Hiring your first employee in Georgia looks simple from a distance: one flat income tax rate, no brackets, no complicated withholding tables. What the headline rate does not tell you is that every hire also pulls in a three-way pension contribution most new employers have never heard of, a contract with its own mandatory content, and a monthly filing obligation that starts the moment you make the first payment - not the moment you get around to registering for it. Here is what running payroll in Georgia actually involves.
The moving parts, in one place
Before the detail, the shape of the whole system:
| Element | Rate or rule |
|---|---|
| Personal income tax | Flat 20% of taxable salary, withheld by the employer |
| Employee pension contribution | 2% of gross salary |
| Employer pension contribution | 2% of gross salary, on top of gross pay |
| State pension top-up | 2% up to GEL 24,000 of annual salary, 1% on the next GEL 36,000, nothing above GEL 60,000 |
| Filing deadline | The 15th of the month following payment, via rs.ge |
| Standard working week | 40 hours |
| Statutory paid annual leave | 24 calendar days |
Each of these is straightforward on its own. Where employers actually lose time and money is in how they interact, which is what the rest of this guide works through.
Employment taxes: the 20% personal income tax
Georgia charges a flat 20% personal income tax on employment income, with no brackets and no progressive rates above it. The employer withholds it at source and remits it to the Revenue Service - the employee never sees the gross figure land in their account and then has to pay tax on it separately.
The order of the calculation matters and it is where a lot of first-time employers get the arithmetic wrong. The 20% is applied to the salary after the employee's own pension contribution is deducted, not to the full gross figure. On a 3,000 GEL monthly salary, that looks like this:
| Step | Amount |
|---|---|
| Gross monthly salary | 3,000 GEL |
| Employee pension contribution (2%) | 60 GEL |
| Taxable base (gross minus employee pension) | 2,940 GEL |
| Personal income tax (20% of taxable base) | 588 GEL |
| Net pay to the employee | 2,352 GEL |
| Employer pension contribution (2%, additional cost) | 60 GEL |
| Total cost to the employer | 3,060 GEL |
There are no personal allowances, no dependent deductions and no lower band for small salaries. The 20% is the rate at every income level, which makes the arithmetic easy once you know the order it runs in, and wrong every time you assume it applies to the full gross amount.
Pension contributions: the 2+2+2 scheme
Georgia runs a mandatory funded pension scheme, and the "2+2+2" shorthand people use for it is close to accurate but not quite complete. The Pension Agency began collecting contributions on 1 January 2019 under the Law of Georgia on Funded Pension, and the structure has three separate contributors:
- The employee pays 2% of gross salary, withheld by the employer.
- The employer pays a further 2% of gross salary, as its own additional cost rather than a deduction from pay.
- The state adds up to 2% on top, funded from the budget rather than from either party's pocket.
The state's share is not a flat 2% regardless of salary. It applies 2% on the first GEL 24,000 of annual salary, drops to 1% on the portion between GEL 24,000 and GEL 60,000, and contributes nothing above GEL 60,000 a year. A junior hire on a modest salary gets the full 2% state top-up on all of it; a senior hire earning well above 60,000 GEL a year gets none on the excess.
The effect is easiest to see at a higher salary. An employee on 8,000 GEL a month earns 96,000 GEL a year, well past every threshold:
| Slice of annual salary | State contribution rate | State contribution on that slice |
|---|---|---|
| First GEL 24,000 | 2% | GEL 480 |
| Next GEL 36,000 (to GEL 60,000) | 1% | GEL 360 |
| Remaining GEL 36,000 | 0% | GEL 0 |
| Total state top-up for the year | GEL 840 |
The employee and employer contributions do not taper the same way - both keep paying 2% of gross salary on every lari, with no ceiling. Only the state's share is capped.
Participation is mandatory for Georgian citizens and for foreign citizens or stateless persons who hold a permanent Georgian residence permit. It is voluntary for anyone who had already reached 60 (men) or 55 (women) when the law took effect, and for self-employed people generally.
The law's mandatory scope is narrower than most employers assume. It covers Georgian citizens and foreigners with a permanent residence permit - not a temporary one, and not simply working here on a visa-free stay. A foreign employee without permanent residency sits outside the mandatory scheme entirely: no employee contribution withheld, no employer contribution owed, and no state top-up earned. If most of your hires are foreign nationals without permanent status, your actual pension exposure is smaller than the "2+2+2" framing suggests, and it is worth confirming case by case rather than assuming everyone is enrolled.
