Payroll & HR Insights From a Global Payroll Outsourcing Provider
This guide is a must read before you either outsource your Jordan payroll or build a local HR and Payroll function. As a Global Payroll provider, Mercans can guarantee your full compliance with all the applicable regulations.
Registrations and Establishing an Entity
Companies in Jordan must register for taxes (including corporate tax, income tax, and VAT) by completing the application form and submitting it to the relevant one-stop-shop counter of the Companies Registry. The company obtains a unique Tax Identification Number (TIN).
There are two types of operating companies in Jordan
- A limited period whereupon such companies are awarded tenders and carries out their business in Jordan for a period limited to the duration of a contract. The registration of such companies shall cease upon completion of their business in Jordan.
- Companies operating permanently in Jordan under a license granted by the authorities.
Registering a company is mandatory for operating the business in Jordan and the documentation requirement for the registration are as follows-
- A copy of the Articles and Memorandum of Association of the company.
- The official documents certifying that the company has obtained the approval of the competent Jordanian authorities to perform its business.
- A list of the names of members of the Board of Directors of the company, the management committee or the shareholders and their respective nationalities, in addition to the names of the authorized signatories of the company.
- A copy of the power of attorney by virtue of which a foreign company authorized a person resident in Jordan to carry out its activities and receive service letters/notifications on its behalf.
- The financial statement for the last fiscal year of the company (head office) certified by a licensed auditor.
- Any other data or information that the controller of Companies deems necessary.
- The application form for registration must be signed by the person authorized to register the company before the controller of companies, or any person authorized in writing, or public notary.
- All documents should be legalized by the Jordanian Embassy/consulate, the ministry of foreign affairs in the company’s country of origin, and the Jordanian ministry of foreign affairs. All documents should also be translated into Arabic and legalized by a public notary in Jordan.
It is mandatory to have an in-country account in Jordan to process payroll.
Banks are open from 08:30 to 13:00, and some have recently introduced afternoon hours from 16:00 to 18:00.
Friday is the weekly holiday when government offices, banks and most offices are closed. Most businesses and banks have a half-day on Thursday, and some businesses and banks take Sunday as a half-day or a complete holiday.
Government departments are open from 08:00 to 14:00 daily except Friday.
The maximum working hours are forty-eight during a six-day week. The seventh day is a paid weekly holiday. Additional hours will be considered as overtime and qualify for compensation of 25% over the regular wage. Except in the event of an emergency, an increase in daily work hours is subject to approval by the Minister of Labour.
Basic Facts about Jordan
Full Name: Hashemite Kingdom
Major Languages: Arabic
Currency: Jordanian dinar (JOD)
Main Industries: Clothing, Phosphate Mining, Fertilizers, Pharmaceuticals, Petroleum Refining,
Cement, Potash, Inorganic Chemicals, Light Manufacturing, Tourism
GDP Growth: 3.0%
Internet Domain: .jo
International Dialling Code: +962
How to say: –
Hello As-Salām ‘Alaykum
Good Morning Sabā-hul Kh-Ayr
Good Evening Masā’ Al-Khayr
Do You Speak English? Hal Tatakallam Inglizi
Good Bye Bāy Bāy / Ma`A As-Salāma
Thank You Shukran Jazīlan (Shukran)
See You Soon! Bshoufak Areebaan
Dates & Numbers
Dates are usually written in the day, month and year sequence. For example, 1 July 2015 or 1/7/15.
Tax & Social Security
In Jordan the non-residents are taxed on their Jordan-sourced income. However, married couples are generally taxed separately but they may elect for joint taxation.
Taxable profits include:
- Interests, Discounts, Exchange Gains and Commissions,
- Any Obligation or Annuity,
- Income or rent and other profits from movable and immovable property
- Capital gains from the disposal of immovable property during the course of a business and from the disposal of property acquired on or after 01 November 1989.
A new Tax Law was issued on 1st January 2015 which states that Deductions and allowances are determined at JOD 12,000 for a single person and JOD 24,000 for a family. An additional annual exemption of JOD 4,000 is available to cover medical treatment, housing loan interest, rent, education expenses and technical, engineering and legal services.
The exemption is granted on a case-by-case basis after the Income Tax Department has reviewed the related supporting documents.
After excluding the applicable exemptions from the taxable income, the following tax rates are applied to the annual taxable income:
- 7% – JOD 0 – 10,000
- 14% – JOD 10,001 – 20,000
- 20% > JOD 20,000
As for the income corporate tax, the amount is as follows:
- 30% on Banks and Financial Companies.
- 24% on Communication Companies, Mediation and Financial Exchange.
- 14% on Rest Types of Companies Including Industrial and Commercial.
Income Tax Table
For payments made by Resident Taxpayers to Non-Residents for taxable activities in Jordan, taxpayers must withhold 10% of gross payments and remit this withholding tax to the tax authorities within 30 days after the due date or payment date, whichever is earlier. This tax is final.
