Introduction to Payroll in Uganda

Paying your remote team members in Uganda requires careful compliance with local labor laws. You need to keep strict compliance with Uganda’s employment legislation to not only avoid potentially costly legal fees and penalties, but also to ensure you pay your workers accurately and on time. However, navigating Uganda’s policies regarding payroll takes genuine in-country expertise that you probably do not have. This is where Skuad’s local legal expertise can help you run payroll in Uganda hassle-free.

Employee compensation, benefits, and taxes

Skuad’s in-country expertise in Uganda’s local employment legislation lets you navigate employee salary requirements, meet the specifics of taxation legislation, and manage the expectations regarding employee benefits expectations:

• Corporate, income, and regional taxes
• Social security, healthcare insurance, pension, and unemployment benefits
• Leaves and holiday compensation
• Other taxes and mandated employee contributions

Talk to Skuad’s in-country experts now and find out for yourself how you can easily run payroll in Uganda.

Payroll Process in Uganda

The payroll process generally stays uniform across international markets, so Uganda has no specific processes that apply only to workers in the country. Of course, local legislation relating to payroll will change details such as wage calculation and taxation.

The payroll process itself, however, will always consist of three steps.

Pre-payroll phase

This stage is a due diligence phase that lets you prepare and standardize the policies and sub-processes that the rest of the payroll will rely on in the next steps.

Setting up the organization

Every business has its own distinct approach to setting policies and standardizing processes, which in turn impact payroll processing. This makes the due diligence that goes into pre-payroll even more critical. There are foundational aspects in business that you need to pay close attention to during the pre-payroll phase, including:

Business profile

Your business profile is the set of various identifications and registered business numbers that you will then use for the submission of required documents and forms. Think reimbursements, payslips, and of course, tax forms. These all need to be filed or sent to appropriate governing organizations.

Work location

Different work policies should be created for different work locations. Note that even locations within the same country will benefit from policies drafted specifically for them instead of solely relying on a blanket country policy.

Leave policy

As the different types of leaves directly impact wage calculations, you should standardize a clear and compliant leave policy.

Attendance policy

Attendance policy is the very foundation of salary computation, so it should be compliant, well-defined, and transparent for your workers. For instance, attendance policy needs to incorporate increases and decreases in wages based on overtime and half-days. It also needs to integrate all the necessary tools used for attendance tracking.

Statutory components

Local labor laws in Uganda prescribe statutory components you absolutely need to include in your internal company policy. Noncompliance opens you up to penalties and other legal fees.

Salary components

The different factors that comprise worker salary include the base rate, deductions, and bonuses. You need to meet locally mandated minimums while also balancing market rates and internal policy.

Pay schedule

Employees in Uganda expect to be paid at the end of every two weeks or month, depending on the contract. Make sure to take local norms and labor practices into account when scheduling pay.

Employee information

A lot of input collection and validation happens during the pre-payroll phase, which includes employee data that will impact pay computation. Make sure you set policies and processes that efficiently gather and validate employee information to make the rest of the payroll process smooth sailing.

Payroll calculation phase

The second stage of the payroll process is dedicated solely to the actual wage computation. In this phase, payroll platforms can help make the work more efficient and accurate through automation and other tools if they’ve been properly calibrated during the pre-payroll phase.

Post-payroll phase

Salary payments

The actual sending of advice to your bank or payment processor for salary disbursement makes up most of the post-payroll phase.

Payroll accounting

For internal purposes, accounting for employee salaries is typically performed after wage disbursement.

Payroll reporting and compliance

Whereas accounting is internal, reporting for compliance purposes is external. So this involves submitting invoices and tax forms to appropriate government agencies.

Payroll Processing in Uganda

Evidently, payroll in Uganda requires intricate steps during every phase. Partnering with a trusted provider like Skuad is a preferred strategy for many organizations looking to expand their international teams.

Payroll Processing Company in Uganda

Skuad is an HR management and payroll solutions provider that offers the in-country expertise to help you seamlessly run payroll in Uganda, and even expand your workforce in the country. The key benefit of partnering with a payroll processing company in Uganda is being freed from shouldering the responsibility of managing compliance in-house, allowing you to instead focus on building teams and running payroll.

Payroll Management in Uganda

Payroll management is the maintenance and recording of financial documents and other supporting paperwork. Skuad’s services include payroll management in Uganda.

