Jamaican Payroll Guide-April 2025 to March 2026

Payroll processing in Jamaica involves calculating payments to employees for their work within a company, based on either time or productivity, as well as calculating benefits and statutory deductions. Each organization must process payroll periodically, which can be done weekly, fortnightly, monthly, or daily (for daily wage workers).

Payroll calculation is often considered a complex process that differs from one company to another. Each organization may have a unique payroll structure, comprising various components specific to that company.
In accordance with labor laws, payroll processing and calculations are regulated by the Government of Jamaica through the Tax Administration Department, using a system known as Pay As You Earn (PAYE). The PAYE system facilitates the payment of income tax and national insurance contributions. To ensure statutory compliance, employers are required to deduct taxes and national insurance contributions from employees’ wages or occupational pensions before disbursing them.

 

Important Payroll definitions

Employee: An Employee is someone over 18 and under the age of retirement who is gainfully occupied in employment and not earning less than the minimum wage.

1. Employed in Jamaica under any contract (whether written or oral) of service or apprenticeship regardless of whether it was expressed or implied.
2. Employed outside of Jamaica under any contract (whether written or oral) of service or apprenticeship regardless of whether it was expressed or implied, by a person/company/business domiciled (based) in Jamaica.
3. Employed as a master or a member (or in another capacity as a part) of the crew of any vessel registered in Jamaica or any other vessel of which the managing owner or manager resides or has his/her principal place of business in Jamaica.
4. Employed as a pilot, commander, navigator, crew member, or any other capacity aboard any aircraft flying the Jamaican flag.
5. Employed (as a citizen of Jamaica) outside of Jamaica by a Jamaican Embassy, Jamaican High Commission, Jamaican Consulate, Jamaican business/company (meaning one that was incorporated in Jamaica) or a resident abroad.
6. Serving as a member of the Jamaica Defense Force.
7. Employed under a contract of service by your spouse.

Gross salary: Gross income is all a person’s receipts and gains from all sources, before any deductions.

Taxable Income: Taxable income is the amount of income used to calculate how much tax an individual or a company owes to the government in a given tax year.

Statutory Income: Statutory Income as defined in the income tax act means, subject to section 6, the aggregate amount of income of any person from all sources remaining after allowing the appropriate deductions and exemptions under the act. This is the employee’s Gross salary minus allowable Deductions such as contributions for NIS, Approved Pension and Employees Share Ownership Plan (ESOP).

Dividends: Dividends paid to a resident of Jamaica by Jamaican resident companies is currently subject to a withholding tax rate of 15%; based on the legislation the withholding tax on dividends is a final tax and therefore tax on dividend cannot be used as a credit against any other income. Dividend income should be deducted before the application of any other rate of tax of zero, 25% or 30%. A final tax is the full amount of tax due and payable on that source of income.

Self-Employed Individuals: These individuals are required to file estimated income tax returns for the year of assessment (2022) and pay their estimated income tax liability in quarterly installments.

Nontaxable Income: The Tax Administration considers almost every type of income taxable, but a small number of income streams are considered nontaxable. For example, if you are the Governor-General of Jamaica or an approved farmer (under Section 36D of the Income Tax Act) or a handicapped/disabled person (as defined by Section12 (y) (i) of the Income Tax Act) -, your income is non-taxable. Additionally, allowances for high court and Supreme Court judges and child support received should be nontaxable.

Ceiling: This is a limit on an amount that can be taxed.

Period Threshold: Amount of Gross income that is tax-free.

Income Tax: An income tax is a tax that the Government of Jamaica imposes on income generated by businesses and individuals. By law, taxpayers must file an income tax return annually to determine their tax obligations. Income taxes are a source of revenue for governments. They are used to fund public services, pay government obligations, and provide goods for citizens. The current Income tax rate in 2022 is 0% for annual taxable earnings up to $1,500,096, 25% for annual taxable earnings up to $6,000,000 and 30% for annual taxable earnings over $6,000,000. Persons who attain age 65 or become pensionable at any time during 2022 will be entitled to the relevant exemptions for the full year.

Net Pay: The portion of money received by an employee after the total amount has been withheld for state tax deduction is fundamentally what ‘’net pay’’ stands for. Therefore, to put it in layman’s terms, the amount of money that comes in an individual’s paycheck is what net pay is.

Employee’s NIS Contribution: (Effective April 1, 2021) This is calculated at 3% of Gross Salary up to a ceiling of $3,000,000 ( per year). The maximum amount an employee pays for NIS is $150,000 yearly or $12,500 monthly.

