How bonuses and overtime are taxed in Ghana

December is when many Ghanaian employers pay bonuses, and it’s also when payroll mistakes get noticed. A bonus or an overtime payment does not simply get added to the month’s salary and run through the PAYE bands. Ghana has separate rules for both, and they often work out cheaper for the employee than people expect.

Bonuses: 5% up to a limit

The GRA’s rule is:

• A bonus of up to 15% of the employee’s annual basic salary is taxed at a flat 5%.
• Anything above that limit is added to the employee’s employment income and taxed at the normal PAYE rates.

Example

An employee earns a basic salary of GH₵5,000 a month, which is GH₵60,000 a year. In December they get a bonus of GH₵12,000.

1. The 15% limit: 15% of GH₵60,000 is GH₵9,000.
2. The first GH₵9,000 is taxed at 5%, which is GH₵450.
3. The remaining GH₵3,000 is added to December’s taxable income and taxed through the PAYE bands, along with their normal salary.

If this employee is already paying 25% on the top slice of their salary, that GH₵3,000 costs them GH₵750 in tax. Put the whole GH₵12,000 through PAYE instead and you’d take about GH₵3,000 in tax. That’s the difference the bonus rule makes.

Overtime: special rates for junior staff

For eligible junior staff, the GRA taxes overtime separately from salary:

• Overtime pay up to 50% of the employee’s monthly basic salary is taxed at 5%.
• Overtime above that 50% is taxed at 10%.

Senior staff, and anyone outside the GRA’s junior-staff threshold, have their overtime added to normal income and taxed through the PAYE bands. Check the current qualifying threshold with the GRA before you set this up.

Example

A junior staff member on a basic salary of GH₵2,000 earns GH₵1,200 in overtime in a month.

1. Half of basic is GH₵1,000. That part is taxed at 5%: GH₵50.
2. The remaining GH₵200 is taxed at 10%: GH₵20.
3. Overtime tax: GH₵70, on top of the normal PAYE on their GH₵2,000 salary.

What the Labour Act says about overtime itself

Tax is only half of it. The Labour Act, 2003 (Act 651) sets the ground rules for overtime work:

• Normal hours are a maximum of eight hours a day or 40 hours a week (section 33). Work beyond the hours fixed by your rules is overtime.
• You can’t require a worker to do overtime unless you have fixed rates of pay for overtime (section 35). In other words, write your overtime rate down before you ask anyone to stay late.
• A worker generally can’t be compelled to work overtime, except in businesses that need it to be viable or in emergencies that threaten life or property.

The Act doesn’t set the overtime rate itself. Time and a half on weekdays and double time on rest days and public holidays are common, but your rate comes from your contracts, your rules or your collective agreement.

Mistakes we see every year

1. Running the whole bonus through PAYE. The employee pays far more tax than they should, and they will notice.
2. Using monthly basic for the bonus limit. The 15% is of annual basic salary.
3. Giving every employee the junior staff overtime rate. Only eligible junior staff qualify. Everyone else pays normal PAYE on overtime.
4. Paying overtime nobody approved. If overtime isn’t approved before it’s worked, or at least before payroll closes, it becomes a dispute at month end. Here’s how to manage overtime approvals.

How Eban handles it

In Eban, overtime starts as a request that a supervisor approves, or comes straight from attendance records, and the approved amount flows into the payroll run. Bonuses and overtime appear as their own lines on the payslip, and the special tax rules are applied from your payroll settings. When you set Eban up, check those settings against the GRA’s current limits.