Wage sector - Labour law issues

Labour law governs the relationship between employer and employee and includes various aspects relating to wages. This article provides you with a comprehensive overview of labour law issues relating to wages and explains your rights and obligations when it comes to payroll accounting.

Labour law issues relating to wages are of great importance to ensure that employees’ rights are protected and that they are paid appropriately. Knowledge of the legal provisions, minimum wage and possible collective agreements is therefore essential. Correct payroll accounting and compliance with continued remuneration are important obligations of the employer. In case of uncertainty, it is advisable to consult an expert in the field to ensure compliance with the employer’s obligations.

Processing employee wages and managing payroll accounts are important accounting tasks. Various legal requirements must be observed, which are laid down in various regulations such as the Wage Tax Implementation Ordinance (LStDV), the Industrial Code (GewO) and the Remuneration Certification Ordinance (EBV).

Payroll is an area of business accounting that is subject to constant change. Therefore, it is of great importance for payroll accountants to have a comprehensive knowledge of payroll tax, employment and social security law and to be regularly informed of current legal developments. ECOVIS KSO Steuerberater & Rechtsanwälte GmbH & Co. KG will be happy to advise you on this matter.

Tax and social security matters are reviewed as part of company audits. Such audits can have a significant impact on the company and its employees. There are different types of tax audits, which cover different areas and are carried out by different institutions. With regard to payroll accounting, there are a total of four different types of tax audits:

1. Business management audit for accident insurance: In this case, the assessment of remuneration subject to accident insurance and the correctness of the annual accident insurance report are audited, with the pension insurance institution acting as the responsible body.
2. Social security audit: This audit checks notifications and the correct calculation of social security contributions, with the pension insurance acting as the responsible body.
3. Special VAT audit: This audit focuses on non-cash benefits and benefits in kind, while the tax office acts as the responsible body.
4. Wage tax audit and external audit: this involves checking the correct withholding and payment of wage tax, with the tax office as the responsible body.

Focus of Operational Audit in Payroll Accounting: Analysis of Tax-Relevant Expenses

As part of the tax audit of payroll accounting, particular attention is paid to the reimbursement of expenses, including:

• Travel expenses
• Expenditure on double household
• Costs of the home office

In addition, the auditors examine various benefits in kind and in cash, such as:

• Gifts to employees
• Corporate events (e.g. Christmas parties)
• Company pension scheme
• Company cars

The accounting of part-time employees, students, trainees and pupils will also be reviewed.

The external audit of wage tax is carried out by the tax office. The focus here is on issues relevant to payroll tax, including the proper withholding and payment of payroll tax, church tax and solidarity surcharge. The company receives at least two weeks’ notice of the external wage tax audit.

Special VAT audit in payroll accounting

The special VAT audit focuses on non-cash benefits and non-cash benefits in payroll accounting. The field service of the tax office checks whether the employer is correctly paying the VAT included for benefits in kind (e.g. company car) or meals.

In summary, it can be said that the tax audit of payroll accounting places a strong focus on analysing tax-relevant expenses. This includes analysing reimbursements to employees such as travel expenses, expenses for double household and costs for the home office. In addition, various non-cash and non-cash benefits such as gifts to employees, company events (e.g. Christmas parties), company pension schemes and company cars are analysed by the auditors. The audit also focusses on the payroll of part-time employees, students, trainees and pupils.

The external audit of payroll tax is carried out by the tax office and relates to matters relevant to payroll tax, including the correct withholding and payment of payroll tax, church tax and solidarity surcharge. The company is informed of the external wage tax audit at least two weeks in advance.

A special VAT audit is also carried out in payroll accounting, focussing on benefits in kind and non-cash benefits. Here, the field service of the tax office checks whether the employer is properly paying the VAT included for benefits in kind (e.g. company car) or meals.