A home-based work is a very convenient form for some positions. We have already spoken about the rules for registration of home-workers. Now we find out how to pay for labor of such personnel and how it should be taxed.
What should be prescribed in a collective agreement
According to Art.97 of the Labor Code (hereinafter - Labor Code) forms and systems of payment for labor, labor standard, rate scale, wage scale, rates, salary schemes, conditions for implementation and the amount of supplements, surcharges, bonuses, rewards and other incentive, compensatory and guarantee payments should be established by a company (institutions, organizations) independently in a collective agreement, in compliance with the norms and guarantees provided by legislation, general and industrial (regional) agreements.
The most optimal in the case of the use of labor home-workers is the establishment of part-time wages depending on the standards of production. They can be installed individually based on specific home-work conditions.
The Regulation on the working conditions of home-workers, approved by the decision of the State Committee of the USSR on Labor and Social Affairs and the Secretariat of All-Union Central Soviet of Trade Unions dated September 29, 1981, No. 275/17-99 (hereinafter - Regulation No. 275), recommends to use the job contract system in addition to piece rate system. In this case, the task is given to perform not a separate work, but the whole complex, for which payment is made.
The employer and the employee can agree on the payment in the amount of the official salary for the normal working hours at home.
At the same time, the employer must comply with the requirements of Art.115 of Labor Code and Art.24 of the Law of Ukraine “On Labor” dated March 24, 1995, No. 108/95-VR (hereinafter - Law No. 108), according to which wages are paid to employees on a regular basis on working days within the terms established by a collective agreement, but not less than two times per month, and over a period of time that does not exceed 16 calendar days and not later than seven days after the expiration of the period for which the payment is made.
In addition, the employer must adhere to the minimum wage guarantees specified in Art.3 and 31 of Law No. 108. That is, the accrued employee’s salary must not be less than its minimum amount, which amounts to UAH 3 200 per month in 2017 and UAH 19.24 in case of hourly payment.
Taxation of home-workers’ salaries
Salaries of home-workers should be taxed in the general order, as well as salaries of other employees.
That is, from the accrued salary it is necessary to:
- withhold the personal income tax (hereinafter - PIT) at a rate of 18% (paragraph 167.1 of the Tax Code of Ukraine, hereinafter - TCU);
- withhold the war tax at a rate of 1.5% (para.161 of sub-sec.10 of sec. XX of TCU);
- accrue the unified social contribution (hereinafter - USC) in the amount of 22% (part 5 of Article 8 of the Law of Ukraine “On the Collection and Accounting of the Unified Contribution to the Mandatory State Social Insurance” dated 08.07.2010 No. 2464-VI, hereinafter – Law on the USC).
In case if the USC accrual basis does not exceed the minimum wage established by law for the month in which the income is received, the amount of the contribution is calculated as the product of the minimum wage, established by law for the month in which the income (profit) was received, and the rates of the USC (para.5 of Art.8 of the Law on the USC). That is, the employer must pay the minimum insurance premium in this case.
Often, home-workers use their own tools during work. This is one of the peculiarities of work at home. This fact must be documented for compensation.
Employees who use their tools for the needs of the company (institution, organization) are entitled to compensation for their depreciation (amortization).
The amount and procedure for payment of this compensation are determined by the owner or the body authorized by him/her, in agreement with the employee (Art.125 of the Labor Code, para.10 of Regulation No. 275 and para.16 of VI International Labor Organization’s Recommendations on Work at Home No. 184 (hereinafter - Recommendations No. 184)).
The employee should submit an application for compensation in order to obtain it, and the employer should issue an order for its payment. The amount of compensation and the method of depreciation, on which it is accrued, should be indicated in the order.
For the purpose of taxation of the personal income tax (hereinafter - PIT), compensation to employees for the use of their tools for production needs is regarded as an additional benefit in the form of the amount of monetary or property compensation for any costs or expenses of the taxpayer, other than those that are necessarily reimbursed according to the law at the expense of the budget or are exempt from taxation in accordance with sec. IV of TCU (sub-para. “г” of para.164.2.17 of TCU). Compensation is taxed at a general rate of 18%. In the tax calculation for f. No. 1DF such compensation is indicated with a sign of income “126”. Since compensation is a taxable income, the war tax should be also withheld from it.
At the same time, on the basis of para.3.22 of the Guidelines on Statistics of Wages, approved by the order of the State Statistics Committee of Ukraine dated 13.01.2004 No. 5, compensation to employees for use of own tools and personal transport for the production is not a part of the payroll fund. In addition, compensation paid to an employee is included in the list of payments, on which the USC is not accrued (para.11 of sec. I of the List of types of payments made at the expense of employers, for which the unified contribution to the mandatory state social insurance is not accrued, approved by the resolution of the Cabinet of Ministers of Ukraine dated December 22, 2010 No. 1170). Therefore, the amount of compensation to the employee is not the subject to taxation.
