Entering 2026, the legal environment regarding labor and wages in Vietnam is shifting from an inspection mechanism to a proactive monitoring mechanism. While previously businesses mainly faced periodic inspections, now income, tax, and insurance data are interconnected and automatically cross-referenced.
This shift has exposed the risks of traditional salary structure designs. Salary models based on allowances, subsidies, or income splitting to optimize short-term costs are no longer suitable as management systems become increasingly transparent. During the review of their salary systems, many businesses have found that income components previously designed to optimize costs now become risk factors when data is automatically cross-referenced.
From a practical implementation perspective, the changes in 2026 are not just legal adjustments but are directly impacting businesses' human resource cost management strategies.
I. Direct pressure from the new social insurance contribution mechanism on the enterprise payroll fund.
The new regulations continue to emphasize the principle that wages used as the basis for social insurance contributions must reflect the actual income of employees. This puts businesses that maintain a low base salary structure but where allowances and benefits account for a large proportion of their income at risk.
- The definition of wages used as the basis for mandatory social insurance contributions has become stricter: All allowances and other supplementary payments that are regular payments and directly related to the job position are subject to insurance contributions.
- Hidden costs are increasing: Adjusting the regional minimum wage leads to an increase in the minimum social insurance contribution rate, causing the actual total personnel costs to balloon even if the nominal salary remains unchanged.
- Risk of cumulative recovery: The automated reconciliation mechanism makes it easier for authorities to detect discrepancies between personal income tax returns and insurance data, potentially leading to retroactive collection for previous years along with late payment interest and administrative penalties.
II. Changes in personal income tax that affect net income
Alongside social insurance, adjustments to personal income tax in 2026 will also directly affect salary structure and employee morale:
- The Gross-Net gap has widened: When insurance contributions increase and regulations on personal deductions change, workers will feel that their net income does not increase proportionally to their efforts.
- Pressure to retain talent: Businesses face increased expenses (due to social insurance and taxes) while employees feel their income has decreased, easily leading to negative reactions or a wave of talented personnel leaving for competitors with more transparent salary structures.
III. Overall impact on corporate salary structure
From a practical implementation perspective, these changes create four major challenges for businesses:
- Increase in fixed costs: When the proportion of salary used for social insurance contributions is high, businesses find it difficult to adjust costs flexibly according to revenue fluctuations.
- Lack of growth momentum: The "one-size-fits-all" compensation system prevents top-performing employees from seeing the difference in their compensation, eroding a culture of performance.
- Risks from inconsistent personnel records: Discrepancies between the employment contract, salary regulations, and actual payroll are the clearest evidence that puts businesses at a disadvantage when inspections or labor disputes arise.
- The inefficiencies of the traditional model: The high fixed salary model is no longer flexible enough to optimize efficiency in the new context.
In that context, many businesses began to shift their focus. 3P salary structure as a solution that ensures legal compliance while maintaining flexibility in cost management.
IV. The 3P Compensation System: A Strategic Solution Balancing Compliance and Optimization
Under pressure to comply with legal regulations by 2026, the transition to a salary model is underway. 3P (Position – Person – Performance) It has become the optimal solution to help businesses standardize data and manage risks effectively.
- P1 (Position): Establish accurate contractual salaries based on job value, ensuring compliance with regional minimum wage levels and salary scales.
- P2 (Person – Competency): Establishing a salary growth roadmap based on employee skill development helps to transparently explain salary differences among employees.
- P3 (Performance): Establishing a clearly defined system of bonuses or variable income not only makes the payroll more flexible but also clearly distinguishes between salary subject to insurance contributions and performance-based bonuses.
The legal regulations of 2026 no longer leave much room for short-term, unsustainable cost-saving solutions. Businesses need to proactively review and restructure their payroll systems to ensure legal compliance and optimize the efficient use of human resources.
Is your business ready for the changes in Social Insurance and Tax regulations in 2026?
Many businesses are struggling not because of a lack of compensation models, but because their income structures haven't been designed to meet new compliance requirements. Connect with Expertis To conduct an assessment of the salary system structure and legal compliance, and subsequently develop a roadmap for adjustments that align with the company's operational realities.