ACCOUNTING AND FINANCE ISSUES

VALCO WTR PROCESSING – BASE PAY AND EXCEPTIONS

EMPLOYEE TAX ISSUES PERSONAL FINANCIAL MANAGEMENT

VALCO WTR PROCESSING

BASE PAY AND EXCEPTIONS

BASE PAY

• Base Pay information is fairly static and it is the responsibility of the Human Resource Department to determine and input this information into the system at the time the employee is newly engaged, promoted or when there are any general changes in employee conditions of service that also includes the adjustment of Base Pays.

EXCEPTIONS• The second major input are the Exceptions. It is assumed

that every regular employee works 8 hours a day and that works out to 40 hours every week. This is the standard number of hours that every employee is assigned by the system every week. However, if the employee does more or less than the standard hours, these will be captured by way of exceptions. For example if an employee does overtime for 4 hours on a particular day, these hours will have to be captured by the employee’s manager in the form of an exception. Similarly if an employee absents himself or herself from work without permission, the absence will be captured in the form of an exception.

CODE DESCRIPTIONS

031 OVERTIME - ORDINARY032 1ST REST DAY O.T. - SATURDAY033 2ND.REST DAY O.T. - SUNDAY034 6TH DAY O.T 035 HOLIDAY WORKED SHIFT WORKER WORKS ON A

HOLIDAY(2.1)036 HOLIDAY OFF- DUTY OFF DUTY BUT WORKS (3.1)037 HOLIDAY VACATION - DURING VACATION038 SWING 039 GRAVE

CODE DESCRIPTIONS

040 CALL A - RECALL FROM HOME AFTER WORK. 041 CALL B - RECALL FROM THE PARKING LOT042 HEIGHT A - POTROOM STACK 1ST STAGE 043 HEIGHT B - CAST HOUSE STACK044 HEIGHT C - VACUUM UNLOADER045 HEIGHT D - ALUMINA/COKE SILOS, 048 STACKED CONTAINERS 049 ROOF TOPS ALL BLDS IN PLANT

CODE DESCRIPTIONS

050 CARB DUCT / CAST PITS - CONFINED SPACE - 051 DISCOMFORT A 052 DISCOMFORT B 304 ACTING ALLW SUPV 325 VACATION RELIEF 330 PERIOD PHYSICAL 335 SAFETY MEETING 336 UNION MEETINGS 343 MATERNITY LEAVE 345 ANNUAL LEAVE

CODE DESCRIPTION

• 346 CASUAL/BEREAVEMENT LEAVE • 347 SICK LEAVE • 348 INPLANT MEDICAL • 349 UN-EXCUSED ABSENCE • 350 TRAINING • 352 SUSPENSION • 355 EXCUSED ABSENCE • 356 PARTIAL ABSENCE

CODE DESCRIPTIONS

• 357 INDUSTRIAL INJURY • 358 LATENESS • 366 HOLIDAY PAY • 369 CEDAC/ISO MEETING • 370 BUSINESS PLAN MEETING • 371 SAFETY TOUR • 372 PAY BOOTH

CONTROLS

• Users must be set up to be able to gain access to the ELKE menu on the AS400. AS400 passwords are confidential. They should not be shared with any other employees. If managers are proceeding on vacation, they should send an e-mail to MIS to set up whoever will be in their stead to perform the WTR entry function for the area/section.

CONTROLS

• Managers are authorized to enter WTR for employees in particular cost centers. For example a manager in Plant Protection will be set up to enter exceptions for employees in Plant Protection. If an employee is transferred to another cost center, his/her manager in the previous cost center will not have access to his/her record. Managers will have to seek assistance from MIS if they get a message from the system that reads “Employee not under this Manager”.

April 22, 2023

EMPLOYEE TAX ISSUES

April 22, 2023

INTRODUCTION AND OVERVIEW• As citizens, we expect the state to satisfy our

needs in the area of health, security, road infrastructure, social amenities etc.

• The state uses taxation as a tool to raise revenue, influence firms and individual decisions as well as international trade and relations to achieve this.

• It is therefore, important for us to appreciate the basic canons of taxation.

April 22, 2023

INTRODUCTION AND OVERVIEW

What is tax?• An involuntary financial burden laid upon

persons;• Legally by government• Whether under the name of income tax, VAT,

duty, excise, or other levies; and • Administered by the Ghana Revenue Authority

under the GRA Act, 2009 (Act791) & Local Authorities

April 22, 2023

INTRODUCTION AND OVERVIEW• Income tax is one that is charged on the gains or

profit accruing to an individual exercising employment in Ghana.

