This article provides an in-depth look at the key elements of compensation structure design in Vietnam, power analysis regulatory compliance, market competition and employee motivation. The article elaborates on the latest labor regulations in Vietnam, provides a comprehensive market salary analysis, and innovatively proposes. At the same time, the article also discusses the flexible design of the recruitment structure, localization strategies and digital management methods, aiming to provide enterprises with a system that is both consistent and regulations, are complementary, and can effectively guide the design of employee recruitment structures.

Current situation of Vietnam’s labor market

As one of the fastest-growing economies in Southeast Asia, Vietnam’s labor market is undergoing significant changes. With the continuous influx of foreign direct investment and the rapid development of local enterprises, Vietnam’s labor market is highly competitive and rapidly changing. Against this background, it is particularly important to design a salary structure that meets both regulatory requirements and market competitiveness. important. An efficient salary structure can not only help companies attract and retain talents, but also motivate employees to increase productivity, thereby promoting employee productivity improvements. However, Vietnam’s complex labor regulations, regional differences in economic development, rising labor costs, and the competition for talents in emerging industries have all brought huge challenges to the design of salary structure. Finding a delicate balance between regulations, controlling costs and maintaining conflict, while taking into account Vietnam’s unique cultural context and employee expectations. Therefore, developing a deep understanding of Vietnam’s labor market dynamics and formulating flexible and efficient compensation strategies accordingly has become a key task for local and multinational companies operating in Vietnam.

Overview of Vietnam’s legal provisions on salary

Vietnam’s salary system is subject to strict laws and regulations, the most critical of which is the Labor Law revised in 2019 (No. 45/2019/QH14). This law lays the foundation for Vietnam’s labor relations and remuneration system. According to this law, Vietnam implements a regional minimum wage system. The country is divided into four regions, and each region has different minimum wage standards. As of 2024, the monthly minimum wage in Category 1 areas (including urban areas of Hanoi and Ho Chi Minh City) is VND 4.7 million (approximately US$200), while in Category 4 areas (rural and less developed areas) the minimum wage is VND 323 10,000 VND (about 137 USD). This standard is usually set by the government every year based on economic development and inflation rates.

Social insurance, medical insurance and temporary insurance are important components of Vietnam’s salary structure and are governed by the Social Insurance Law (No. 58/2014/QH13) and the Medical Insurance Law (No. 25/2008/QH12, approved by 46/2014 ) / QH13 Law Amendment) system. Under these laws, both employers and employees are required to contribute to these insurance programs. Specifically, employers are required to contribute 17.5% of employees’ wages for social insurance, 3% for medical insurance, and 1% for unemployment insurance. Employees are required to pay 8%, 1.5% and 1% respectively. It is worth noting that these payment bases have an upper limit, usually 20 times the regional minimum wage.

In addition, the Labor Law also provides for several other provisions that have a significant impact on the wage structure. For example, the calculation method for overtime wages (Article 98) stipulates that overtime wages on weekdays shall not be less than 150% of normal wages, overtime wages on holidays shall not be less than 150% of normal wages, and overtime wages on holidays shall not be less than 150% of normal wages. Overtime wages during holidays shall not be less than 150% of normal wages. If it is less than 300%, night overtime work will be increased by at least 30%. Year-end bonus (Article 104), although not what it used to be, has become a common practice among Vietnamese companies and is usually equivalent to one month’s basic salary.

The Personal Income Tax Law (No. 04/2007/QH12, as amended by Law No. 26/2012/QH13) also has an important impact on the design of salary structure. Vietnam adopts a burdensome progressive system with a maximum limit of 35%. Tax exemptions and tax benefits are also provided, such as partial or full taxation on overtime wages, night shift allowances, hazardous work allowances, etc., which provides room for optimizing the fiscal structure.

In recent years , the Vietnamese government has also introduced some new regulations to further improve the system. Decree No. 90/2019/ND-CP, which came into effect in October 2020, stipulates that enterprises must formulate wage grades and salary schedules, which must be filed with the local labor management department. This provision is intended to improve the transparency and fairness of subsidies.

These laws and regulations together constitute the legal framework for remuneration in Vietnam and have an inevitable impact on the company’s remuneration structure. When designing salary plans, companies must not only consider minimum wage standards and file social insurance claims, but also make full use of the tax benefits provided by the law and optimize the salary structure on the basis of compliance to maximize employee benefits and control corporate costs. At the same time, companies also need to pay close attention to updates to laws and regulations and promptly adjust compensation strategies to adapt to Vietnam’s evolving labor market environment.

