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Hiring in Ghana
Ghana, officially known as the Republic of Ghana, is a country in West Africa. Accra is the capital and the largest city of Ghana. Ghana is a middle income economy. Service sector, manufacturing and extractive industries are some of its key sectors. It is rich in industrial minerals, hydrocarbons, and precious metals. Ghana is the second largest producer or cocoa in the world. Its main trading partners are China, Switzerland, India, and South Africa. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Ghana’s legal and tax regulations. Employment regulations including probation, holidays and termination are covered by the Labor Code. The Labor Code stipulates that employees are entitled to 15 days of paid annual leave. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Ghana’s Labor Code and tax laws.
statutory labor requirements
Probation Period
- Probation period is not outlined in the law, except for that that it should be reasonable.
- In general, probation periods are agreed upon in collective agreements.
Annual Leave
- Employees are generally entitled to at least 15 days of paid annual leave.
Public Holidays
- New Year's Day (1st January)
- Independence Day of Ghana (6th March)
- Good Friday (10th April)
- Easter Monday (13th April)
- Labor Day (1st May)
- Eid al-Fitr
- Eid al-Adha
- Founders' Day (4th August)
- Kwame Nkrumah Memorial Day (21st September)
- Farmers' Day (4th December)
- Christmas Day (25th Husband)
- Boxing Day (28th December)
Maternity Leave
- Female employees are generally entitled to 12 weeks of paid maternity leave.
Paternity Leave
- There is no statutory paternity leave
Sick Leave
- There is no specific time period for sick leave given in the labor code.
Work Hours
- In general, Ghanaians work an 8-hour day, 5 days per week.
Overtime
- A worker may not be required to perform overtime work, exceeding normal working hours, unless that undertaking has fixed rates of pay for overtime work.
- However, the law does not fix the rate of overtime remuneration.
- Overtime hours are usually paid at 150% of the normal hourly wage rate.
Notice Period
- Weekly workers are entitled to 7 days’ notice; workers on a contract of less than 3 years are entitled to 2 weeks’ notice.
- Workers with longer contracts are entitled to 1 months’ notice.
Severance
- Where an employment is closed down or undergoes an amalgamation and that arrangement is likely to sever relationships between a worker and an employer immediately before the close down and this is likely to result in the worker being unemployed or suffering a diminution in the terms and conditions of employment, that worker is entitled to be paid compensation which is known as the redundancy pay.
- The amount of compensation or redundancy pay is subject to negotiation between the employer and the worker on the one hand and the trade union or the worker on the other hand
13th / 14th Month Pay
- No
- There is no statutory requirement to pay the 13th or 14th month salary.
- However employees may receive fringe benefits.
income tax
- Ghana taxes its resident individuals on income from any employment, business, or investment, whether or not the source from which the income is derived has ceased.
- Resident individuals are taxed on their worldwide income, and, as such, foreign-sourced income is taxable.
- However, an exemption exists for employment income of a resident individual who exercises one's employment outside Ghana and is employed by a non-resident employer or by a resident employer, where that individual is present outside Ghana for more than 183 days.
- Non-residents pay taxes at the flat rate of 25%.
- Residents are subject to tax at rates ranging between 0% and 30% on the following annual graduated scale of income:
|
Taxable Income (GHS) |
Rate (%) |
|
First 3,828 |
0 |
|
Next 1,200 |
5 |
|
Next 1,440 |
10 |
|
Next 36,000 |
17.5 |
|
Next 197,532 |
25 |
|
Exceeding 240,000 |
30 |
deductible expenses
Personal Deductions
- Apart from social security contributions, qualifying insurance premiums, and donations, no non-business expenses are deductible, and no standard deductions are allowed.
Personal Allowances
- The tax-free annual threshold is GHS 3,828.