• The gains or profit from any employment of a person is deemed as accruing in or derived from Ghana to the extent that the employment is exercised in Ghana, regardless of the place of payment.

• Ghana practices source taxation, and the system of employment taxation is Pay As You Earn (PAYE), which is a graduated rate from 0 percent to 25 percent for residents and a 15 percent flat rate for non-residents.

April 22, 2023

TAX LAWS AND GENERAL PRINCIPLES• Internal Revenue Act,2000 Act 592 plus

Amendments (L.I 1675,1803,1819).• Sec 1 Imposition Of Income Tax• Sec 8(1)- A person’s income from employment is that

person’s gains or profits from that employment.• Sec 8(2) The gains or profits from employment of a

person include any allowances or benefits paid in CASH or given in KIND to, or on behalf of that person from that employment, other than….

April 22, 2023

MONTHLY TAX TABLE

Taxable Amt (GH¢) RateFirst 84.00 FreeNext 20.00 5%Next 60.00 10%Next 1,186.00 17.5%Exceeding 1,350.00 25%

April 22, 2023

BONUS TAXBonus payment should be taxed at 5% if it is

within the lower of :

(i)15% of the employee’s qualifying income from that employment for the year or

(ii) 1,620 Currency Points (i.e. GH¢ 1,620) Any amount in excess of this is added to the individual’s income and taxed within the applicable brackets as above.

Note: One (1) Currency Point is equivalent to GH¢ 1.00

April 22, 2023

Tax on Overtime (L.I.1675 amendedby L.I 1819)

OVERTIME TAX

• Qualifying Junior Employee is Defined as: Junior staff member whose salary is not more than GH¢ 800.00 per month.

First GH¢ 120.00 @ 2.5% Next GH¢ 280.00 @ 10% Exceeding GH¢ 400.00 add to salary and tax at

prevailing personal income tax rates.• Any employee with a salary above GH¢800.00 is

not legible for the concessionary rates above

April 22, 2023

Tax Reliefs: Personal Reliefs

Reliefs Granted Upfront

Reliefs Granted upon Filing of Returns

•Marriage

•Children’s Education

•Disable

•Aged Relief

•Aged dependent

•Individual Undergoing Training

•Life Insurance

Taxable Income• Taxable income is the portion of a person’s

assessable income that is subject to tax. • Assuming a person’s only source of income is

from employment, then, his/her taxable income

= Base pay + Allowances+ Elements of Benefits in kind – Insurance cont. – Personal Reliefs

April 22, 2023

April 22, 2023

Example:Regular Pay 726.77Guaranteed wage 22.98 Overtime 320.99 Taxable swing 7.04 Non-tax swing 11.84 Grave 2.94 1st rest pay 114.20 Discomfort allow. 42.90Gen. upkeep 174.00 Gross Pay 1,423.66

April 22, 2023

Example (cont.)

OTHER INFORMATION:Child Educ. Relief 10.00Load: Educational Grant/Leave 112.48

April 22, 2023

Example (cont.)

COMPUTATION OF TAXABLE INCOME:

(Base Pay+ Allowances +benefits in Kind - 5.5% SSNIT -5% Eosb - Personal Reliefs)

=(726.77+22.98+7.04)+42.90+(435.19-400)-41.24-37.49-10+112.48

= 858.63

April 22, 2023

Example (cont.)

REGULAR TAX COMPUTATION:

1st 84.00 @ 0% = 0.00Next 20.00 @ 5% = 1.00 Next 60.00 @10% = 6.00Last 694.64 @ 17.5% = 121.56

Total Tax Payable: = 128.56

April 22, 2023

Example (cont.)

OVERTIME TAX COMPUTATION:

1st 120.00@ 2.5% = 3.00Next 280.00 @ 10% = 28.00

Total Overtime Tax Payable: = 31.00

April 22, 2023

Example (cont.)Gross income = 1,423.66SSNIT = (41.24) EOSB = (37.49)Tax (128.56+31.00) = (159.56)Other (Salary Adv., VEHOCS etc) = (50.00)Net Pay 1,135.37

April 22, 2023

Tax planning

Tax Avoidance • Legal means of minimizing ones tax liability• Good arrangement of ones financial affairs

resulting in less payment of taxes (eg. educ. Grant/leave load, etc)

• Must be distinguished from tax evasion, an illegal means of minimizing tax liability such as under declaring income to pay less tax, etc

April 22, 2023

PERSONAL FINANCIAL

MANAGEMENT

April 22, 2023

INTRODUCTION • Every body has goals or, at least, needs, wishes or

dreams, in life. The accomplishment, satisfaction or fulfillment of these involves the expenditure of resources.