Employee’s NHT Contribution: NHT is payable by the employee at 2% of taxable emoluments. The contributions together with any accrued bonus or interest are refundable to the contributor on an annual basis after seven years and fully on retirement. Note that the expatriate employee is refunded the full sum when he leaves the island. Self-employed persons pay NHT of 3% on chargeable income.

An employer makes a contribution of 3% of gross emoluments. If you are within a Self-Employed category of 1 – 5 then you will be required to contribute 3% of your income. If, however, you are classified within the categories of 6 –7 you will instead be required to contribute 2% of your income.

Employee’s Education Tax Contribution: Education Tax as the name suggests was implemented with the intention to advance education in Jamaica. The law was established in July 1983 by the Education Tax Act. However, the tax collected under this legislation goes directly into the consolidated fund which is a pool of funds used by the government for public benefit. The education tax is payable on statutory income, that is, gross income less NIS and any payment to an approved pension fund at a rate of 2.25%

Employers Education Tax Contribution: The following employers are exempt from paying the employer’s portion of the Education Tax: A Ministry or Department of Government, Parish Councils, Kingston and St Andrew Corporation, The University of the West Indies, Additionally the following entities located in Jamaica are not to liable pay education tax in respect of Jamaican citizens employed to them: A foreign embassy, High Commission, Consulate or agency of the United Nations, or, International organization entitled to diplomatic privileges under the Diplomatic Immunities.

Employer HEART Contribution: 3% of Gross Salary

Employer NIS Contribution: 3% of Gross Salary

Employer NHT Contribution: 3% of Gross Salary

Employer ED Tax Contribution: 3.5% of Gross Salary

Rules

Preparing for Payroll

Employees must be compensated for the work they perform, and it is the employer’s responsibility to ensure this happens. Employee payroll can be handled in various ways, including manually, using an in-house computerized system, or outsourcing to a payroll service. Each approach involves different tasks. Regardless of the system used, certain general principles apply when calculating payroll.

The calculation of payroll is a highly structured process that must be followed carefully to prevent errors in the net pay issued to employees or the taxes paid to the government. The steps for payroll calculation are as follows:

1. Notify employees: Inform employees, if applicable, to complete their timesheets, and commission reports, and update any changes to their salary deduction records. Overtime, in particular, must be approved, as it is 50% more expensive than regular pay.
2. Enter hours worked: Input this information if the hours worked are collected manually. If the data is already stored in the system, verify its accuracy.
3. Enter wage rate changes: Update the payroll system with all authorized changes, including wage rate adjustments, withholdings, and deductions. Special attention must be given to ensuring that all deductions impacting gross wages for tax purposes are accounted for, as they influence the amount of payroll taxes to be paid.

Payroll Calculation Formula

 Payroll period Codes

Usually the government lists ceilings and tax thresholds as an annual figure. Period codes help to break down those figures to represent the period you are paying an employee for. In other words, you can’t factor the Income-tax threshold of $1,500,096.00 in a bi-weekly payroll unless you divide that figure by 26 fortnights.

• Monthly=12
• Weekly=48
• Fortnightly =26

Payroll Variables

1. PeriodThreshold = $1,500,096.00 / Payroll_Period_Code
2. Maximum NIS: = $150,000 / Payroll_Period_Code
3. Employee NIS Rate = 3% (Effective April 1, 2021)
4. NHTRate = 2%
5. EDTAXRate = 2.25%
6. PAYERate = 25%
7. SixMilPAYERate = 30%

Employee_NIS = If((GrossSalary * NISRate < MaximumNIS) then value =(GrossSalary * NISRate) else value= (MaximumNIS))

Employee_NHT= GrossSalary * NHTRate

Employee_EDU_Tax = (GrossSalary – MaximumNIS) * EDTAXRate

Income Tax Calculation

If (GrossSalary * 12) >= $6,000,000 Then

IncomeTax = (GrossSalary – Employee_NIS – PeriodThreshold) * (SixMilPAYERate)

Else

IncomeTax = If((GrossSalary – Emp – PeriodThreshold) * PAYERate > 0, (GrossSalary – NISAmount – PeriodThreshold) * PAYERate, 0)

End If

Net Salary Calculation

Net_Salary= Gross_Salary – (Employee_NHT+Employee_EDU_Tax+IncomeTax+Other deductions)

Post Payroll

Review. Print a preliminary payroll register and examine the gross pay, deductions, and net pay for each employee, to ensure that it is correct. If it is not correct, revise the prior entries and run another preliminary payroll register.

Pay employees. Cut paychecks and remittance advice. Also, print a final payroll register and archive it. Have an authorized person sign the checks. Alternatively, issue electronic payments to employees.

Remit taxes online using this: S01 Excel template .

Distribute pay. If checks were cut, retain them in the company safe and distribute them on payday. Extra control is to require proof of identification before handing a check to an employee.