Core components of salary structure

Designing an effective compensation structure requires careful consideration of a number of core components to ensure compliance with regulatory requirements while attracting and retaining talent. These core components include Base Salary, Performance Bonus, Perks and Dignity and Egypt Benefits Each component plays an important role and together form a comprehensive bonus package.

Base salary is the cornerstone of the compensation structure and typically accounts for the largest portion of an employee’s total income. In Vietnam, basic wages must meet at least the minimum wage standards set by the government. This standard varies by region, reflecting the cost of living and economic development levels in different regions. When setting the basic salary, enterprises must not only consider the minimum wage standard, but also refer to the industry average and personal skills. It is worth noting that the basic salary is usually also the basis for calculating social insurance, medical insurance and temporary insurance contributions, which makes it a good choice in the industry. Position within the pension structure is even more important.

Performance bonuses are an important tool for motivating employees and are often directly linked to individual or team performance. In Vietnam, many companies adopt the form of “13 salary” or year-end bonus, but more and more companies are beginning to introduce more flexible quarterly or monthly performance bonus systems. This system can reflect employees’ contributions in a more timely manner and improve work enthusiasm. When designing performance bonuses, companies need to establish clear and fair bonus assessment standards and ensure that bonus payments comply with Vietnamese regulations. For example, certain types of bonuses may be considered non-taxable income under Vietnamese tax laws, which provides room for compensation optimization.

Perks and allowances are flexible parts of the perks structure and can be adjusted based on company policy and the employee’s personal circumstances. Common allowances include transportation allowance, housing allowance, communication allowance, etc. In Vietnam, some allowances may not be included in the social insurance payment base, which provides companies with opportunities to optimize their salary structures. For example, some companies may choose to provide meal subsidies or transportation for disadvantaged workers rather than simply raising basic wages to reduce the burden of social security contributions. However, enterprises need to note that according to Vietnamese labor law, some fixed allowances (such as labor allowances or post allowances) may be regarded as part of the salary and need to be included in the social security payment base.

Welfare Welfare is the girls’ part of the senior structure and is directly governed by Vietnamese laws and regulations. These include social insurance (pension, sickness, maternity, work-related injury and occupational disease insurance), medical insurance and unemployment insurance. As of 2023, employers are required to provide insurance for employees and levy social insurance premiums equivalent to 17.5% of wages, 3% medical insurance premiums and 1% temporary insurance premiums. In addition to these insurances, baseline benefits include paid annual leave (usually at least 12 days per year), statutory holiday pay. Some high-profile companies will provide additional benefits, such as supplementary medical insurance or life insurance, to enhance salary compensation.

When designing a compensation structure, companies need to balance these core components. An ideal salary structure should be able to meet the basic needs of employees (through basic salary), stimulate high performance (through performance bonuses), and adapt to individual needs (through various allowances). In addition, companies also need to consider industry characteristics, company development stage and long-term Talent strategy, making appropriate adjustments to the proportions of these components. For example, a giant company may offer a lower base salary but higher performance bonuses and equity incentives, while a mature company may focus more on providing a stable base salary and a comprehensive benefit package.

Tax Optimization Strategy

In Vietnam’s salary structure design, tax optimization strategy is a crucial link, which directly affects the company’s cost control and the actual income of employees. To develop an effective tax optimization strategy, you first need to have a deep understanding of Vietnam’s personal income tax system.

Vietnam’s personal income tax system adopts progressive tax rates, ranging from 5% to 35%, with a total of 7 tax levels. Specifically, a 5% tax rate applies to monthly income below VND 5 million, while a maximum increase of 35% applies to monthly income exceeding VND 80 million. It is worth noting that Vietnamese law stipulates that taxes can be deducted from taxable income in small and medium-sized items, including personal tax exemption (11 million VND per month). In addition, certain specific income, such as overtime pay, night shift allowance, etc., in Tax benefits are available to a certain extent.

In such a tax environment, the optimization of salary structure becomes crucial. The salary structure design mentioned above can significantly increase after-tax income without increasing the total cost of the enterprise. Among them, optimizing the ratio of employees’ basic salary and bonus is a key strategy. Often, adding a portion of your earnings from base salary to a performance bonus can lower your overall tax burden. This is because certain types of bonuses, such as year-end bonuses, may enjoy preferential policies for separate taxation, thus reducing marginal benefits. However, companies need to consider when adjusting this ratio to ensure that the basic salary is not lower than the benchmark minimum wage standard. At the same time, it also has an impact on the social insurance payment base.

