Are you looking for a fair and effective salary solution for your business? terra will help you understand what 3P salary is, why you should use it, and how to set up a 3P salary system in detail. Read on to build a salary structure that attracts and retains top talent.
What is 3P Salary?
3P salary is a modern pay system based on three main factors:
- Position: Job role
- Person: Individual capability
- Performance: Work results
This system provides fairness, transparency, and supports employees to grow fully. It works best for medium and large businesses that operate in a highly competitive market. Companies that have strong financial resources and follow modern management practices should also consider the 3P salary system to improve efficiency.
Why should businesses use the 3P salary structure?
Using the 3P salary structure brings real benefits to both businesses and employees. This approach creates an objective work environment where employees can confidently show their abilities and do their best.
Benefits for businesses
This system helps companies manage payroll costs better. By linking salary to job role, capability, and performance, the company can control salary budgets more effectively.
Besides, the 3P salary system also helps increase productivity and work quality. When employees see that their efforts are recognized and rewarded fairly, they become more motivated. This leads to better overall performance for the business.
In addition, it helps companies attract and keep talented people. A fair, clear, and competitive salary structure creates an attractive workplace that draws in skilled candidates and retains high-performing employees.
Benefits for employees
The 3P system ensures fairness and transparency in how salaries are paid. Employees are paid based on their skills, experience, and actual work results, so they do not need to worry about favoritism or unfair treatment.
On the other hand, 3P salary also encourages employees to grow, showcase their strength, and improve work performance. Under this pay method, income depends on ability and results. This makes employees more willing to learn, improve their skills, and work hard to complete tasks.
In addition, the 3P salary structure provides employees with a clear career development roadmap. It usually comes with a competency framework and specific performance criteria so employees know what they need to do to earn higher salaries and advance in their careers.
Three factors in the 3P salary system
To build a 3P salary structure, you need three main factors. Understanding and analyzing each factors is very important to create a fair and clear pay structure that improves performance.
P1 – Pay for Position
Pay for Position (P1) is the base of the 3P salary system. It depends on how much the job is worth to the company. This value shows in how complex the job is, the level of responsibility, and the skills and experience needed.
Pay under P1 usually means setting a salary range for each position with different levels. The specific salary depends on the job and the employee’s experience.
Example: On the job market now, a marketing staff with 3 to 5 years of experience may earn 20 to 30 million VND per month. A marketing manager with similar experience can earn 30 to 45 million VND per month. This difference reflects the value and responsibility of the two positions.
P2 – Pay for Person
Pay for Person (P2) is the second factor in the 3P system. It focuses on skills, professional knowledge, soft skills, and other personal qualities.
This pay method often uses a competency assessment system with clear criteria. Salary changes based on competency level, recognizing those with strong abilities.
Example: A marketing staff with strong technical skills, good results, and who keeps improving other skills like research, presentation, and communication will be offered a higher salary than others.
P3 – Pay for Performance
P3 is pay based on actual results and work performance of a person or team. It is the core of the 3P salary system, rewarding employees who make direct contributions to company success. When someone not only meets expectations but exceeds them and adds more value, they will receive pay or bonuses that match their contribution.
Common forms include:
- For individuals: Commission for sales staff, pay per piece for factory workers, commission for consultants, or project bonuses for meeting targets.
- For teams or departments: Spot bonuses for big achievements or team bonuses when a department meets goals.
- For the whole company: Large companies often offer stock bonuses or share purchase plans so employees can share profits and stay committed long term.
To make P3 work well, businesses need:
Clear work goals (KPIs)
Fair performance assessments
A good pay and bonus plan
How to build a 3P salary system for your company
Building a 3P salary structure needs time, effort, and resources, but the results are worth it. Here is a step-by-step guide to building an effective 3P salary system:
Step 1: Build a standard salary framework for positions – P1
To build the salary framework for positions (P1), businesses need to clearly define the value of each job to the organization. This can be done through job analysis, detailed job descriptions, and assessing the importance of each position.
Since P1 is the foundation for P2 and P3, businesses should invest resources to do this properly, including market surveys and benchmarking salary standards along with recruitment criteria. To set up a strong P1 framework, focus on standardizing the organizational structure and creating detailed job descriptions for every role, including:
Clearly define the organizational structure (usually through an org chart).
Build a job title framework that specifies roles and benefits.
Classify levels for each position (e.g., Fresher, Junior, Senior).
Set an appropriate budget.
Step 2: Create a competency-based salary system – P2
Ví dụ: Hệ thống lương theo năng lực cho vị trí Marketing Executive
At this step, businesses need to identify the skills and competencies required for each role. This can be done by creating a competency framework, listing specific skills, and defining different proficiency levels.
Key factors to consider when building a competency-based pay system include:
Professional knowledge
Soft skills (communication, teamwork, problem-solving)
Work experience
Ability to learn and adapt
Other personal qualities
To develop P2, businesses can use the ASK model to assess each employee’s competencies:
Knowledge
Skill
Attitude
You need to clearly define specific criteria within each ASK group for every position. Based on this, an employee’s P2 level will be determined fairly according to how well they meet the knowledge, skill, and attitude requirements.
