The management of labor relations is not only about wages and policies for employees but also the compliance procedures for competent state agencies. In the following article, VIVA would like to share some frequently asked questions about the 13th month salary that should be noted for both employers and employees.
1. WAGES AND SALARY?
According to local labor laws and regulations:
- Wage is a monetary amount which is paid by an employer to an employee to do a job as agreed by the two parties.
- Wage includes a wage amount which is based on the work or title, wage allowance(s) and other additional payments.
- An employee’s wage must not be lower than the minimum wage set by the Government.
- A wage must be paid to an employee based on labor productivity and quality of the work performed.
- An employer shall pay equal wages without gender-based discrimination to employees doing a job of equal value.
- Allowances, subsidies, rank promotion and wage raise Allowances, subsidies, rank promotion, wage raise and other incentives for employees must be agreed in the labor contracts and the collective labor agreement or stipulated in the regulations of the employer.
2. THE 13TH MONTH WAGE & SALARY IS A BONUS?
Actually, the 13th month wage & salary is a bonus:
- Bonus is a sum of money paid by an employer to his/her employees on the basis of annual business results and the level of work performance of employees.
- Bonus regulations must be decided and publicly announced by the employer at the workplace after consultation with the representative organization of the grassroots-level employees’ collective.
3. THE 13TH MONTH SALARY INCOME SUBJECTS TO PERSONAL INCOME TAX AND TAXABLE?
The 13th month salary is one of the items that subjects to personal income tax include income from wages and remunerations including:
- Wages, remunerations, and the other amounts paid as wages or remunerations in cash or not in cash.
- Allowances and benefits.
- Remunerations in the forms of agent commission, brokerage commission, payments for participation in science and technology researches, payments for participation in projects and schemes, royalties according to regulations of law on royalties, payments for teaching, payments for participation in artistic performance, sports, payments for advertising, payments for other services, and other remunerations.
- Rewards in cash or not in cash in any shape or form, including rewards in the form of securities.
4. THE 13TH MONTH SALARY IS DEDUCTIBLE EXPENSES FOR DETERMINING CIT TAXABLE INCOME?
The 13th month salary is deductible expense for determining CIT taxable income if:
- Salaries, wages and other amounts payable to employees that enterprises have accounted as production and business expenses in the period and have made such payments and have legal payment documents as required by law;
- Salaries and bonuses for employees for which the conditions for entitlement and rates of entitlement are fully specified in one of the following dossiers: labor contract; collective labor agreement; financial regulations of the company, corporation or group; reward regulations issued by the chairman of the Board of Directors, general director or director under the financial regulations of the company or corporation.
5. THE 13TH MONTH SALARY SUBJECTS TO COMPULSORY SOCIAL INSURANCE?
According to local labor laws and regulations:
- The compulsory social insurance premium rate shall be calculated only based on an employee’s monthly salary. The voluntary social insurance premium rate shall be calculated based on the monthly income selected by employees. This bonus is not a monthly salary so it does not subject to compulsory social insurance.
Read more:
