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Basic Salary and Minimum Wage: Differences and Their Important Role

2023-08-08

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In Vietnam’s salary system, both the basic salary and minimum wage play a crucial role in determining the earnings of workers and employees. This article will focus on the differences between these two types of wages and their significance in the current salary structure in Vietnam.

What is the Basic Salary?

What is basic salary?

The basic salary is a fundamental factor in calculating wages and allowances for employees. It serves as the basis for determining salary levels in pay scales and allowances according to legal regulations for corresponding positions. Additionally, the basic salary plays a vital role in calculating operational fees and living expenses, as prescribed by the law.

What is the Regional Minimum Wage?

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What is minimum wage?

The minimum wage is the lowest wage rate set by either businesses or the government that employees must receive. This minimum wage must be paid under any circumstances and cannot be negotiated lower. Its purpose is to ensure a minimum standard of living for workers and promote fairness in wage payment. The minimum wage is established regionally and can be fixed on a monthly or hourly basis.

Differences between Basic Salary and Minimum Wage:

Subject of application

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Subject of application

– Basic Salary: Applied to officers, civil servants, and officials.

– Minimum Wage: Applied to all workers and employers within a country or region, including laborers, employees, freelancers, businesses, organizations, and other labor groups.

 Impact of Wage Increases

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Impact of Wage Increases

– Basic Salary: When the basic salary increases, all officers, civil servants, and officials receive a raise.

– Minimum Wage: When the minimum wage in a region increases, only employees earning less than the new minimum wage receive a raise. It also affects the amount contributed to social insurance.

Wage Adjustment Cycles

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The cycle of increasing both types is often unstable

– Basic Salary: Usually subject to changes based on business needs and economic growth rates.

– Minimum Wage: Typically regulated by the government or governing bodies, adjusted based on the annual minimum living standard for workers or at specific intervals.

Basic Salary for 2023:

As per Decree 24/2023/NĐ-CP, starting from July 1, 2023, the basic salary for officers, civil servants, and officials will be raised to 1,800,000 VND/month, equivalent to a 20.8% increase compared to the current basic salary. The salary for civil servants is calculated using the formula:

Salary = Basic Salary x Salary Coefficient

Refer to the civil servant salary table from July 1, 2023.

Minimum Wage for 2023:

Starting from July 1, 2023, the minimum wage levels in various regions will be applied according to the regulations in Article 3 of Decree 38/2022/NĐ-CP as follows:

Region Minimum monthly wage

(Unit: VND/month)

Minimum hourly wage

(Unit: VND/hour)

Region I 4.680.000 22.500
Region II 4.160.000 20.000
Region III 3.640.000 17.500
Region IV 3.250.000 15.600

Basic salary and minimum wage play a vital role in Vietnam’s salary system. To ensure fairness and meet the financial needs of employees, it is necessary to consider and utilize both types of wages. Additionally, the government and businesses must enhance monitoring and enforcement of regulations regarding the basic salary and regional minimum wage to protect workers’ rights and maintain a balance between the interests of employees and companies.

If you are concerned about calculating salaries and allowances for your employees fairly and accurately, consider using terra’s salary calculation services. We understand the importance of complying with legal regulations and meeting your company’s needs. Let us assist you in calculating fair and professional salaries for your team, creating favorable conditions for effective and sustainable business operations.

Reference: 4 Advantages of Payroll Outsourcing Service

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