Withholding Tax at Source: What Impact on Companies?
In 2019, companies will be responsible for collecting income tax directly from their employees’ salaries. This tax reform creates significant changes for payroll and human resources managers. It could also impact the relationship between the employee and their employer.
Companies: What Impact on Payroll and Human Resources Management?
The consequences of the new withholding tax at source system should be visible for employees as early as January 2019. From that date, they will receive a payslip from which their tax amount will be deducted.
The consequences for HR departments and payroll management are numerous: data exchanges and monthly remittance of withholdings to the tax administration (DGFIP), procedures to guarantee data confidentiality, impacts on payroll mechanisms (advance payments, overpayments, etc.).
A Need for Communication and Anticipation by the Employer
The system is designed so that the employee’s monthly salary is not reduced, net of the tax deduction. However, in the event of incorrect personal data, the tax administration will apply a “non-personalized rate.” Calculated on the basis of a single person without children, this rate could have significant consequences on take-home pay.
In case of problems, employers could find themselves challenged by employees, but also by the tax administration (DGFIP), even though they are merely applying a withholding rate transmitted by the latter.
To avoid potential tensions, it is essential that the employer anticipates the reform as early as possible. They will need to inform employees, reassure them about the confidentiality of withholding at source, and remind them that the tax administration remains their primary point of contact.
Through effective communication, payroll managers can spend less time answering employee questions and thus avoid an increased workload. To be able to effectively respond to employee inquiries, human resources management and payroll teams will also need to be adequately trained.
Find our HR Consultants at our offices in Aix-en-Provence – Amiens – Bobigny – Bordeaux – Cergy – Créteil – Evry – Grenoble – Lille – Lyon – Marseille – Melun – Montpellier – Nanterre – Nantes – Nice – Orléans – Paris – Rennes – Rouen – Saint-Denis de la Réunion – Strasbourg – Toulon – Toulouse – Versailles.
Discover our other HR services and our locations.