• However, since our income cannot afford us all the desires of our hearts, some needs have to normally be postponed or forgone. It entails decisions/choices that have wide implications in our lives.

• This is the crux of personal financial management – how to utilize our finances to meet our needs today whilst not sacrificing that of tomorrow.

Have Realistic Expectations

• Nothing you do is going to change your financial situation overnight, but each time you make a sound financial decision, it will make a small difference.

• And every financial decision you make will impact your life over an extended period of time.

• It is important to keep an open mind about your personal finances and to stick to your financial goals. Similar to a successful weight loss program, you must change the way you view your financial decisions, just as you would change your eating decisions.

April 22, 2023

Have Realistic Expectations

• You must find a plan that works for you and stick to it. Financial advice will work for you but it will take a long time and you have to remain committed to finding financial freedom for yourself. One of the goals of financial planning is to plan for retirement, or better yet, early retirement.

April 22, 2023

Live Within Your Financial Means• Actually, you should live below your means! The

most important way to generate wealth is to live within or below your means. For example, if you make GH¢30,000 a year, then live like you make GH¢25,000 a year and save, pay down debt, or invest the remaining GH¢5,000. There are people who have spent everything they’ve earned and have almost nothing to show for it. Don’t try to compete with your friends or neighbors, don’t spend money fruitlessly, and most importantly, don’t spend more than you make.

April 22, 2023

Live Within Your Financial Means

• Even your mortgage or rent could be less if you chose a different location to live. With that said, there is a fine line between spending appropriately and spending above your means.

• Just remember that it is always better to forego purchases until you can pay for them in cash rather than to borrow from the future to meet your needs now. The most common exception to this rule is buying a house. Although it will raise your cash expenses dramatically, it is often wise because:

April 22, 2023

Live Within Your Financial Means

• it’s an investment which will add to your future net worth,

• the interest is tax deductible which effectively lowers your income tax liability,

• your mortgage payments will add to your net worth as you pay down the principal on the loan, and

• you were probably paying rent anyway so it will in effect turn your rent payment into an investment.

April 22, 2023

Maintain Spotless Credit

• Being credit worthy is one of the most important resources you will ever have when saving money. Basically, the better your credit, the lower your risk profile and therefore the lower your interest rates will be.

• More importantly, good credit is of the utmost importance when buying a house or taking any kind of loan. And even more importantly, if you ever get into a bind or run into a cash liquidity problem, having good credit will vastly help you raise the funds you need at reasonable prices.

April 22, 2023

Rationalize Your Spending

• Avoid impulse buying • Think twice before spending your money. • One often gets excited about making a purchase and

want to jump into it immediately. Before doing so, take a step back and weigh that decision.

• Ask yourself do I really need that item? If you can't find a solid reason to spend your money, then don't spend it!

• We should look at the cost versus the benefit of each decision we make.

April 22, 2023

Understand the Time Value of Money

• The most basic law in finance - The time value of money - states that a dollar today is worth more than a dollar at some time in the future.

• Okay, it’s not that simple to understand at first glance so let me delve into this advice a little with some financial examples:

April 22, 2023

Understand the Time Value of Money

• If I invest GH¢1,000 in a 5% savings account today, it will be worth GH¢1,050 in one year.

• Therefore, if I can have GH¢1,000 today or choose to have GH¢1,000 one year from now, it is always better to have the money now.

• By saving and investing today, you make the time value of money work for you.

• By year ten, the initial GH¢1,000 investment would be worth GH¢1,629 and by year 25 it would be worth GH¢3,386.

April 22, 2023

Take Appropriate Financial Risks

• If you want to build wealth you need to take risks. • The higher level of risk that you take, the higher your

return should be. • With that said, only take the risks that are

appropriate to you! For example: • You have the choice of investing in a savings account,

a money market account, stocks etc. • Each investment has a different level of risk and each

investment makes sense for different people

April 22, 2023

Take Appropriate Financial Risks

• The right investment for you depends on many things, but the two most important factors are:

• 1) Your realistic time horizon, and • 2) Your aversion to risk.