Effective use of tax programs is another optimization tool. Vietnamese tax law allows multiple taxes or partial taxes, such as employee training fees, machinery fees, certain types of important allowances, etc. Companies can reduce the proportion of these tax items by increasing the proportion of these tax items. For example, providing employees with meal subsidies or transportation income, rather than simply raising wages, can increase employees’ actual income without increasing the tax burden.

Deferred pension strategies are also an option worth considering, especially for those with higher incomes. By delaying the increment of part of the pension, the gradient can be smoothed to a certain extent and avoid applying an excessively high employee marginal growth rate due to high income in a certain period. For example, part of the bonus can be dispersed to the following year, or long-term incentives can be formulated plan. However, when implementing the strategy of deferring wages, companies need to pay attention to Vietnamese laws on wage payment time to ensure compliance.

When optimizing the salary structure, companies also need to consider the impact on social insurance contributions. Although lowering the base of social security contributions can reduce the current expenditures of enterprises and employees, it may affect the long-term interests of employees, especially in terms of wages. Therefore, companies need to find a balance between short-term optimization and long-term employee benefits.

Employer Responsibilities

Employer responsibility is an important aspect that cannot be ignored in tax optimization strategies for salary structures in Vietnam. Employers and companies not only need to ensure the legality and compliance of the salary structure, but also bear corresponding tax declaration and tax obligations. The law stipulates that employers need to pay personal income tax for their employees, which requires companies to establish a two-tier salary management system, accurately calculate taxable income and report to the tax authorities in a timely manner. In addition, employers are also required to pay social security, medical insurance and unemployment insurance for their employees. Insurance, these are legal responsibilities and cannot be avoided.

Employers need to balance tax optimization and compliance risks when optimizing their tax structures. For example, excessive utilization of tax items or unreasonable reduction of taxable income may lead to questions and investigations by tax authorities. Therefore, when designing a tax structure, companies should follow the principle of substance over form and ensure that each promotion arrangement has reasonable business purposes and legal considerations. At the same time, employers should also pay attention to protecting the rights and interests of employees and ensuring that optimization strategies do not harm employee welfare.

Special tax considerations for multinational corporations

For multinational companies, tax optimization strategies in Vietnam also need to consider more special factors. The first is the issue of double taxation. Vietnam has implemented double taxation agreements with many countries. Multinational companies need to fully understand the contents of these taxes, reasonably arrange the tax-free structure for executives and expatriate employees, and avoid repeated tax payments. For example, for foreign employees stationed in Vietnam for a short period of time, they may be able to enjoy personal coverage for hospitalization during the tax holiday, which needs to be considered when designing the tax exemption.

Secondly, multinational companies must also pay attention to transfer pricing issues. The Vietnamese tax authorities need to pay urgent attention to related-party transactions between multinational companies, including intra-group remuneration arrangements. Therefore, when designing a globalized salary system, it is necessary to ensure that the salary arrangements among subsidiaries in each country comply with the principle of arm’s length transactions, and to retain sufficient documentation to cope with possible tax audits.

Finally, multinational companies also need to consider exchange rates and exchange controls. Vietnam has certain controls on foreign exchange, which may affect the implementation of cross-border salary payments and equity regulatory plans. Therefore, when designing a cross-border restructuring plan, these factors need to be fully considered, and it may be necessary to adopt a localized remuneration strategy or set up a special remuneration payment mechanism.

Case Study: Successful Silicon Valley Optimization Practices

This is a detailed case study of how a multinational technology company successfully implemented a Silicon Valley optimization strategy in Vietnam.

When the Silicon Valley-based technology company entered the Vietnamese market, it faced the challenge of maintaining its global compensation policy while complying with local regulations. The company first conducted an in-depth study of Vietnam’s Silicon Valley regulations and labor laws, and then developed a comprehensive compensation optimization plan.

The company first adjusted the ratio of basic salary and performance bonus. Taking into account Vietnam’s progressive growth rate system, the company converts part of the fixed salary into an annual bonus linked to the company’s performance. This not only reduces the monthly personal income tax, but also enhances the awareness of employees and the company’s relationship to develop together. Specifically, the company reduced the proportion of basic salary to total bonus from 70% to 60%, and increased the proportion of annual performance bonus to 25%. The remaining 15% is used for various allowances and benefits.

Secondly, the company made full use of tax items in Vietnamese tax laws. For example, companies offer employees tax-based work meals and transportation advantages instead of simply raising wages. The company has also set up an employee training fund to subsidize employees to participate in work-related training. These measures not only reduce employees’ taxable income, but also enhance employees’ skills and loyalty.

