund analyzed?

In case of deviations of actual payments to employees (WF) from the planned payroll fund, changes in revenue are analyzed. With such changes, part of the wage fund that relates to the variable may change. When actual payments (wage fund) exceed the planned indicators (payroll fund), the reasons for the excess expenditure are analyzed. It makes sense to explore the overspending for individual categories of employees for whom the overspending occurred. The reasons for the overspending of the payroll fund may be, for example:

• Hiring more staff and increasing working hours.
• Increasing the tariff rates and salaries of employees.
• It is also possible to save on the wage fund when expenses on payments to employees are lower than planned. This may be, for example, due to cheaper production or an increase in revenue without reducing wages.
• Several factors that affect the size of wages are analyzed to analyze the company’s expenses on the wage fund and find ways to save on such costs. For example, the duration of the working day and the amount of work that employees perform on average per hour are considered.

Why is it essential to plan the payroll fund?

First of all, the payroll fund is essential for determining the cost of the company’s products. Also, payroll planning in a company is critical for several reasons:

• Cost control. Planning the payroll fund helps to control payroll expenses and avoid overspending. This is especially important for companies that operate in a limited resource environment or seek to increase the efficiency of using funds.
• Fairness and transparency. Planning allows for establishing a fair pay system that considers each employee’s contribution to achieving the company’s goals. This contributes to increased employee motivation and reduced turnover.
• Compliance with the law. Planning helps to comply with labor law requirements, reducing the risk of fines and litigation.  
• Strategic planning. Payroll planning is part of the company’s overall strategic planning. It allows you to determine the need for personnel, assess the costs of maintaining it, and develop measures to optimize these costs.  
• Forecasting and budgeting. Planning allows payroll expenses to be forecasted for a certain period of time and included in the company’s overall budget. This helps ensure the financial stability and sustainability of the business.  
• Risk management. Payroll planning allows you to consider possible risks associated with changes in the economic situation, fluctuations in the labor market, and other factors. This allows the company to be more flexible and adaptable to changes in the external environment.
• Performance evaluation. Planning provides an opportunity to evaluate the effectiveness of the pay system and make the necessary adjustments to improve it.

In general, payroll planning is an essential tool for managing a company that helps to optimize costs, increase employee motivation, ensure compliance with the law, and achieve strategic goals.