Administering accurate compensation on a predictable schedule is vital to employee satisfaction at your company. Still, complying with employment regulations has its challenges in your local office — let alone every country your global workforce calls home.
The challenges of handling an international payroll can burden your in-house team. Currency exchange rates fluctuate, time zones and holidays complicate communication, and international banking practices lack standardized operations.
When you expand your company, you need a cost-effective, compliant way to manage payroll. Partnering with an employer of record is a risk-free strategy to ensure that your employees receive the correct compensation on an automated schedule.
Afghanistan follows the Income Tax Law of 2009, which requires employers to withhold a percentage of all wages and salaries for taxes.
The withheld amount of an employee’s salary depends on their monthly income. Employees who earn under 5,000 AFN are exempt from these taxes. Withholdings for each progressive bracket are as follows:
- 5,000 to 12,500 AFN: Two percent of any earned wages over 5,000 AFN.
- 12,500 to 100,000 AFN: 150 AFN plus 10 percent of any earned wages over 12,500 AFN.
- 100,000 AFN or more: 8,900 AFN plus 20 percent of any earned wages over 100,000 AFN.
Note that all brackets assume a regular working period of 40 hours per week.
Employers pay pensions from a dedicated fund, and social protections come from the company’s budget.
Afghanistan Payroll Options
When your company hires overseas, you can choose between a few payroll management strategies:
- Remote: Your parent company can handle payroll for your in-house team and global workforce. Remote payroll management is cost-effective, but the added responsibility is tremendous. Your company also carries full liability for oversights or failure to comply with employment laws anywhere you employ a team member.
- Internal: If you set up a subsidiary, that entity can separate its payroll from yours. Under this model, your parent company is free from legal responsibility. However, setting up a subsidiary and establishing a department to handle employee paychecks is time-consuming and expensive.
- Payroll processing company: Subsidiaries can also choose an Afghanistan payroll processing company to manage compensation. This solution frees your team from the task of handling payroll. Keep in mind, though, that the subsidiary is still liable for compliance failures.
- Employer of record: When you work with a global PEO like Globalization Partners, our experienced team takes care of compensating your employees and offering other benefits. Under our Employer of Record model, we ensure total compliance, and we’ll take full responsibility for any legal mistakes.
How to Set Up Payroll in Afghanistan
To set up your payroll, you must register your company with the Afghanistan Revenue Department (ARD) or your local Mustufiat office. Once the administration approves your application, you’ll receive your company’s Taxpayer Identification Number (TIN), which you’ll need when you file monthly withholding reports.
If you work with Globalization Partners, we hire your employee as their Employer of Record and put them on our payroll. Your monthly invoice includes their wages, and we keep our practices compliant with country-specific regulations.
Termination and Entitlement
If an employee cannot work due to an extended illness or liability, their employer must pay their standard wages and offer benefits until they can resume work or retire. Families of deceased employees receive 10 months of wages to pay for a burial ceremony.
An employer may terminate an employment contract for repeated disciplinary infractions and absences. Extended work stoppages, closure of the company, and other grounds require the employer to pay the remainder of the employee’s salary. Since each contract lasts for a year, a one-month notice period is acceptable.
The legal team at Globalization Partners can lawfully end an employment contract, and we’ll ensure former employees receive the funds they’re entitled to.
Work With Us for Afghanistan Payroll Outsourcing
Put your global payroll on a single platform with Globalization Partners. Contact our team today for more information.