What is a Contract for the IT Employees Registration in HTP Companies and “Salary” Taxes

Modern companies, especially those working in information technology, increasingly face the need of concluding contracts with IT employees. In the context of rapid technological development and high competition for talented specialists, the proper relationship between the employer and the employee is significant. This is especially true for companies that are residents of the High-Tech Park, where their specific conditions and tax regimes apply. In this article, we will consider a contract with IT employees in the context of the High-Tech Park and also analyze the key aspects related to “salary” taxes.

Why is it Important for IT companies to Understand the Specifics of Concluding Contracts with Employees and “Salary” Taxes

In modern business, especially in the field of information technology, for the successful operation of IT companies, it is important to understand the specifics of concluding contracts with employees and paying taxes related to salaries. Here are some key reasons why it is important to know:

1. Legal Security

Properly drafted employment contracts help avoid future legal disputes. Clear working conditions, responsibilities, and rights of the parties help protect the company and the employees.

2. Tax Optimization

Understanding tax laws and the structure of payroll taxes allows companies to manage financial resources effectively. It may include optimizing tax deductions and freeing additional funds for investing in business and development.

3. Attracting and Retaining Talent

Competition for qualified IT specialists is high. Transparent and attractive terms of employment contracts, as well as knowledge of the possibilities of tax deductions and benefits, can be a decisive factor for candidates when choosing an employer.

4. Compliance with Legislation

Companies must comply with the labour and tax laws of the country in which they operate. Lack of knowledge in this area can lead to fines, sanctions, and reputational losses.

5. Flexibility in HR Management

Contracts can be tailored to specific projects, timeframes, and individual employee needs. The ability to sign contracts for different terms (maximum five years, minimum one year) and extend contracts helps IT companies choose the most appropriate option for a particular situation.

6. Criminal and tax risks

Ignorance of laws and practices can lead to unforeseen consequences, including criminal cases for tax violations. Companies must be aware of all potential risks and take measures to minimize them.

7. Strategic Planning

Understanding the procedure for registering employees and taxation of salaries allows IT companies to more accurately forecast their financial expenses and better plan production and hiring, which is vital for sustainable development.

Thus, knowledge of the specifics of concluding contracts with IT employees and understanding “salary” taxes is crucial for stabilizing the business, achieving competitive advantages, and building long-term relationships with employees.

Concluding contracts with employees in Belarus

What Employment Agreements are Called Contracts

A contract is one form of fixed-term employment agreement. It can be drawn up with employees engaged in temporary activities and those who perform permanent work. This difference distinguishes the contract from fixed-term employment agreements, which, as a rule, are not concluded to close permanent positions.

A contract is a paper document signed by the employee and the employer. One copy remains with the employee, and the second is with the employer. Contracts are concluded with employees, even with those hired for remote work, always in the personal presence of the employees. Each contract page is numbered and signed by the employee and the employer’s representative.

Contract Form

The government recommends a sample form when concluding contracts with employees for companies (https://etalonline.by/document/?regnum=C29901180). This form can be supplemented with conditions that do not worsen the employee’s position compared to the minimum guarantees provided by the state for employees. If additional contract terms worsen the employee’s position (for example, provide for fines), such terms are considered invalid, but the contract itself will remain valid.

Who Contracts are Concluded with, Contract term

Contracts can be concluded with Belarusian and foreign employees, as well as with temporary and permanent employees. The minimum term is one year, and the maximum is five years. The contract can be extended for any period within this five-year period.

Although there are no clear categories of contracts, they can be classified according to their duration: short-term contracts, which are valid for up to a year, and long-term contracts, which are concluded for a period of one to five years.

Termination of Contract

The contract terminates on the day indicated as the last in the text. The end date may coincide with a weekend or holiday, but this does not affect the termination of the contract.

When can a Contract be Concluded with an Employee

A contract can be concluded with an employee upon hiring or during work when the employee is hired not under a contract but under an employment contract for a fixed or indefinite period.

Transferring employees to a contract is a change in working conditions, about which employees must be informed in advance. Only with the employee’s consent can employees with whom employment agreements for an indefinite period were concluded upon hiring be transferred to a contract:

Pregnant women.
Women who have children under three years of age (disabled children – under 18 years of age).