Additionally, the company introduced a stock option plan as part of long-term incentives. Although the bonus treatment of stock options in Vietnam is relatively complicated, the stock company has proposed a design that allows the options to be exercised at an optimized time point, thereby improving employee efficiency. The company has also established an employee stock ownership plan that allows employees to purchase company shares at preferential prices. This is an innovative move in Vietnam’s IT industry.

The company also pays special attention to the special tax regulations for foreign employees in Vietnam. For foreign employees posted to Vietnam for a short period of time, the company adopts a “tax tax” policy to ensure that the global tax burden of these employees will not increase due to working in Vietnam. At the same time, the company also provides tax consulting services to foreign employees who have been stationed in Vietnam for a long time to help them plan their personal taxes reasonably.

The company also takes compliance very seriously. They regularly communicate with local tax experts and legal advisors to ensure that all tax policies comply with Vietnamese laws and regulations. The company has also established an internal audit mechanism to regularly check the tax and tax situation for prevention. Potential compliance risks.

This comprehensive human resources optimization strategy has achieved remarkable results. One year later, the company’s employee satisfaction levels improved significantly and the turnover rate dropped by 15%. At the same time, the company’s overall labor costs increased by only 5%, but employees’ actual tax subsequent income increased by an average of 12%. This case shows that by in-depth understanding of local regulations and flexible application of global experience, multinational companies can effectively optimize the poverty structure in the Vietnamese market.

Employee Incentive Plan

Short Term Incentive Package

Short-term incentive plans not only effectively motivate employees, but also help companies achieve short-term business goals. Short-term incentive plans usually include performance bonuses, sales commissions and project rewards. Many forms have their own unique design considerations and application scenarios.

Performance bonuses are one of the most common forms of short-term incentives. In Vietnam, many companies adopt a monthly or quarterly performance bonus system, as well as a year-end bonus (often called “13th month salary”). Designing an effective performance bonus program requires a lot of consideration. First, the selection of performance indicators is crucial. These metrics should be quantifiable, aligned with company goals, and directly impact employees. For example, for production line employees, you might consider productivity, quality, and safety metrics; for salespeople, it could be sales or new customer development; for managers, it might include metrics such as department performance and cost control. Secondly, the bonus calculation method should be simple and clear, so that employees can easily understand the difference between their efforts and rewards. Some companies adopt a stepped bonus structure, that is, different proportions of bonuses will be obtained for different performances. This method can continue to motivate employees. Pursue higher performance. Finally, the frequency of bonus distributions also needs to be carefully considered. Monthly or quarterly releases can provide more immediate incentives, while annual releases may be aligned with the company’s long-term goals.

Sales commission is a special form of short-term incentive for the sales team. In Vietnam, especially in industries such as fast-moving consumer goods, real estate, and insurance, sales commissions can account for a very high proportion of a salesperson’s total income, sometimes even exceeding the basic salary. There are several key factors to consider when formulating a commission plan. The first is the setting of the commission rate, which usually varies based on the product’s profit margin, sales share and competitive market conditions. Some companies use a tiered commission rate, that is, sales followed by the selection of a commission base, which can be total sales, profits, or the number of new customers. In Vietnam, as cash transactions are still common, some companies will link commissions to actual receipts to ensure the health of invoices. In addition, the balance of team selling and individual selling needs to be considered to promote teamwork. Some companies adopt a hybrid model for collaboration, in which in addition to individual commissions, there are also team commissions to balance individual incentives and teamwork.

Project rewards are another important form of short-term motivation, especially suitable for project-based work or special tasks. In Vietnam, with the rapid development of technology and service industries, project production working methods are becoming more and more common, and the importance of project rewards is also important. When designing a project reward program, first clarify the key success indicators of the project, which may include the time to complete the project, Quality, budget control, etc. Award amounts are usually set in relation to the importance, impact and expected benefits of the project. The company adopts a milestone reward system, which sets reward points at key stages of the project. This not only continuously motivates the team, but also helps control the project progress. For cross-department projects, reward allocation needs to take into account the contributions of different departments to promote cross-department collaboration. In addition, project rewards can also include non-monetary forms such as professional training opportunities, highlights or public donations, which is particularly effective in Vietnam’s collective culture.

When implementing these short-term incentive programs, companies need to pay attention to several key points. The first is fairness and transparency, ensuring that reward criteria and calculation methods are open to all employees and are widely understood and recognized. The second is flexibility. The plan design should be able to be adjusted according to changes in the business environment. Again, consistency with company culture and long-term goals ensures that short-term incentives do not lead to short-sighted behavior. Finally, Vietnam’s tax policy also needs to be considered. Certain types of bonuses may enjoy preferential treatment, which can be taken advantage of in plan design.

