Payroll Calculation: How to Align Pay Lists with the New Regulation

As of July 1, 2023, a new Regulation on the Content of Payroll Calculation, Salary Compensation, Severance Pay, and Compensation for Unused Annual Leave (NN, No. 68/23) is in effect, which regulates the mandatory content of payroll documents prescribed by Article 93 of the Labor Law. Amendments to the Labor Law, which have been in effect since January 1, 2023, have expanded the obligations of employers regarding the delivery of documents on paid receipts to employees. The expansion relates to an increase in the scope of data that employers are required to present in the payroll calculation and salary compensation, and the types of receipts for which the employer is obliged to provide the employee with a calculation of the paid receipt; if the receipt is not paid by the end of the month in which the obligation became due, then also an enforcement document on the unpaid receipt.

Before the amendments to the Labor Law, the delivery of payroll documents was prescribed only for salary, salary compensation, and severance pay, and as of January 1, 2023, the obligation has been extended to compensation for unused annual leave. Employers have been required to act according to the amended Labor Law since January 1, 2023, and by October 1, 2023, they must align the content of pay lists with the new regulation. For pay lists on paid receipts, they may use forms published in the annex of the new regulation, but they are not obliged to do so. If it is simpler for them, they can create their own forms for paid receipts that they provide to employees.

Deadline and Purpose

Within fifteen days of the payment of salary, salary compensation, severance pay for termination of employment, and compensation for unused annual leave, the employer is obliged to provide the employee with a calculation of the paid amount. The purpose of issuing the calculation and other receipts is so that the employee can verify whether the employer has respected the rights that belong to them according to the law, collective agreement, work regulations, and/or employment contract. The control does not only relate to the amounts and scope of individual supplements in the salary, the amount of salary compensation, the amount of severance pay, and compensation for unused annual leave but also to the correctness of the calculation of public contributions on which the social and tax rights of employees depend.

Method of Delivery

The method of delivering the calculation is regulated by regulation, collective agreement, an agreement concluded between the workers’ council and the employer, or work regulations, and if not otherwise regulated by these acts, documents on paid receipts must be delivered to the employee in written or electronic form. The amended Labor Law as of January 1, 2023, regulates the possibility of delivering confirmations, documents, acts, and other written materials to the employee in electronic form. If calculations are delivered in electronic form, they must be accessible to the employee, and the employer must be able to print and store them.

Regardless of the method by which the document on the paid receipt is delivered to the employee, the employer must have proof of the delivery of the document to the employee, which is monitored by the labor inspection. The proof is usually the signature of the employee by which the employee or another person on their behalf confirms receipt of the calculation. If the calculation is delivered electronically or sent by postal delivery, the employer must also have proof that the document was delivered to the employee.

Changes in Content

The payroll calculation and salary compensation (form IP1) must contain data on the gross amount of salary for work performed in periods (hours) recorded in the working time records as worked hours, supplements, the amount of other receipts considered part of the salary for work performed, the amount of salary compensation for periods (hours) recorded in the working time records as justified absences from work, and, as a novelty, the amount of other receipts that, according to the Labor Law, are not considered salary for work performed, but are paid as part of the employee’s monthly receipt (e.g., compensation for costs for work at a remote workplace, transportation costs for commuting to work, meal allowances).

Data on gross receipts are presented, and for non-taxable amounts of compensation, data on non-taxable receipts. The calculation of public contributions according to receipts that are considered salary under tax regulations must be presented on the form, and a new obligation is to present total labor costs. The regulation also specifies which special data should be presented for employees working at a remote workplace, employees sent to work abroad, and for seafarers on ships in international navigation. The same form is provided for the payment of severance pay and compensation for unused annual leave, but in such a way that the data for severance pay is presented separately, and the data for compensation for unused annual leave is presented separately.

For severance pay, criteria must be presented according to which the amount and height of severance pay are determined, as well as public contributions according to the taxable part of the severance pay.

For paid compensation for unused annual leave, the calendar year to which the right pertains must be presented, the total number of days of annual leave to which the employee is entitled for that year, the number of days the employee has not used, the amount of compensation in gross amount, and the amount of calculated public contributions.