What Conditions are Included in the Contract with an IT Employee of the Company – Residents of the High-Tech Park

The following should be highlighted among the mandatory conditions of the contract:

1. Information about the employee and the company in which he works under the contract.
2. Indication of the specific place of work and the corresponding department.
3. Job title.
4. Basic rights and obligations of the parties entering into the contract.
5. Contract term.
6. Peculiarities of the employee’s working hours and rest if they differ from the generally accepted standards in the company.
7. Salary amount and payment frequency, indicating specific days of the month – at least twice a month.
8. Providing up to 5 days of additional paid leave and increasing the tariff rate (salary) by no more than 50% (this can be either 1% or less). The state requires these measures from employers as an incentive for employees to have a contract with them.
9. Reduction or deprivation of bonuses for failure to perform work duties without good reason, in addition to disciplinary sanctions.
10. Reduction of the employee’s labour leave for the year by the number of days of absenteeism or deliberate failure to perform duties over three hours a day without good reason. In this case, the minimum leave must be at least 24 calendar days.
11. The employee and employer are obliged to notify each other in writing of their intention to continue or terminate the employment relationship by one month before the end of the contract.

The contract may include additional provisions in addition to mandatory conditions, such as increased guarantees for the employee or a preliminary trial period condition. However, conditions that worsen the employee’s position compared to the established labour standards in Belarus are prohibited.

What Conditions Can a High-Tech Park Resident Include in a Contract with an IT Employee

When an employee is hired for remote (distant) work, the contract must specify that the employee is hired specifically for remote work, as well as the following conditions:

1. The employee performs work using equipment, software, hardware, and other means that belong to the employer or that the employer has recommended using.
2. In what order the employer transfers property to the employee to perform the work (if property that belongs to the employer is used).
3. In what order the employer compensates the employee for using his property to perform the work (if the employee’s property is used) and pay other compensation related to remote work.
4. In what order, within what time frame, and in what way the remote employee submits reports to the employer.
5. On the remote employee’s independent determination of the work and rest schedule.
6. On the procedure for granting vacations.

Additional Conditions

Additionally, HTP resident companies may include the following provisions in their contracts with employees:

Wage indexation.
Employee development plan (career plan).
Possibility of relocation.
Bonuses and social guarantees.
The amount of compensation for signing a non-competition agreement (NCA), which the employer pays for the duration of the employment contract. In any case, when concluding an NCA, the employer pays at least 1/3 of the average monthly salary for each month of compliance with the NCA conditions for at least one year after the end of the employment contract.
Obligation to sign the IT company’s Regulation on commercial secrets.
Obligation to conclude a non-disclosure agreement (NDA) and the procedure for paying the employee for signing a non-disclosure agreement.

Other conditions may also be established that do not worsen the employee’s position compared to state requirements.

What Taxes are Considered “Salary”

There is no official definition of “salary taxes”. We include in such taxes those that the employer calculates and pays on payments to employees with whom contracts have been concluded. An employer – a resident of the High-Tech Park who concludes contracts with employees, is obliged to pay:

1. 13% income tax on wages and income of employees. A reduced tax rate of 9% is established for residents of the High-Tech Park of Belarus. However, for 2023 and 2024, a general rate of 13% is applied.
2. Mandatory pension insurance contributions total 28% of the wage fund.
3. Social insurance contributions amount to 6% of the wage fund.
4. 1% of employees’ salaries as a social insurance contribution.
5. Contributions to the insurance organization Belgosstrakh for compulsory insurance against industrial accidents and occupational diseases amount to 0.6% quarterly from all payments made by the company to employees during the quarter.

How do “Salary” Taxes Affect the Amount of Salary

The salary, the amount specified in the contract, should not be affected by taxes paid by the employer.

However, the contract may specify an amount excluding taxes. In this case, the employee’s salary “take-home pay” will be less than that specified in the contract. Income tax (13%) and 1% social security contributions affect this amount. The employer pays other taxes and contributions from the general salary fund of the entire company, and they do not affect the salary amount specified in the contract.