April 22, 2023

Take Appropriate Financial Risks

• Regarding time horizon, if you have 40 years to retirement, you should invest your money in the highest risk, highest yielding sectors (maybe 70% stocks, 15% bonds and 15% money markets).

• But if you are close to retirement or can't afford to risk your investments, the majority of your investments should be allocated toward the low-risk investments such as savings accounts, money market accounts, CDs and maybe even a bond fund.

April 22, 2023

Take Appropriate Financial Risks • Regarding risk aversion, you must make this decision

yourself. If you have trouble sleeping at night because you're investing in stocks, you should probably sway toward the lower risk investments.

• The major takeaway from this section is that it is important to take risks. The more risk you take the more you can expect to earn and accumulate over the long-term.

• However, be conscious of yourself and your goals and do not take more risk than your time horizon or your own personality will allow.

April 22, 2023

Take Appropriate Financial Risks • Regarding risk aversion, you must make this decision

yourself. If you have trouble sleeping at night because you're investing in stocks, you should probably sway toward the lower risk investments.

• The major takeaway from this section is that it is important to take risks. The more risk you take the more you can expect to earn and accumulate over the long-term.

• However, be conscious of yourself and your goals and do not take more risk than your time horizon or your own personality will allow.

April 22, 2023

Save Your Money

• The smartest words ever said by anyone: “A pesewa saved is a pesewa earned.” Start small.

• Don’t give up. Don’t dip into your savings unless it’s an emergency.

• Every little bit helps. Saving GH¢1 per day and investing it at 10%, you’d have almost GH¢200,000 in 40 years.

• Every little bit counts and it is very important that you take this financial advice, get out of debt and save money - and start saving it now!

April 22, 2023

Save Your Money• You can save money in many different ways. • You can save money by foregoing spending until a

future date or by foregoing spending on non-essential items.

• For some people, self-control is a real issue and if the money isn’t “accounted for” immediately, they tend to spend it on impulse and luxury items that are non-essential.

• If you find yourself in this category, or have trouble saving, you should create an investment account that is automatically funded each month.

April 22, 2023

Save Your Money

• If you find yourself in this category, or have trouble saving, you should create an investment account that is automatically funded each month.

• For example a standing order with your bank. To do this, you may need to create a monthly budget to determine a monthly savings goal.

• If you do create a budget, make sure that it is realistic, matches your lifestyle and that it leaves plenty of room for miscellaneous expenses that seem to pop up regularly

April 22, 2023

Save Your Money

• If you create an unrealistic budget you’ll likely save less than what your budget calls for, become frustrated and resort to your old ways.

April 22, 2023

Invest With a New Frame of Mind• The word “invest” in this instance, don’t mean just

putting money into a savings account or the stock market. You should treat every decision you make in your life as an investment decision.

• For example, when you’re deciding whether or not to go out to dinner tonight, whether or not to subscribe to Dstv, whether or not to go on that clothes shopping spree: look at each decision as an investment. It’s fine to spend your money, but you’d be surprised how much you can accumulate if you start investing with a new frame of mind.

April 22, 2023

Start As Soon As Possible• Do not procrastinate. You must start today!!

Assuming you have 30-40 years until retirement, every year you forego saving or investing money today will subtract 1-5 years from your retirement. Just think, by saving and investing all you can today, you may be able to retire up to 5-20 years earlier than you expected.

• A cedi saved today is worth so much more than a cedi saved tomorrow.

April 22, 2023

Diversify Your Investments and Wealth

• A great piece of financial advice! It means, don’t put all your eggs in one basket. If all shares held by you are in banking sector, you’re not diversified. A good diversification strategy involves spreading your investments and wealth across many different asset classes. By doing so, you reduce the risk of losing a large percentage of your wealth by events that only affect one asset class.

• The right diversification strategy for you depends on how much wealth you have, your age range, your risk profile and many other factors.

April 22, 2023

Diversify Your Investments and Wealth

• Diversify across the following categories: real estate, stocks, savings or money market accounts, bonds, other investments

• Diversify within each category above. • If you invest in stocks, try not to let any one stock

account for more than 5-10% of your portfolio. • Use mutual funds to diversify stock risk. Buy different

mutual funds from different fund companies.

April 22, 2023

Retirement Planning• Retirement planning is something everyone knows

they need to do, but very few take the time to plan accordingly. A simple plan to help you achieve your retirement goals. Simply stated, you should SAVE AND INVEST YOUR MONEY!

• By following the steps discussed above you will effectively be planning your retirement.

April 22, 2023

April 22, 2023

THANK YOU

Questions time