How is the 'Small income allowance' (Reparatietoeslag) calculated in an Aruban payroll?
When is an employee entitled to the Small income allowance (RT)?
If you are an employee working in the private sector, you can apply for the Small income allowance at your employer. To do so, you must comply with all legal requirements. These terms are:
1. You are registered in the population register of Aruba;
2. You are not receiving AOV or AWW benefit from SVb Aruba. (AWW = General Widow and Orphan Insurance and AOV = General Old Age Insurance);
3. Your spouse does not receive a AOV benefit from the SVb Aruba. If you or your spouse/wife receives a benefit from SVb Aruba, you or your spouse/wife will receive the Small income allowance from the SVb Aruba;
4. You do not receive a Small income allowance from another employer;
5. Your total wage per month for a normal working period is at least. Afl. 1,636,69 and maximum Afl. 2,500.00;
6. Your working time is on average 20 hours or more per week;
7. You complete this statement (attachment) clearly, correctly and completely. If you complete this statement incorrectly, you may be fined and
8. You sign and deliver this statement at the right time to your employer. See explanation below for part 2. If you have multiple employers, you will provide this declaration to the employer from whom you receive the highest salary.
If you meet all of the above conditions, you are entitled to the Small income allowance. The amount of this allowance depends on your salary per month. Your employer will pay the repayment allowance to you per month. The repayment allowance is exempt from wage tax and income tax.
In Celery the Small income allowance is applied automatically. In case when employees are not entitled to the RT you have to switch off the RT manually (in Employees/'choose employee'/Taxes/Small income allowance).
'Regular working hours' is defined in the Landsverordening Reparatietoeslag (attached) as: a working period of an average of 40 hours per week. In cases where employees work an average of more than 20 hours but less than 40 hours a week, the salary will be converted to a 'regular working time' of 40 hours per week to be able to apply this wage in the RT table (attached). That is 173.33 hours per month (40*52/12).
'Wage' in this case means the term wage referred to in Article 6 of the Landsverordening Loonbelasting (attached). This means not only the fixed gross salary, but also payroll components such as overtime wages, taxed allowances, taxed fringe benefits etc. should be included in the calculation.
How is the RT amount calculated?
For employees eligible for Small income allowance and the calculation of the RT, employees should be divided into 3 groups, namely:
1) employees who work on average for less than 20 hours a week;
2) Employees working on average over 20 but less than 40 hours a week and
3) Employees working an average of 40 or more hours a week.
Ad 1) These employees are not entitled to RT.
For example this can be employees that work and are being paid per hour, or an employee that is working for a fixed 15 hours per week.
Ad 2) These employees are entitled to RT.
However, the 'wages' of these employees will have to be converted to a 'normal working time', which is set at 40 hours a week.
Employee earns gross Afl. 1,650 per month based on an employment of 130 hour per month plus a gross Afl. 150 for 10 overtime hours (total 140 hours per month). In addition, the employee earns Afl. 200 as a taxed allowance.
The total number of hours is less than 173.33 so it will have to be converted.
Total wage is Afl. 2,000 (1,650+150+200) as of 140 hours per month = salary 14,2857 per hour => converted to a 'regular working time' * 173.33 hours per month = converted 'regular' salary of Afl. 2,476.14 per month.
In this case, therefore, Afl. 70 RT should be applied (range 2450-2500).
Ad 3) These employees are entitled to RT.
However, converting is only mandatory if an average of less than 40 hours per week is worked. The RT should be determined in this type of cases (average 40 or more hours per week) based on the real wage.
For example, this could be employees with a 6-day working week of 7.5 hours a day (195 hours per month), or an employee who works 40 hours a week plus overtime.
Employee earns gross Afl. 1,800 per month based on employment of 173.33 hours per month. In addition, employee earns Afl. 200 as a taxed allowance.
The total number of hours is 173.33, so converting is not necessary.
Total wage is Afl. 2,000 (1,800+200).
In this case, therefore, Afl. 95 RT should be applied (range 1950-2050).
Employee earns gross Afl. 1,800 per month based on an employment of 195 hours per month plus a gross Afl. 150 for 10 overtime hours (total 205 hours per month). In addition, employee earns Afl. 200 as a taxed allowance.
The total number of hours is on average over 40 hours a week, so RT should be determined based on the actual wage.
Total wage is Afl. 2,150 (1800+150+200).
In this case, therefore, Afl. 85 RT should be applied (range 2150-2250).