Issue 130326 - Salary Payment (Principles, Method, and Payment Period)

Dear Valued Clients,

Salary payment principles constitute one of the core aspects of labor relations management and play a decisive role in the development of fair, transparent, and legally compliant remuneration policies. The establishment and proper implementation of salary payment principles not only aim to safeguard the lawful rights and interests of employees (“Employees”), but also represent a material legal obligation of employers (“Employers”).

This legal article focuses on analyzing the fundamental salary payment principles that Employers are required to comply with under current labor laws, while also highlighting key issues that enterprises should carefully review when formulating and implementing salary policies in practice. Proper and full compliance with salary payment principles not only helps enterprises mitigate legal risks, but also contributes to building a transparent working environment, enhancing labor productivity, and promoting stable and sustainable long-term development.

Definition of Salary

Pursuant to Article 90 of the Labor Code 2019 (“Labor Code 2019”), salary means the amount of money paid by the Employer to the Employee as agreed in order for the Employee to perform work, including the wage based on the job or position, salary allowances, and other additional payments. Salary agreements must be clearly recorded in the labor contract (“Labor Contract”) and must comply with the mandatory provisions of labor laws.

Labor laws stipulate that the wage based on the job or position must not be lower than the statutory minimum wage. The minimum wage is defined as the lowest wage paid to Employees performing the simplest work under normal working conditions, intended to ensure the minimum living standards of Employees and their families, in line with socio-economic development conditions. The minimum wage is determined by region and prescribed on a monthly and hourly basis.

Adjustments to the minimum wage are considered and decided by the State based on multiple factors, including: the minimum living standards of Employees and their families; the correlation between the minimum wage and prevailing market wages; the consumer price index; economic growth rate; labor supply and demand; employment and unemployment conditions; labor productivity; and the payment capacity of enterprises.

In addition, labor laws establish the principle of equal pay, under which Employers are responsible for ensuring that there is no gender-based discrimination in salary payments to Employees performing work of equal value. This principle aims to promote gender equality in labor relations and constitutes one of the key legal obligations that enterprises must observe when developing and implementing salary policies.

Principles of salary payment to Employees

Pursuant to Article 94 of the Labor Code 2019, salary payment to Employees must comply with fundamental principles designed to safeguard the lawful rights of Employees and the legal responsibilities of Employers.

First, Employers are obligated to pay salaries directly, in full, and on time to Employees. In cases where Employees are unable to receive salaries directly, Employers may only make salary payments to individuals who are lawfully authorized by the Employees. This provision aims to ensure transparency, clearly identify the responsible party in salary payment relationships, and limit disputes arising in connection with salary payment obligations.

Furthermore, labor laws strictly prohibit Employers from restricting or interfering with Employees’ autonomy in deciding how their salaries are spent. Accordingly, Employers are not permitted to compel Employees to use their salaries to purchase goods or services from the Employer itself or from any other organization or individual designated by the Employer, in any form whatsoever. This principle is essential to protecting Employees’ property rights and legitimate economic interests.

Accordingly, salary payment must simultaneously satisfy three core requirements: direct payment, full payment, and timely payment. Employers bear primary responsibility for fulfilling salary payment obligations and must ensure that salary payments are consistent with the agreements set forth in the Labor Contract as well as the mandatory provisions of applicable labor laws. Failure to comply with these principles may expose Employers to legal risks, including compensation liabilities and administrative penalties in accordance with the law.

Forms of salary payment to Employees

Pursuant to Article 96 of the Labor Code 2019 and the guiding provisions of Decree No. 145/2020/ND-CP, based on the nature of work and production and business conditions, Employers and Employees may agree on salary payment forms, including payment based on time, products, or lump-sum assignments. The selected salary payment form must be clearly stipulated in the Labor Contract and must comply with labor law regulations.

First, salary based on time is paid to Employees receiving time-based wages, calculated according to working time by month, week, day, or hour as agreed in the Labor Contract, specifically as follows:

Monthly salary is paid for one month of work;

kly salary is paid for one week of work. Where the Labor Contract stipulates a monthly salary, the weekly salary is calculated by multiplying the monthly salary by 12 months and dividing by 52 weeks;
Daily salary is paid for one working day. Where the Labor Contract stipulates a monthly salary, the daily salary is calculated by dividing the monthly salary by the number of normal working days in the month as prescribed by law and selected by the enterprise. Where the Labor Contract stipulates a weekly salary, the daily salary is calculated by dividing the weekly salary by the number of working days per week as agreed in the Labor Contract;
Hourly salary is paid for one working hour. Where the Labor Contract stipulates a monthly, weekly, or daily salary, the hourly salary is calculated by dividing the daily salary by the number of normal working hours per day as prescribed in Article 105 of the Labor Code 2019.

Second, salary based on products is paid to Employees receiving product-based wages, calculated based on the level of completion in terms of quantity and quality of products, in accordance with established labor norms and assigned product unit prices.

Third, lump-sum salary is paid to Employees receiving lump-sum wages, based on the volume and quality of work and the required completion timeframe.

Regarding the method of salary payment, salaries may be paid in cash or via the Employee’s personal bank account. In cases where salaries are paid via bank transfer, Employers are responsible for covering fees related to account opening and salary transfers, unless otherwise agreed by the parties in compliance with applicable laws.

The proper selection and application of salary payment forms not only ensure legal compliance but also help minimize labor disputes and enhance human resource management efficiency within enterprises.

Salary payment schedule for Employees

Pursuant to Article 97 of the Labor Code 2019, salary payment schedules are determined based on the salary payment form agreed in the Labor Contract and must be duly and timely implemented by Employers. Accordingly, for Employees paid by the hour, day, or week, salaries are paid after the working hour, day, or week, or may be aggregated for payment but not exceeding 15 days. For Employees paid monthly, salaries are paid on a monthly or semi-monthly basis. For Employees paid based on products or lump-sum assignments, salaries are paid as agreed by the parties; where work is performed over multiple months, monthly advances must be made in proportion to the completed workload.

Labor laws allow Employers to delay salary payments in certain exceptional circumstances arising from force majeure events as prescribed by law. However, in all cases, salary payment delays must not exceed 30 days. Where salary payments are delayed for 15 days or more, Employers are required to pay Employees an additional amount equivalent to the interest accrued on the delayed salary amount, calculated based on the one-month term deposit interest rate announced by the bank at which the Employer opens its salary payment account at the time of payment.

Failure to comply with regulations on salary payment schedules or unlawful delays in salary payments may give rise to legal liabilities for Employers, including obligations to compensate Employees for damages and exposure to administrative penalties in accordance with applicable laws. Therefore, Employers should establish clear salary payment mechanisms, proactively plan financial resources, and manage cash flows to ensure timely salary payments and minimize labor disputes in practice.

As always, we hope that you find this article useful and we look forward to accompanying and supporting you in the time ahead.

Sincerely,