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Indigo Payroll long prepared for the Tax on Overtime Rules, 2020

June 22, 2020

Shireburn Software takes pride in enabling customer success and growth through innovative solutions. A key factor in this is ensuring that our solutions are kept up to date with the any legislative developments that may affect our clients’ business processes. This is key in ensuring that our customers have peace of mind that they will always be in compliance with local legislation.

Indigo Payroll is designed to make pay runs and employee management as simple as possible for you, and that includes adjusting for tax and other financial regulations defined by the government.

The Maltese Government confirmed on Thursday, 18 June, the Tax on Overtime Rules, 2020. This rule, put into effect on January 1, 2020, decreased the tax rate on the first 100 hours of overtime worked by full-time employees to 15 percent. According to the Tax on Overtime Rules, 2020, an employee qualifies for this rule if:

  1. the rate of basic weekly wage for that employee does not exceed three hundred and seventy-five euro (€375) per week, and
  2. the post in which that individual is engaged in terms of the said full-time employment is not a managerial post.

You can read more about this ruling here. The full Income Tax Act (CAP. 123) can be found here.

What does this mean for you as an Indigo payroll administrator?

You as a payroll administrator may be wondering how to handle this change in your Indigo system.

While this decree has been issued only now, halfway through the year, our Indigo team pre-emptively developed a solution for this change back in our 2020 New Year system update.

The system is already prepared to apply this tax on calculations to your employees. Default overtime pay items (up to double-time) are configured with the new tax on overtime rules, meaning that the 15 percent tax rate is applied to the first 100 hours of overtime worked by employees.

Additionally, fields in Indigo payslips and cheques and columns in detailed payroll reports were created to help you report on overtime concessions.

What to do for employees who should be exempt for this rule?

Indigo has in place an overtime concessions opt-out checkbox for you to use in your employees’ profile pages. When you check this box for any employee, Indigo will exempt them from the 15 percent tax on the first 100 hours of overtime worked.

We have a help article to help guide you through exempting employees from this overtime concessions tax.

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