This article provides a complete and detailed guide on how to organize a Payroll Management System (also known as a salary system) in a business.
Understanding Salary Scale Systems
1. What is a salary scale?
A salary scale (or more accurately, a salary scale system) is a system of salary groups, salary grades, and salary levels designed as the basis for paying employees.
Depending on their skills, job position, and the complexity of their work, businesses will pay employees based on an established salary scale.
2. The role of salary scales in businesses
Establishing a salary scale helps businesses ensure fairness in compensation, allowing employees to understand their actual income and setting expectations for advancement to higher-paying positions within the scale.
Salary scales also demonstrate professionalism in a company's labor management system, helping businesses easily plan their payroll budget and manage salary costs extremely effectively.
Establishing a salary scale is the responsibility of the enterprise. When establishing a salary scale, the employer must consult with the collective labor representative organization at the workplace and make it public at the employees' workplace before implementation.
The process of building a salary scale for a business.
1. Principles for constructing salary scales
- Employers must establish wage scales, salary tables, and labor norms as a basis for recruiting and employing workers, agreeing on wages according to the job or position specified in the labor contract, and paying wages to employees.
- Labor standards must be at an average level that ensures the majority of workers can perform the tasks without extending normal working hours, and must be tested before being officially implemented.
- Employers must consult with the employee representative organization at the workplace, if such an organization exists, when developing wage scales, salary tables, and labor norms.
- Salary scales, wage tables, and labor standards must be publicly displayed at the workplace before implementation.
Note:
From January 1st, 2021, businesses are no longer required to register their salary scales with government agencies.
A salary scale serves as the basis for businesses to negotiate salary levels based on the job or position specified in the employment contract with the employee. The minimum wage is the lowest wage paid to an employee performing the simplest tasks under normal working conditions.
Therefore, when constructing salary scales, businesses need to base them on the regional minimum wage to comply with regulations on salary payment principles.
The regional minimum wage effective from July 1, 2024, is stipulated in Decree 74/2024/ND-CP as follows:
|
Region |
monthly minimum wage |
minimum hourly wage |
|
I |
4,960,000 đ |
23,800 đ |
|
II |
4,410,000 đ |
21,200 đ |
|
III |
3,860,000 đ |
18,600 đ |
|
IV |
3,450,000 đ |
16,600 đ |
2. The process and method of constructing a salary scale.
Establishing a salary scale system that ensures salaries are paid according to position and title requires following these steps:
a. Job analysis:
Job analysis aims to gather detailed information about each specific job position, identifying the main tasks, relationships, job responsibilities, professional requirements, educational qualifications, knowledge, experience, and necessary working conditions for each job.
b. Job value assessment
Based on job analysis, a job value assessment is conducted to identify similar job positions that can be grouped together, serving as the basis for determining salary scales and pay tables for each group.
c. Job classification (levels)
After analyzing and evaluating the value of each job, jobs with similar functions and required knowledge and skills are grouped together. Each group of jobs is assigned a category (level) depending on the importance of the job group.
d. Establish salary scales and tables for each job category (level).
Based on the collected information and considered influencing factors, the process of establishing salary scales and wage tables is carried out in the following order:
- Determine salary grades within the company by gathering information from the job classification process.
- The number of salary grades within each category is determined by calculating performance-based bonus points and considering the required complexity of the salary scale and table.
- Salary levels are regulated according to grades and ranks.
These are the steps to build a basic salary scale according to legal guidelines. In practice, businesses may sometimes develop additional salary management methods depending on their specific characteristics.
👉 Refer: Develop a salary scale based on the 3P salary model.
Note:
If the company changes its size, structure, or salary levels, or if the government mandates changes to the minimum wage, the business needs to... Update the salary scale..
FAQ - Frequently Asked Questions about Salary Scales
According to Clause 1, Article 16 of Decree 28/2020/ND-CP regulating administrative penalties in the fields of labor, social insurance, and sending Vietnamese workers abroad under contract, the following is stipulated:
1. A fine of VND 2.000.000 to VND 5.000.000 shall be imposed on employers who commit any of the following acts:
a) Failure to publicly display salary scales, wage tables, labor norms, and bonus regulations at the workplace;
b) Failure to maintain payroll records and present them when requested by competent authorities;
c) When changing the method of wage payment, the employer fails to notify the employee at least 10 days in advance of the change;
d) Failure to establish salary scales, wage tables, or labor norms;
e) Using wage scales, wage tables, and labor norms that are not in accordance with regulations, even after receiving feedback on amendments and supplements from the district-level state management agency for labor;
f) Failing to consult with the collective labor representative organization at the workplace when developing wage scales, salary tables, labor norms, and bonus regulations.
Therefore, if a business does not establish a salary scale, it will be penalized according to the regulations mentioned above.
According to Article 93 of the 2019 Labor Code, employers are no longer required to register wage scales and tables with state agencies, but when establishing wage scales and tables, employers must:
– Consult with the employee representative organization at the workplace, if such an organization exists.
– Make a public announcement at the workplace before implementation.
Businesses that violate the above regulations will be fined from 2.000.000 VND to 5.000.000 VND.
When establishing salary scales and wage tables, businesses must base their decisions on the current regional minimum wage to determine salaries for each job title, position, or group of jobs, ensuring compliance with legal principles. Specifically:
– The lowest salary for the simplest job or position under normal working conditions must not be lower than the regional minimum wage;
– The lowest salary for jobs and positions requiring trained or apprenticed labor (including labor trained by the enterprise itself) must be at least 7% higher than the regional minimum wage;
– Compared to the salary of a job or position of equivalent complexity working under normal working conditions, the salary of a job or position with arduous, hazardous, or dangerous working conditions must be at least 5% higher; and for a job or position with exceptionally arduous, hazardous, or dangerous working conditions, it must be at least 7% higher.
An increase in the regional minimum wage does not necessarily mean that businesses have to revise their salary scales. Whether or not adjustments are necessary depends on the company's current salary scale. There are two possible scenarios:
Case 01: The lowest salary for the simplest job in the company's current salary scale is equal to or higher than the regional minimum wage. In this case, the company is not required to adjust its salary scale because this salary already meets the condition of not being lower than the regional minimum wage.
Case 02:
The lowest salary for the simplest job in the company's current salary scale is lower than the regional minimum wage. Therefore, when there is a change in the regional minimum wage and the minimum wage in the company's salary scale is lower than the current regional minimum wage, the company must also revise its salary scale to conform to the regional minimum wage.
According to Clause 2, Article 7 of Decree 49/2013/ND-CP, the difference between two consecutive salary levels must be sufficient to encourage employees to improve their professional, technical, and vocational skills, accumulate experience, and develop their talents, but it must be at least 5%.
The number of salary grades in a salary scale or pay table is determined by the enterprise based on the complexity of management, job level, or required job title.
The law does not stipulate that each business can only establish one salary scale or wage table. Therefore, a business can establish multiple salary scales or wage tables.
For example, a business can create a payroll for managerial staff, a payroll for technical and professional staff, and a payroll for direct production, business, and service workers.