Listen! Here's How To Determine Employee Salaries For Small Businesses Based On Turnover

Illustration of calculating employee salaries (Katya_Ershova/Pixabay)

YOGYAKARTA – Micro, Small, and Medium Enterprises (MSMEs) must learn how to determine employee salaries for small businesses. As a business owner, you can't just hand them a wad of cash. This is because employee salaries are included in labor costs or HR costs, the percentage of which comes from turnover.

How to Determine Employee Salaries for Small Businesses Based on Turnover

Just so you know, employee salaries are included in operating expenses or labor costs. What is meant by labor expense is the percentage obtained from the turnover or gross income of your business during the month.

In large companies, operating expenses are not only about calculating employee salaries, but also include the cost of employee retention programs and recruitment.

Whereas in MSMEs, operating expenses usually consist of the amount of employee salaries. So, how do you determine employee salaries for small businesses based on turnover?

According to experts, the labor burden that must be spent on your business is 15 to 20 percent of gross income.

For example, your business turnover is IDR 90 million per month. If you use a percentage of 20 percent, then the operating expenses you have to spend are IDR 18 million per month.

You can allocate operating expenses of IDR 18 million to pay employee wages.

The amount of wages given must be in accordance with the rules stated in Government Regulation (PP) Number 36 of 2021 concerning wages.

In this regulation, the amount of wages set for small business employees is:

At least 50 percent of the average provincial consumption.

At least 25 percent above the provincial level poverty line.

Average public consumption and poverty line can be known from the data released by the competent authority in the field of statistics.

Illustration of employee salary (photo: Doc. Antara).

For example, you have a small business in Yogyakarta. According to the Central Bureau of Statistics, the average level of public consumption in 2022 is IDR 1,480,374

Then the minimum wage that must be paid is IDR 740,187 per month. This figure is equivalent to 50 percent of the average consumption level of the people of Yogyakarta.

However, if you pay employees with the above nominal, of course, they will not be satisfied. The reason is, salary or wages is the best motivator for employees.

Employee productivity will decrease if the salary you provide does not match the workload. The solution, you can provide a salary according to the provincial minimum wage (UMP).

In Yogyakarta, the 2023 UMP set by the provincial government is IDR 1,981,782.39. You can still reach this salary amount if your operating expenses are IDR 18 million per month.

Is My Employee's Salary Taxable?

Adapting from VOI, Wednesday, January 18, 2023, Based on Law Number 7 of 2021 concerning Tax Harmonization, there are several classifications of people who may be subject to Income Tax (PPh). One of them is the imposition of taxes on those who earn above IDR 4.5 million a month or IDR 54 million a year.

This means that income below this value is free from tax and is only required to report on the SPT.

Meanwhile for single people or those who do not have dependents who earn IDR 5 million per month, a tax of 0.5 percent is imposed.

This is information on how to determine employee salaries for small businesses. May be useful!