Contributions are collected through the same monthly rs.ge process used for income tax withholding and are then passed to the Pension Agency, so there is no separate pension filing to remember on top of the ordinary payroll declaration.
Can you contribute to the scheme yourself as an Individual Entrepreneur?
Yes, voluntarily. Self-employed people, including IE owners, are not swept into the mandatory scheme the way employees are, but the law explicitly allows them to opt in. If you run your own business and have no employer withholding a contribution on your behalf, joining is a choice you make deliberately rather than something that happens automatically the way it does for staff on your payroll.
Registering to hire your first employee
There is no separate "employer registration" the way there is in some countries. If your Individual Entrepreneur or LLC already exists, it already has an rs.ge profile from incorporation, and that profile is what you use to declare payroll. What changes when you hire is not your registration status - it is what you are now obliged to file every month.
Two structural points are worth knowing before you sign anyone. First, an IE holding Small Business Status can have employees; Micro Business status cannot, and adding staff while on Micro status forces a move to Small Business status or the standard 20% regime. Second, hiring does not change your own 1% tax on turnover if you are on Small Business Status - it adds a separate, parallel set of obligations on top for the salaries you pay out, which is genuinely easy to conflate with your own tax bill in the first few months.
In practice, the sequence looks like this: confirm the business is registered and your rs.ge login works, agree terms with the employee and put them in writing, add the employee's details to your payroll records before the first payment goes out, and file the first withholding declaration the following month covering that payment. Nothing in that sequence requires a visit to a government office - it is entirely a matter of what you file and when.
Employment contracts in Georgia
The Labour Code of Georgia allows employment relationships to be established orally or in writing, with one firm exception: any contract that includes a probationary period must be in writing, and the probation itself cannot exceed six months.
Where a contract is written - which is what we recommend regardless of the legal minimum, because an oral agreement is a bad foundation for a dispute - it needs to cover at least:
- The start date, and the end date if the contract is fixed-term
- Working hours and rest periods
- The workplace location
- Position and the type of work
- Remuneration and how it is paid
It also has to be in a language both parties actually understand, which matters more than it sounds for a Georgian company hiring an English-speaking remote employee. Any later change to the terms has to be agreed and recorded in writing, not adjusted by a verbal understanding that drifts over time.
The standard working week is 40 hours, typically across a five-day schedule, with overtime paid at an increased rate. Statutory paid annual leave is 24 calendar days, plus a further 15 calendar days of unpaid leave available on request.
Ending an employment relationship
Terminating a contract on the grounds the Labour Code recognises - redundancy, incompatible qualifications, long-term incapacity, or other listed objective circumstances - carries one of two notice-and-severance combinations, and the employer chooses which: 30 calendar days' notice with severance of at least one month's pay, or as little as 3 calendar days' notice paired with at least two months' severance. An employee can ask for the reasons in writing within 30 days of being told, and the employer has seven days to answer that request. There is no version of this where notice and severance are both skipped.
Hiring employees: the practical steps
Once the contract terms are agreed, the sequence is straightforward: sign the written agreement, register the employee in your rs.ge account before or alongside the first payment, and start withholding from that first payslip onward. There is no separate government approval step between agreeing terms and starting work.
The part that catches people out is not the paperwork but the classification. Paying someone as a contractor when the underlying relationship looks like employment - fixed hours, your equipment, ongoing supervision - is a well-understood pattern the Revenue Service and the banks both recognise, regardless of what the invoice calls it. If you are choosing between hiring someone directly and paying them as an independent Georgian IE, contractors versus employees in Georgia covers where that line actually sits.
The payroll cycle: what happens every month
The monthly rhythm is the same one every registered business in Georgia already runs on, just with an extra layer:
- Calculate gross pay, the employee's pension contribution and the personal income tax due for each employee.
- File the withholding declaration through rs.ge, covering the previous month's salaries.
- Pay the withheld tax and both pension contributions to the Revenue Service by the 15th.
- The Revenue Service forwards the pension portion to the Pension Agency on the employer's behalf.
Miss the 15th and the same automatic penalty and interest regime applies as for any other declaration filed late. There is no grace period tied to payroll specifically, and the deadline does not move for a business with a single employee versus fifty.
Keep the underlying records even though most of the filing itself happens on a portal. Signed contracts, monthly payslips showing the gross-to-net breakdown, and a running log of who was paid what and when are what you or your accountant reach for the moment the Revenue Service asks a question about a specific month, and reconstructing them after the fact is far more expensive than keeping them as you go.
