Companies need to perform a multitude of financial calculations, regulations, and tracking duties. Completing these tasks accurately and completely is not only a legal obligation, but also crucial for maintaining the company’s balance sheet and structure. The payroll, which is arranged by the employer within companies, is one such document. Let’s answer the question, “What is a payroll and how is it calculated?” together.

What is a Payroll?

To understand the concept of a payroll, it’s beneficial to briefly discuss the concept of wages first. Wages are defined in Article 32 of the Labor Law No. 4857 as “the amount paid in cash to a person by an employer or a third party in return for their work or labor”. In this context, the qualified document where companies report the legal wages they pay to their employees in detail is referred to as a payroll.

Payrolls legally attest the wages that employers are obliged to pay their employees, while also serving as a document that the employee can refer to when declaring their income and other financial matters. Every employee has the right to request a payroll from their employer. Indeed, companies are required to periodically create payrolls and declare the payroll documents agreed upon with the employee.

How is a Payroll Prepared?

Payrolls should be prepared in accordance with specified payment periods. Worker and employer deductions made within the framework of laws by the employer must also be fully included in the payroll. Payrolls can be prepared by the company’s accounting departments, but in today’s world, this process has become much simpler through applications and software. This digital transformation has provided great convenience by allowing payroll calculations, which used to be particularly cumbersome for large companies in the past, to be completed in a very short time.

Today, many small and large scale companies can get support from intermediary firms for financial processes where payroll calculations are also integrated. These frequently chosen intermediary firms offer professional service to companies in these matters. The biggest factor in preferring these services is that it is cheaper and more advantageous for companies in terms of employee and department costs to use intermediary firms. Therefore, professional external support can be obtained for the management of many financial processes.

What to Pay Attention to When Preparing a Payroll?

One of the points that companies need to pay the most attention to when preparing a payroll is that the information is completely indicated on the document. Worker earnings, employer and worker deductions, additional taxes, and all other details should be declared clearly on the payroll. The information that should be included on the document can be listed as follows:

  • The current period and date when the payroll was created
  • Registration number of the workplace
  • Employee’s name, surname, Social Security Institution (SGK) registration number, title, wage and wage type information
  • Employee’s working days and earnings related to weekly holidays
  • Legal deductions such as Social Security Institution worker share, income tax, unemployment insurance worker share, stamp tax
  • Fees such as fuel aid, child aid, health insurance, if any
  • Special deductions like foundation dues, financial aid, and health deductions
  • General tax base items like Social Security Institution, income tax, stamp tax, cumulative income tax base
  • The signature of the employee

A payroll should generally include the information listed above. These pieces of information may show slight variations according to the Labor Law, Social Insurance and General Health Insurance Law, and Tax Procedure Law. These changes can be revised according to the position requested by the employer and prepared. The steps that employers need to follow and pay attention to when preparing payrolls are clearly determined by the laws and made accessible to companies. The department or person who will arrange the payroll can prepare the payroll based on this information.

How is a Payroll Calculated?

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Preparing the Payroll: What to Pay Attention to?

When preparing the payroll, one of the points that companies should pay the most attention to is to indicate the information on the document in a complete manner. The earnings of the employee, deductions made by the employer and the employee, additional taxes, and all other details must be declared clearly on the payroll. The information that should be included on the document can be listed as follows:

  • The current period and date the payroll is created
  • The registry number of the workplace
  • The employee’s name, surname, Social Security Institution (SGK) registry number, title, wages and wage type information
  • The earnings of the employee due to working days and weekends off
  • Legal deductions such as the SGK employee share, income tax, unemployment insurance employee share, stamp tax
  • If applicable, fuel aid, child aid, health insurance, etc. fees
  • Special deductions such as foundation dues, financial aid and health deductions
  • General tax base items such as SSK, income tax, stamp tax, cumulative income tax base
  • The signature of the worker

A payroll should generally contain the information listed above. These pieces of information; The Labor Law, Social Insurance and General Health Insurance Law, and the Tax Procedure Law may show slight variations. These variations can be revised by the employer according to the requested position.

The steps that employers need to follow and pay attention to when preparing payrolls have been clearly determined by laws and made available to companies. The department or person who will make the payroll arrangement can prepare the payroll in accordance with this information.

Deductions from the Worker

  • Social Security Premium (SSK) worker’s share = Gross wage x 14%
  • Unemployment insurance worker’s share = Gross wage x 1%
  • Income tax base = Gross wage – (SSK worker’s share + unemployment insurance worker’s share)
  • Amount of income tax = Income tax base x 15%
  • Amount of stamp tax = Gross wage x 0.00759
  • Total of deductions = Worker’s share + unemployment insurance worker’s share + income tax + stamp tax
  • Net wage = Gross wage – total of deductions Deductions from the Employer
  • SSK premium employer’s share = Gross wage x 15.5% (with a 5% discount incentive)
  • Unemployment insurance employer’s share = Gross wage x 2%

Applying the deductions from both sides correctly and including them in the payroll is very important. Employers should not forget that they can face different deductions according to the status of the workers they employ. Worker groups within the scope of the law are included in the calculation with different deduction rates.

Example of Payroll

Employers calculate payrolls over the gross wages of workers. During the creation of the payroll, employers should make sure that the information they declare is complete and in accordance with the laws. Otherwise, penal sanctions are imposed in accordance with the Labor Law No. 4857 and the Tax Procedure Law No. 213. It should also be remembered that these penal sanctions are applied separately for each incorrect declaration.