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In Vietnam, there is a common misconception between base salary and basic salary. Many employees thought that they are the same, with just a slight difference in the pronunciation. However, it is not quite true as these concepts are not the same in nature. So, what are the difference between base salary and basic salary in Vietnam?
Base salary and basic salary in Vietnam
According to Decree 72/2018/ND-CP of the Government, base salary (lương cơ sở) is the salary level used as the basis for calculating the salary level in the salary tables, allowances and implementation of other regimes, calculating activity fee levels, calculating deductions and entitlements according to this salary.
On the other hand, basic salary (lương cơ bản) is not specified in any legal document but is just a way of calling the lowest salary that the employee and the employer agree on.
Subjects of application of base salary and basic salary
Base salary is applied to public employees, state officials, employees, and beneficiaries of regimes in the State sector including State agencies, socio-political organizations, armed forces, operating units with funding support from the State, etc.
Base salary is not applied in enterprises and organizations outside the state sector.
On the contrary, basic salary is applied to both domestic and non-state sectors as it is just a common concept exchanged between employers and employees, among employees in the daily life in society.
The calculation of base salary and basic salary
The way to calculate basic salary and base salary is different.
This is because the base salary is specified by clear numbers in legal documents that are only for employees working in the state sector.
On the other hand, the basic salary, also known as the lowest possible salary paid to employees, needs to be determined according to the regional minimum wages stipulated by the law that varies at the time and according to the region the employee work in.
The calculation of base salary for officials and employees of the State sector
Officials in the State sector will be paid according to the base salary regime. Specifically, the monthly salary calculation formula is based on the base salary and salary coefficient:
Monthly salary = Base salary x salary coefficient.
The base salary is stipulated according to the latest regulations (from July 1, 2019, onwards is VND 1,490,000).
The calculation of basic salary for businesses and organizations outside the state sector
For employees working in enterprises and organizations outside the state sector, basic salary is determined based on the regional minimum wage. According to Clause 1, Article 3, Decree 157/2018/ND-CP of the Government, the regional minimum wage is regulated as follows:
- For enterprises in Region I, the applicable rate is 4,420,000 VND/month.
- For enterprises in Region II, the applicable rate is 3,920,000 VND/month.
- For enterprises in Region III, the applicable rate is 3,430,000 VND/month.
- For enterprises in Region IV, the applicable rate is 3,070,000 VND/month.
Enterprises in each specific region will calculate the basic salary based on the regional minimum wage of that area, meaning that the basic salary of the employees must equal or exceed the minimum wages. If the enterprises pay the basic salary less than the minimum wages, they have conducted a violation action that will be administratively sanctioned according to the law of Vietnam.
In addition, businesses should note that for employees who have undergone vocational training or apprenticeship, the basic salary must be at least 7% higher than the regional minimum wage.
ASL LAW is the top-tier Vietnam law firm for Employment and Labor Law. If you need any advice, please contact us for further information or collaboration.
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