Regulations employees need to know about Gross and Net salary in Vietnam, Gross and Net salary in Vietnam, Instructions for calculating Net salary from Gross salary, Gross salary or Net salary

Regulations employees need to know about Gross and Net salary in Vietnam

In Vietnam, not all employees know about the concept of Gross salary and Net salary. Sometimes, because of this lack of knowledge, they are abused by employers and end up overworked, underpaid. So, what are the regulations employees need to know about Gross and Net salary in Vietnam?

As a matter of fact, the concept of gross salary is not currently regulated in legal documents. It is actually a term in the economic field used by businesses when negotiating salaries with employees.

“Gross” in English means total. Accordingly, it can be understood as the total monthly income of the employee, including basic salary and allowances, subsidies, commissions, etc., excluding the compulsory insurance contributions and personal income tax (if any).

Consequently, this is not the actual salary that the employee receives every month which is known as Net salary. 

Net salary is the income of the employee after deducting all insurance costs and personal income tax, simply understood it is the amount of money that goes into the employee’s pocket.

The relationship between Gross salary and Net salary can be calculated using this formula:

NET SALARY = GROSS SALARY – (social insurance + health insurance + unemployment insurance + PIT)

Which is better: Gross salary or Net salary?

At first glance, the employee may think that the Net salary is more profitable because that is the amount they receive and can actually spend. On the other hand, when receiving a Gross salary, the employee might feel left out, lost, and confused because they won’t receive that entire amount of money every month.

However, Net salary and Gross salary are actually the same. The employee will receive the same amount of money in both scenarios. Nonetheless, when receiving a Gross salary, the employee will have the advantage of being able to calculate exactly their Net salary and know the insurance and tax payments that the company pays for the employee. 

Regulations employees need to know about Gross and Net salary in Vietnam
Regulations employees need to know about Gross and Net salary in Vietnam

This might sound unimportant but in reality, there are many shady companies that pay less than the amount of social insurance needed to earn more profits. With the reduced amount of social insurance, the employee won’t feel the impact right now, or even in a few years. But that will strike them when they are on maternity leave or retirement and at that moment, it will be too late. 

So, the employees need to equip themselves with the necessary knowledge in order to not be led and used, or abused by the employers and the business.

Instructions for calculating Net salary from Gross salary

The salary received by the employee is also known as the net salary. This salary is calculated according to the following formula:

Net salary = Gross salary – Compulsory premium payment – PIT (if any)

Inside:

– The employee’s compulsory insurance premium = 10.5% of salary.

– Personal income tax (if any): PIT = (Total Income – Exemptions – Deductions) x Tax Rate

To clarify, if Mr.A negotiates a Gross salary of 20 million VND and has one dependent family member, we can calculate his Net salary following this formula:

GROSS salary: 20,000,000 VND

Social insurance (8%): – 1,600,000 VND

Health insurance (1.5%): – 300,000 VND

Unemployment Insurance (1%): – 200,000 VND

Income before tax: 17,900,000 VND

Personal family deduction: – 11,000,000 VND

Dependent family deduction: – 4,400,000 VND

Taxable income: 2,500,000 VND

Personal income tax: – 125,000 (Mr. A receives a taxable rate of up to 5 million VND and has a tax rate of 5% – equivalent to 125,000 VND)

Net salary (Income before tax – Personal income tax): 17,775,000 VND

On the other hand, the employer will have to pay the following amount of money to the employee and the social insurance fund every month:

GROSS salary: 20,000,000 VND

Social insurance (17%): 3,400,000 VND

Insurance for Occupational Accidents – Occupational Diseases (0.5%): 100,000 VND

Health insurance (3%): 600,000 VND

Unemployment Insurance (1%): 200,000 VND

Total: 24,300,000 VND

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.

    CONTACT

    Your infomation


    ***Other service of ASL LAW – full service Vietnam law firm ***

    Retainer service to enterprises

     

    International trademark registration

    Oversea investment consultancy for Vietnamese enterprises

     

    Patent in Vietnam

    PCT Patent in Vietnam

     

    PCT Patent Vietnam Entry

    Intellectual property services (Vietnam IP Firm)

     

    Vietnam Patent Agent

    Trademark in Vietnam

     

    Vietnam Patent Firm

    Vietnam Trademark Agent

     

    Patent translation in Vietnam

    How to register trademark in Vietnam

     

    Vietnam Patent Translation Agent

    Copyright in Vietnam

     

    Vietnam IP Firm

    Vietnam Trademark

     

    Vietnam IP Agent

    Notes to company formation in Vietnam

     

    M&A

    How to open company in Vietnam

     

    Banking & financial services

    Open representative office in Vietnam

     

    Contract consultancy

    Establish company in Vietnam

     

    Employment and labor

    Corporate services in Vietnam

     

    Litigation and dispute resolution

    Vietnam Law Firm

     

    Franchise in Vietnam

    Vietnam Antidumping Law Firm

     

    Vietnam Franchise registration

    Vietnam countervailing law firm

     

    Vietnam Business Law Firm

    Vietnam Real estate law firm

     

    Vietnam construction law firm

    Law firm in Hanoi

     

    Law Firm in Ho Chi Minh

     

     

     

     

     

     

     

    Contact Me on Zalo
    +84366667697
    WhatsApp chat