Example: competency-based salary system for Marketing Executive
| Position | Level | Base Salary (VND) | Requirements |
| Marketing Executive | Level I | 8,500,000 | – University degree in Marketing, Economics, Business Administration, or related field. – Basic knowledge of Marketing. |
| Marketing Executive | Level II | 9,500,000 | – University degree in Marketing, Economics, Business Administration, or related field. – At least 1 year of Marketing experience (preferably Digital or Content Marketing). – Able to handle basic Marketing tasks with guidance. |
| Marketing Executive | Level III | 10,500,000 | – University degree in Marketing, Economics, Business Administration, or related field. – At least 2 years of in-depth Marketing experience (e.g., Digital Ads, SEO, Content Strategy). – Able to independently manage mid-sized campaigns. – Basic data analysis skills. |
| Marketing Executive | Level IV | 12,000,000 | – University degree in Marketing, Economics, Business Administration, or related field. – At least 3 years of experience in a key role or leading projects. – Ability to plan Marketing strategies and optimize campaign performance. – Proficient in analytics tools and reporting. – Able to work independently with high responsibility. |
| Marketing Executive | Level V | 13,500,000 | – University degree in Marketing, Economics, Business Administration, or related field. – At least 5 years of experience, preferably in managing large projects or brand management. – Capable of setting overall Marketing strategies, building, and leading teams. – Strong analytical and strategic thinking to create breakthrough solutions. |
Step 3: Create a performance-based salary system – P3
To build a performance-based pay system (P3), businesses need to define clear KPIs or other measurable performance indicators for each position. These metrics should be specific, measurable, and achievable within a set timeframe.
Factors to consider include:
Sales revenue
Market share
Customer satisfaction
Production output
Operating costs and other relevant metrics for each role
For example, a sales employee might be evaluated based on sales revenue, number of new customers, and customer satisfaction. Their salary will be adjusted according to their performance results.
Step 4: Build an integrated 3P salary system
Once you have completed the details for P1 (Position), P2 (Competency), and P3 (Performance), senior management should work together to create an overall plan and a clear set of standards to assess both job value and individual capability. This is the stage where all three elements are integrated into a unified 3P salary system to ensure fairness, transparency, and improved performance.
Step 5: Implement, monitor, and adjust the 3P salary system
After developing the 3P salary system, businesses should implement it carefully to maintain fairness and effectiveness. During implementation, it’s important to monitor the system regularly and make adjustments based on the company’s real-world situation.
Technology can be used to manage the 3P salary system more efficiently. Modern HR system often includes payroll management modules that help automate salary calculations, payment processes, and tax reporting.
3P salary excel template for businesses
Once you understand the principles of the 3P compensation method, applying it in practice requires an effective tool. Below is an Excel salary template designed by terra to help businesses easily implement and manage their salary system, ensuring transparency and fairness in payments.
Download the 3P salary excel template
Once you understand the principles of the 3P compensation method, applying it in practice requires an effective tool. Below is an Excel salary template designed by terra to help businesses easily implement and manage their salary system, ensuring transparency and fairness in payments.
You can access the 3P salary template for businesses here.
Frequently asked questions about implementing the 3P salary system
Implementing a 3P pay system is a strategic decision, but it often comes with concerns about how to apply and manage it effectively. To help businesses overcome common challenges, we has compiled and answered the most important questions below.
Which businesses are suitable for the 3P pay system?
This method is ideal for large organizations operating in highly competitive environments, with modern management models and strong financial resources. These companies usually aim to attract top talent, improve efficiency, and create a transparent workplace.
Is specialized HR expertise needed to implement 3P?
Yes. Implementing a 3P system requires knowledge and experience in HR management, finance, and labor laws. Businesses can hire external consultants or send internal staff for training to ensure they have the capabilities to roll out the system successfully.
What are the common mistakes when building a 3P salary system
Some frequent mistakes include:
Failing to define clear project goals and scope
Lack of involvement from stakeholders (employees, managers)
Using inappropriate evaluation criteria
Not monitoring and adjusting the system regularly
Which department is responsible for building the 3P salary system?
The HR department usually takes the lead in developing the 3P system. However, close collaboration with other departments (finance, accounting, sales) is essential to ensure effectiveness and alignment with company operations.
Is social insurance calculated based on P1, P2, or all 3P?
Social insurance is typically calculated based on P1 (job position) and part of P2 (individual competency). Bonuses and allowances under P3 (performance) are generally excluded from social insurance contributions.
Gói dịch vụ tính lương terra hỗ trợ triển khai hệ thống lương 3P
Building a 3P salary system starts with clear rules defined by the company. For FDI companies in Vietnam, where payroll structures can be complex, terra Payroll service helps automate the entire payroll process, significantly reducing operational costs, minimizing errors, saving hours of manual work.
Key benefits of using terra payroll service:
Time optimization: Automate the calculation of salaries, allowances, bonuses, and deductions according to the company’s 3P system, saving up to 90% of the time spent on payroll processing.
Accuracy and reliability: Terra’s system ensures precise calculation and reporting based on the company-defined rules, reducing errors even in complex 3P salary structures.
Secure and easy management: Payroll information can be distributed to employees quickly while maintaining strict data security. The system integrates with your existing HR software, allowing controlled access to sensitive payroll data.
Centralized management: All employee payroll information, including P1 (Position), P2 (Person), and P3 (Performance) components, is stored on a single platform for easy tracking and reporting.
Over 250 FDI companies and other businesses in Vietnam trust terra Payroll to handle the heavy lifting of payroll, allowing them to focus on managing their teams and growing their business. Contact us to see how we can simplify your payroll while fully aligning with your company’s rules.
Submit your information for a consultation!
Conclusion
3P salary isn’t just about structure, it’s about balance. When pay reflects position, individual capability, and actual results, companies motivate the right behaviors and employees see a clear path for growth. It turns salary from a cost into a performance tool.