- In addition, annual reliefs for individuals are provided as follows:
|
Conditions |
Annual reliefs (GHS) |
|
An individual with a dependent spouse or at least two dependent children |
1,200 |
|
Disabled person(s) |
25% of Y* |
|
Aged 60 or more |
1,500 |
|
Dependent child or ward education |
600 per dependent** (limited to 3 dependents) |
|
Aged dependents (over 60 years) |
1,000 per dependent** (up to 2 dependents) |
|
Professional, technical, or vocational training cost |
up to 1,000 |
|
* Y is assessable income from any business or employment. ** Where more than one person qualifies in respect of the same dependent, only one person can claim relief. |
|
Business Deductions
- Expenses of a private or domestic nature are generally not deductible.
- For all individuals other than employees, all outgoings and expenses incurred wholly, exclusively, and necessarily in the production of the income that are subject to tax are deductible.
- These include the following:
- Interest on money borrowed and employed in acquiring assets used during the year and debt that was also incurred in the production of income.
- For trading stock of the business, an allowance is calculated in a specified manner.
- Rent payable on land or buildings occupied for the purpose of acquiring the income.
- Repairs and maintenance expenses for depreciable assets that are incurred in the production of income may be deducted. The amount deducted should not exceed 5% of the written down value of the pool at the end of the year; and is allowed in the order in which the expenses are incurred.
- Research and development (R&D) expenses, irrespective of whether the expense is of a capital nature
- Capital allowance
immigration
- A work permit is an approval granted by the Ghana Immigration Service (GIS) for the employment of foreign nationals specifying the number and description of persons authorized to be employed.
- A Ghana work permit is usually valid for 1 year and in some special cases 6 months.
- The work permit specifies the name of the employer and a statement indicating that the holder is only permitted to engage in the particular employment, business or professional occupation specified in the work permit.
- A Residence Permit is usually obtained after the grant of a work permit.
- A formal application must be made on behalf of the employee to the Ghana Immigration Service.
|
Type of Visa/Permit |
Documentation |
Validity |
Eligibility |
|
Work Permit |
|
1 year |
|
|
Residence Permit |
|
n/a |
|
value added tax
- Other than exempt goods and services, VAT of 12.5% is charged on the following:
-
- Every supply of goods and services made in Ghana.
- Every importation of goods.
- The supply of tangible goods by VAT-registered wholesalers and retailers is subject to VAT at the flat rate of 3%.
- An exemption applies for the supply of any form of power, heat, refrigeration, or ventilation. Input VAT incurred by these suppliers is not deductible.
|
VAT |
|
|
Standard Rate |
12.5% |
|
Reduced Rate |
3% |
withholding tax
The WHT rates on various types of payments are as follows (the tax is a final tax for non-residents and the rate may be reduced under an applicable tax treaty)
|
Payment |
Residents |
Non-Residents |
|
Dividends |
8% |
8% |
|
Interest |
0%/8% |
8% |
|
Royalties |
15% |
15% |
|
Management/ professional fees |
7.5% |
20% |
|
Rental payments |
8%/15% |
15% |
termination
- Under Act 651, a contract of employment may be terminated by either party at any time.
- However, where the contract of employment is for three (3) years or more, it may be terminated upon a month’s notice or a month’s pay in lieu of notice.
- Where the contract of employment is less than three years, two weeks' notice or two weeks' pay in lieu of notice is required.
- In the case of contract from week to week, seven days' notice is required to be given to the employee.
- In the event that the contract of employment is determinable at will by either party, it may be terminated at the close of any day without notice.
- Under the law however, termination maybe deemed to be unfair where the termination is only by reason of the fact that the worker intends to join a trade union or has ceased to join a trade union; that the worker has participated in proceedings against the employer:
-
- of race, color, religion;
- or in the case of a pregnant woman as a result of the pregnancy or absence of work on maternity leave; t
- hat the worker has a disability;
- that the worker has refused to perform duties normally required of him as a result of a lawful strike among others.