Employers with more than five employees are required to register and contribute to the Social Security Corporation. All employees who work for the registered employer have to register with the Social Security Corporation.
Non-Jordanians are subject to the social security deductions if they are residing in Jordan and work for an entity subject to the provisions of the Social Security Law.
According to Law No (1) of 2014, social security rates will be increased in 2015, 2016, and 2017. The increase will be 0.25% on employee share and 0.50% on employer share yearly. This will be fixed after 2017 when employee share will be 7.5% and employer share will be 14.25%.
Social Security has two CAPS either 5000 JOD or 3084 JOD depends on the employee enrolment date to social security, and the cut-off date is 15-Oct-2009.
- CAP is 5000 before cut-off date (15-Oct-2009).
- CAP is 3084 after cut-off date (15-Oct-2009).
The tax year is the calendar year. Tax returns must be filed in Arabic using a prescribed form within four months after the end of each fiscal year.
The total amount of tax due must be paid at that time, otherwise a fine of 500 JOD will be incurred for delays in the submission of the needed documents.
When a new employee is hired, the employer should submit the ‘Form of insured’s contribution in the Social Security (Form No.1)’ to the Social Security Corporation (SSC) within a maximum of 15 days from the employment start date.
The documents required to register the new starts are as follows-
- Passport (Expatriates)
- Residency card (Jordanians)
All leavers must be reported to the Social Security Corporation (SSC) within maximum of 15 days from their last working day.
The employer must report to the SSC the ‘Leavers Contributions Form – From 3 Appendix’ that includes all leavers’ details.
There are no procedures regarding the provision of online payslips.
Every employer who pays salaries, wages, allowances or bonuses to employees must deduct from such payments the tax due and forward it to the Tax Authorities on a monthly basis.
Holiday Accrual / Calculations
Each employee shall be entitled to annual leave with full pay for 14 days per year of service unless more than that period was agreed upon, provided that the annual leave shall be 21 days if the employee remains in the service of the employer 5 successive years. The public holidays, religious feasts and the weekly holidays shall not be calculated from the annual leave unless they took place during it.
Working Mothers in Jordan are provided with additional legal protection. The labor law in Jordan disallows employers from terminating their jobs or giving them notice about termination if they are past their sixth month of pregnancy or on maternity leave. It also gives mothers 10 weeks (70 day) of paid maternity leave, as well as an hour a day for breast-feeding during the first year after delivery and a year’s unpaid leave to care for their new-born. Any extra days taken by the employee shall be unpaid.
New Fathers in the private sector are obliged to use another type of leave, such as annual leave or unpaid leave in order to support their wives and welcome their new child.
In the public sector paternity leave has been legally recognised and enforced. Fathers currently receive paternity leave of three consecutive working days during the first month of the child’s birth.
Arguably, paid paternity leave should be in force by law for the private sector too and additional periods of unpaid leave should be granted to new fathers, especially where the mother may have encountered difficulties with her pregnancy or the delivery of the child or where the new-born suffers any complications.
The first 14 days are of Sick Leave are fully paid. The following 14 days are half paid if the employee is not hospitalized but has a supported document from authorized doctor and fully paid if the employee is hospitalized.
Jordanian Labour law regulates the relationship between the employer and the employee, which means that any contract or any term in any contract between both parties that contradicts the labour law is considered invalid.
Visas & Work Permits
All the non-Jordan nationalities must apply for a working permit if they want to work in Jordan; Work permits are issued with the approval of the Ministry of Interior.
An applicant may not begin working in Jordan before obtaining a work permit. Work permits may not be transferred from one employer to another; therefore, if an employee changes employers, the previous work permit is cancelled, and the worker must apply for a new permit.
A work permit is valid for one year and may be renewed each year. The following are the fees for renewal: –
- JD 180 for Arab workers in fields other than agriculture or nursing
- JD 60 for Arab workers in agriculture or nursing
- JD 300 for foreign nationals working in fields other than agriculture
- JD 120 for foreign nationals in agriculture
According to Ministry of Labour instructions, an employer must submit a bank letter of guarantee to the order of the Ministry of Labour in the amount of approximately JD 300 to JD 1,000 for each expatriate employee.
Foreign investors may engage in almost any type of economic activity. Jordan does not impose any limits on foreigners’ investments. Except for certain sectors, including construction and trade, in which foreign ownership may not exceed 50%, non-Jordanians may fully own any economic project in Jordan. The following types of businesses may be 100% foreign-owned:
- Health care
In addition, under the Jordanian Labour Law, non-Jordanians are prohibited from having certain jobs, such as medical and engineering professions, administrative and accounting professions, clerical work including typing and secretarial work, warehouse work, haircutting work, teaching profession and mechanical and car repair profession.