Payroll Compliance in Uganda

Uganda’s local labor laws comprehensively cover just about every facet of employment practice in the country. For payroll compliance, you can expect legislation that governs compensation, leaves, and fair treatment to impact how you run your internal processes.

Regardless of where you want to build remote teams, payroll compliance is unavoidable. You can try to build an in-house team to manage compliance and reduce your risk, but doing so for every country in which you build distributed teams will quickly hinder your growth. What you need is a strategic partner that can help you take care of payroll compliance so you can focus on scaling your business.

Payroll Components in Uganda

The components of payroll in Uganda are essentially divided into the base rate of compensation, deductions, and any benefits. Some notable guidelines dedicated by Uganda’s labor laws that apply to those components are outlined below:

Compensation

In Uganda, the minimum wage was recently increased to 130,000 Ugandan Shilling or UGX ($34.76) per month. Of course, beyond simply meeting this minimum, you're expected to offer competitive and attractive rates to secure Uganda’s top talent.

Working hours

In Uganda, regular workweeks are 48 hours that are spread out at eight hours per day.

Overtime laws

Overtime in Uganda is limited to two hours per day or eight hours per week. Employees are paid at 150% of their base rate (200% for work rendered on holidays).

Social security

Contributions to Uganda’s national social security fund are split between employee and employer at a rate of 5% and 10% of the employee’s gross earnings, respectively.

Sick leave

Employees who have been employed for at least two months consecutively are entitled to 30 days of sick leave with full pay and another 30 days with half pay every year.

Parental leave

New mothers in Uganda are entitled to 60 working days of paid maternity leave. Male employees are entitled to four working days of paid paternity leave after childbirth or miscarriage.

Public holidays

These are the mandated public holidays in Uganda:

• January 1: New Year's Day
• January 26: NRM Liberation Day
• February 16: Archbishop Janan Luwum day
• Date variable: Good Friday
• Date variable: Easter Monday
• March 8: Women's Day
• May 1: Labor Day
• June 3: Martyr's Day
• June 9: National Heroes Day
• Eid al-Fitr (End of Ramadan)
• October 9: Independence Day
• Eid al-Adha (Feast of the Sacrifice)
• December 25: Christmas Day
• December 26: Boxing Day

Payroll taxes

Income tax in Uganda is calculated on a progressive scale based on pay rate.

• Annual income below UGX 2,820,000 is exempt
• Annual income from UGX 2,820,001 to 4,020,000 is not taxed, but the tax on the excess is at a rate of 10%
• Annual income from 4,020,001 to 4,920,000 is taxed UGX 120,000 with the tax on the excess at 20%
• Annual income from 4,920,001 to 120,000,000 is taxed UGX 300,000 with the tax on the excess at 30%
• Annual income above 120,000,001 is taxed UGX 34,824,000 with the tax on the excess at 40%

Note that non-residents are taxed at a different standard.

Other laws

Some other specific local labor guidelines that impact payroll are probation and termination. In Uganda, workers typically serve a six-month probation period that may be further extended another six months maximum, depending on the agreement with the employer. Uganda’s Employment Act of 2006 details the following notice periods for termination:

• Employees who worked for more than six months but less than one year are entitled to two weeks’ notice.
• Employees who worked between one year and five years are entitled to one month's notice.
• Employees who worked between five years and ten years are entitled to two months’ notice.
• Employees who worked for ten years or more are entitled to three months’ notice.

There are no notice requirements for employees who have worked for less than six months.

Book a demo with Skuad today to discuss additional details for your payroll processing needs.

Why payroll outsourcing in Uganda is the best choice

African nations have been pushing for improved IT services and infrastructure in recent years to attract the still-growing outsourcing market. Uganda is one of its key players due to its workforce's strong English capabilities matched with its market's low costs of living. Additionally, its local government is stable and supportive of efforts to attract foreign investment. There are also traditionally low attrition rates for in-demand sectors in the country, such as software development.

While engaging with remote workers in Uganda may be an appealing prospect, it’s clear that compliance will be a critical speed bump. It's crucial to find trusted partners that can help you get over that hurdle efficiently.

Offload what would otherwise be investments in in-house compliance teams to Skuad, and you can easily comply with local labor laws in Uganda while funneling precious business resources to other fronts. Skuad is not only a trusted payroll solutions platform, but it's also a remote HR management provider. Under one provider, you can run payroll in Uganda and immediately ramp up hiring.

Find out more about leveraging Skuad expertise for your own business.