- Additionally, a worker’s termination would be deemed unfair where it is as a result of ill-treatment of the worker by the employer or where the employer has failed to take action on repeated complaints of sexual harassment of the worker at the workplace.
statutory benefits
- These are mandatory benefits as postulated by law
- These include probationary period, annual leave, public holidays, sick leave, maternity leave, overtime pay, notice period, and severance pay
- Statutory benefits also include social security benefits
|
Statutory Benefits |
|
Probationary Period |
|
Annual Leave |
|
Public Holidays |
|
Maternity Leave |
|
Sick Leave |
|
Overtime Pay |
|
Notice Period |
|
Severance Pay |
|
Social Security Benefits |
payments and invoicing
- A tax year other than the calendar year is not permitted.
- There is no joint filing for husband and wife.
- Employers are required to file monthly pay-as-you-earn (PAYE) returns within 15 days after the end of the month.
- Employers are required to file a return of income for all their employees working in Ghana not later than 31 March following the end of every year of assessment.
- A return of income should be filed with the Ghana Revenue Authority (GRA) within four months after the end of a person's basis period.
- Every employer is required to make monthly deductions of tax from the total emoluments of each employee and remit any taxes due within 15 days after the end of the month.
- Final payment is due at the time of filing the annual personal income tax (PIT) return.
ease of doing business
- The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
- Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
- According to the World Bank Ghana ranked 118th in the World in 2019 in terms of ease of doing business.
employee accruals
| Christmas Bonus% |
0% |
| Christmas Bonus Over Vacations % |
0% |
| Severance per Year % |
Employees are entitled to severance pay equal to one month's pay after completion of one year of employment (8.33% of annual salary) |
| Vacations % | Employees are generally entitled to at least 15 days of paid annual leave (4.28% of annual salary) |
| Notice % |
Employees are entitled to 30 days of notice period for one year of service or more (8.24%) |
| Christmas Bonus Over Notifications% | 0% |
| Vacations Plus% | 0% |
| Total percentage of Salary (yearly) | The total employment accruals as a percentage of salary per anum are equal to 20.94% |
employer accruals
Additional information (Country Accruals)
| Social Insurance | 24.81% |
| Maternity | 16weeks |
| Christmas Bonus | 8.33% |
| Christmas Bonus over Vacations | 8.33% |
| Vacations | 7.95% |
| Description | The social security contribution scheme is structured into three tiers. The first two require mandatory contributions; however, the last one is voluntary. Under the first two tiers, the employee is required to contribute 5.5% while the employer contributes 13%. Of the total contribution of 18.5%, 13.5% is contributed to the first tier and 5% to the second tier schemes. These contributions are deductible for tax purposes and are tax free for both the employer and the employee. Under the third tier, there are no restrictions on the contributions made to the fund. However, contributions made by an employer and employee of up to 16.5% are exempt from tax on both the employer and the employee to the extent of their respective contributions to an approved fund manager. All contributions in excess of 16.5% are taxable on the employee or employer or both. Expatriates, unless exempt, are required to contribute to the mandatory social security schemes. However, expatriate employees of contractors and sub-contractors (of the upstream petroleum industry) are not required to participate in any insurance, compensation, or other employee or social benefit programmes established in Ghana. |
Employer Accruals Additional information
| Employment Accruals | ||
| Annual Leave | Employees are generally entitled to at least 15 days of paid annual leave. | This equals 4.1% (15/365 days) of annual income |
| Maternity Leave | Female employees are generally entitled to 12 weeks of paid maternity leave. | This equals 23% (12/52 weeks) of annual income |
| Overtime | Overtime hours are usually paid at 150% of the normal hourly wage rate. | Depends on the number of overtime hours worked |
| Severance | The amount of compensation or redundancy pay is subject to negotiation between the employer and the worker on the one hand and the trade union or the worker on the other hand. | Subjective |
| Social Security | The social security contribution scheme is structured into three tiers. The first two requires mandatory contributions; however, the last one is voluntary. Under the first two tiers, the employee is required to contribute 5.5% while the employer contributes 13%. |
This equals 13% of annual income |
