A fixed salary ensures stability for employees and transparency for businesses. In this guide, terra explains what fixed salary means, its purpose, role, and calculation, while introducing professional payroll services in Vietnam with reliable payroll outsourcing solutions for compliance and efficiency.
What is a fixed salary?
A fixed salary is the predetermined amount of money an employee receives on a regular basis, usually monthly, regardless of short-term performance or sales outcomes.
The key advantage of it is stability: employees are paid consistently within each pay cycle, covering the base wage along with fixed allowances such as lunch, transportation, or phone support.
Example: If you sign a labor contract for 10 million VND in basic salary plus 1 million VND for transportation, your fixed salary is 11 million VND, the guaranteed income you receive every month.
- Fixed salary is the fixed income received monthly.
- It includes both the basic salary and fixed allowances.
The purpose of a fixed salary
For businesses, a fixed salary serves as a strategic commitment to attract and retain talent. A clear and consistent salary structure fosters employee trust and long-term loyalty. In contrast, relying solely on bonuses or hourly pay can result in unstable income, reduced motivation, and higher turnover.
For employees, a fixed salary ensures financial security by covering essential living costs such as food, housing, and transportation. With a predictable monthly income, employees can plan, budget, and manage their finances effectively without the stress of income fluctuations.
The role of a fixed salary
Salary represents a fair exchange between employees and employers: employees contribute time, effort, and expertise, while businesses provide compensation. Establishing a fixed salary at the start of employment builds a foundation for a transparent, fair, and long-term employment relationship.
Additionally, fixed salaries:
- Maintain motivation: Employees stay focused because they know they’ll receive a guaranteed monthly income.
- Ensure fairness: When aligned with roles and competencies, fixed salaries prevent unfair treatment and build trust across the organization.
Factors affecting fixed salary
The amount of it varies widely among employees, even within the same field, depending on several factors:
Work experience
Employees with more years of experience typically receive higher fixed salaries because they bring practical value and require less training. Companies are often willing to pay more to experienced staff who can contribute immediately.
Industry/field of work
Certain industries, such as technology and finance, offer higher fixed salaries due to greater expertise requirements and workload intensity. Meanwhile, general labor jobs may only provide the minimum basic salary or the regionally required fixed salary.
Work location/ region
Employees in major cities like Ho Chi Minh City or Hanoi often earn higher fixed salaries compared to those in smaller provinces. This difference reflects higher living costs and stronger competition for talent in urban centers, sometimes 20-40% higher.
Economic and market conditions
Stable economies often encourage companies to increase fixed salaries to retain staff, while economic downturns may cause freezes or reductions. Understanding the connection between fixed salary and broader economic conditions helps employees interpret income correctly.
Company policies
Each business applies its own salary policies depending on organizational culture, development strategy, and internal structure. Some use seniority-based salary systems, while others rely on standardized allowances or performance stability.
The use of payroll solutions and software allows companies to ensure transparent payroll management and structured salary growth plans.
The Latest Methods of Calculating fixed salary
To determine the actual amount of fixed salary received, employees should understand the standard formula, particularly in cases of unpaid leave:
Formula:
| (Basic salary + fixed allowances) ÷ Standard working days × Actual working days |
- Basic salary + fixed allowances: The total salary used for calculation.
- Standard working days: Usually 22 or 26 days per month, depending on company policy.
- Actual working days: The number of days the employee actually works (excluding unpaid leave).
Example:
- Mr. Nam’s basic salary: 10 million VND + 1 million VND allowance = 11 million VND.
- Standard working days: 22 days/month.
- He takes 2 days of unpaid leave, so he works 20 days.
Calculation: 11,000,000 ÷ 22 × 20 = 10,000,000 VND.
=> Mr. Nam’s fixed salary for that month is 10 million VND after deduction.
Difference between fixed salary and other types of salary
To understand what a fixed salary means, it is essential to distinguish it from other salary types.
Fixed salary vs. Basic Salary
| Criteria | Fixed Salary | Basic Salary |
| Definition | Fixed monthly income (basic salary + allowances) | Salary recorded in contract, excludes allowances |
| Components | Basic salary + fixed allowances | Only the agreed base amount |
| Stability | Stable, paid monthly | Stable, also paid regularly |
| Contract | May appear as total income | Always stated clearly |
| Usage | Actual take-home salary | Used for social insurance, health insurance calculations |
Fixed salary vs. Performance Bonus
| Criteria | Fixed Salary | Performance Bonus |
| Definition | Guaranteed monthly income | Variable income based on achievements |
| Stability | Stable | Unstable, changes with performance |
| Purpose | Ensures financial stability | Motivates employees to perform better |
Fixed salary vs. Flexible Pay
| Criteria | Fixed Salary | Flexible Pay |
| Definition | Unchanging, regardless of performance | Variable, depends on KPIs or performance |
| Calculation | Base + fixed allowances | Fixed salary × performance coefficient |
| Contract | Clearly stated | Usually internal policy, not stated in contracts |
| Usage | Guarantees stable living standards | Drives productivity and efficiency |
Fixed salary vs. Regional Minimum Wage
| Criteria | Fixed Salary | Regional Minimum Wage |
| Definition | Salary agreed upon between employer and employee | Government-mandated minimum wage by region |
| Components | Base salary + allowances | Minimum base salary only |
| Stability | Stable per labor contract | Adjusted periodically by the government |
| Usage | Actual monthly take-home salary | Legal minimum protection for workers |
2025 Regional Minimum Wage in Vietnam:
- Region I: 4,960,000 VND.
- Region II: 4,410,000 VND.
- Region III: 3,860,000 VND.
- Region IV: 3,450,000 VND.
Accurate Payroll Services terra Payroll
Salary management and calculation are complex tasks that require precision and compliance with legal standards. To simplify this process, many companies choose payroll outsourcing services.
terra Payroll Service in Vietnam offers:
- Accuracy & compliance: Always updated with the latest laws.
- Time & cost savings: No need to invest in payroll software or dedicated HR staff.
- Data security: Advanced protection of sensitive information.
- Expert support: A team ready to handle complex payroll issues.
- Customized payroll solutions: Flexible packages suitable for different business sizes.
By using outsourced payroll services, companies can focus on core business activities while ensuring employee satisfaction and legal compliance.
To learn more about terra’s payroll outsourcing services in Vietnam, visit their official website or contact the hotline at +84 28 7102 0608 for tailored consultation.
Conclusion
In summary, understanding fixed salary is essential for both employees and businesses to ensure fair and transparent compensation. It provides stability for workers while supporting companies in building trust and retention. With payroll solutions like terra Payroll, organizations can manage salaries efficiently and sustainably.