We calculate the withholding, file the declaration, and keep the pension contributions straight every month, so a missed deadline never becomes your problem. Priced by transaction volume, not by the hour.
See what it costs
What sits on top of the basics
Once you have staff, a few other obligations tend to arrive at the same time. VAT registration becomes mandatory once turnover crosses 100,000 GEL in a rolling 12 months, and payroll transactions push most growing businesses into that band faster than they expect. Annual reporting and the accounting tier your business needs both step up once employees are involved - our Business accounting tier is built specifically for companies with staff, VAT registration, or both, rather than the lighter package that suits a solo Individual Entrepreneur.
If you are running payroll through an LLC rather than an IE, the interaction between your own compensation and your staff's is worth planning deliberately rather than discovering by accident - we cover how owners actually get paid out of a Georgian LLC, as distinct from what employees are paid, in how to pay yourself from a Georgian company.
Key takeaways
- Personal income tax is a flat 20%, calculated on salary after the employee's 2% pension contribution is deducted, not the full gross figure.
- The pension scheme is 2% employee, 2% employer and up to 2% from the state, tapering at GEL 24,000 and ending above GEL 60,000 of annual salary.
- Foreign employees without a permanent Georgian residence permit sit outside the mandatory pension scheme entirely.
- There is no separate employer registration - your existing rs.ge profile is what you use to declare payroll.
- Written contracts are mandatory only with a probationary period, capped at six months, but are worth using regardless.
- The standard week is 40 hours, with 24 days of statutory paid annual leave.
- The payroll declaration and payment are due by the 15th of the following month, with no exceptions for small employers.
Frequently asked questions
What is the income tax rate on salaries in Georgia?
A flat 20%, with no brackets and no lower rate for small salaries. It is withheld by the employer and paid to the Revenue Service, calculated on the employee's salary after their 2% pension contribution has been deducted.
How does the 2+2+2 pension scheme actually work?
The employee contributes 2% of gross salary, the employer adds a further 2% as its own cost, and the state tops up with 2% on the first GEL 24,000 of annual salary, 1% on the next GEL 36,000, and nothing beyond GEL 60,000. All three are collected together through the monthly rs.ge filing.
Do I have to enrol foreign employees in the pension scheme?
Only if they hold a permanent Georgian residence permit. Foreign employees without one sit outside the mandatory scheme, with no employee or employer contribution and no state top-up, and they generally cannot opt in voluntarily either.
Is an employment contract required to be in writing?
Not always. Georgian law allows oral agreements, except where the contract includes a probationary period, which must be written and capped at six months. We recommend a written contract regardless, because it is the only version that holds up if the relationship goes wrong.
Do I need to register separately as an employer?
No. A registered Individual Entrepreneur or LLC already has an rs.ge profile from incorporation, and that same profile is used to file payroll once you hire. What changes is your monthly filing obligation, not your registration status.
Can an Individual Entrepreneur with Small Business Status hire employees?
Yes. Small Business Status allows employees; Micro Business status does not, and taking on staff while on Micro status forces a move to Small Business Status or the standard 20% regime.
When is the payroll declaration due each month?
By the 15th of the month following the salary payment, filed and paid through rs.ge. The same automatic penalty and interest regime applies as for any other late declaration, regardless of how many people you employ.
What is the standard working week and leave entitlement in Georgia?
40 hours a week, typically over five days, with overtime paid at an increased rate. Statutory paid annual leave is 24 calendar days, with a further 15 calendar days of unpaid leave available on request.
Is there a legal minimum wage in Georgia?
Technically yes, at GEL 20 a month, set by presidential decree in 1999 and never updated since. It functions as a formality rather than a real floor - actual wages are set entirely by negotiation between employer and employee.
What happens if I pay someone as a contractor but treat them like an employee?
It is a well-recognised pattern, not a novel loophole, and both the Revenue Service and Georgian banks look for it. Fixed hours, employer-supplied equipment and ongoing supervision point toward employment regardless of what the invoice or contract calls the relationship, with reclassification risk and back taxes the likely consequence.
Does hiring staff change my own Small Business Status tax rate?
No. Your own 1% turnover tax under Small Business Status is unaffected by hiring. Payroll for your employees is a separate, parallel obligation - withholding their income tax and pension contributions - that sits alongside your own filing rather than changing it.