The amount of tax which an employer charges and withholds from staff salary and pays to the government later is known as payroll tax. The amount of payroll tax is calculated on employee's salary, wages, remuneration (if any), or any other perks. This tax is charged without considering the employee's family status, domicile, or any personal circumstances. All in all, employer has to withhold and pay the payroll taxes on behalf of their staff.

Types of Payroll Tax

There are basically two categories of payroll tax –

* Deduction from staff salary – In this category, employer is entitled to withhold the payroll tax from the staff wages or salary. Also called as withholding tax, the payroll tax covers advance payment of disability and unemployment insurance or income tax.

* Taxes paid by Employer from Employee's Funds – In this category, the employee pays the tax off his own funds. It is based on hiring an employee and it consists of fixed charges or is linked to the salary of an employee. These charges cover the contribution of employer for insurance plans or social security.

Why Payroll Tax?

Here are some of the goals behind introducing the Payroll Tax scheme –

* To sustain the growth of business sector

* To prepare businesses when they are flourishing

* To promote the provision of rebate paid by the employer for their staff

* To help businesses planning to move from one place to another

* To help businesses planning to expand payroll and the ones looking to seek liability of payroll tax payment