Long Term Incentive Plan

Among employee incentive plans in Vietnam, long-term incentive plans are for companies that want to attract and retain high-quality talents in this rapidly growing market. Long-term incentive plans not only closely link employees’ personal interests with the company’s long-term development, but also play an important role in tax optimization. In Vietnam, common long-term incentive plans include equity incentive plans, profit sharing plans, and long-term retention bonuses.

Equity incentive plans are the most attractive option among long-term plans. In Vietnam, although the concept of equity incentives is relatively new, as more and more technology-based incentive companies and other enterprises are determined, this incentive method (Stock Options) is one of the most common forms, which empowers An employee’s right to purchase company stock at a predetermined price in the future. The advantage of this approach is that employees can only perform when the company’s stock price rises, thus motivating them to work hard to increase the company’s value. However, implementing a stock option plan in Vietnam requires consideration of complex legal and tax issues. For example, there are currently some restrictions under Vietnamese law on the implementation of stock option plans for unlisted companies, so companies requiring a kosher design may need to adopt other alternatives.

Restricted Stock Units (RSUs) are another increasingly popular form of equity incentive. Unlike stock options, RSUs directly save a certain number of shares, but these shares usually need to be unlocked by employees after a certain period of time. The advantage of RSUs is that even if the company’s stock price drops, employees still receive a certain value, which is especially true in some growing markets, especially import plans. In Vietnam, the implementation of RSU requires consideration of foreign shareholding restrictions, foreign exchange controls and other factors. Companies choose to circumvent these restrictions by setting up offshore trusts or using stock appreciation rights (SARs).

Profit-sharing plans are another long-term incentive method that is becoming increasingly popular in Vietnam. This type of plan usually distributes a percentage of the company’s profits to employees, which can take the form of cash payments or stock. The advantage of the profit-sharing plan is that it directly links the company’s performance to employee benefits, which enhances employees’ sense of ownership. When implementing a profit-sharing plan in Vietnam, you need to pay attention to the tax implications. For example, profit sharing in the form of cash is generally considered taxable income, while certain forms of stock distributions may enjoy tax benefits. Therefore, companies need to weigh the impact of different options when designing.

Long-term retention bonuses are an important motivational tool for key talent. This type of bonus is usually promised to be paid after the employee completes a certain period of service, and the amount may be tied to company performance or personal performance. In Vietnam, the design of long-term retention bonuses needs to take into account the labor contract law. At the same time, companies can also consider combining retention bonuses with other long-term incentives. For example, they can be paid partly in cash and partly in the form of stocks to achieve better results. tax optimization effect.

When implementing these long-term supervision plans, Vietnamese companies need to pay special attention to several key points. First of all, it is necessary to ensure that the supervision plan complies with Vietnam’s laws and regulations, especially when it comes to foreign shareholding, foreign exchange and other controls. Second, consider the accounting and financial impact of these plans to ensure they do not put undue pressure on the company’s financial statements. Thirdly, it is necessary to design clear performance indicators and assessment mechanisms to ensure that the incentive plan can truly promote the company’s long-term development. Finally, focus on communication and missteps to ensure employees fully understand the value of these programs and how they work.

Non-Material Incentives

In the Vietnamese corporate environment, non-material incentives are also part of a comprehensive employee incentive plan. The right measures can not only increase employee satisfaction and financial loyalty, but also significantly increase employee motivation and productivity without increasing direct costs. The core of non-material incentives include career development paths, work-life balance plans, and recognition and reward systems.

Development path is a guideline for employees’ long-term planning and an important strategy for companies to retain talents. In Vietnam, with the rapid economic development and the career advancement of young talents, career development opportunities have become a key factor in attracting and retaining outstanding employees. Companies can support employees’ career development by establishing clear channels and providing customized training programs. For example, some multinational companies have launched “High Potential Talent Programs” in Vietnam to provide cross-department rotations for young employees with outstanding performance. At the same time, more and more local companies in Vietnam have begun to pay attention to internal talent training and set up overseas mentor systems. Help employees develop personal development plans. These measures can not only meet the needs of growth, but also cultivate management talents for enterprises that match their own employee culture and needs.

Work-life balance programs are gradually gaining importance in Vietnam, especially playing an important role in attracting the younger generation of employees. Vietnam has traditionally valued the role of family, so policies that help balance work and personal life often receive a positive response. Specific measures are likely to receive a positive response from employees. Includes flexible working, telecommuting options, paid time off and more. Some innovative companies have even launched an “unlimited paid vacation” policy, which allows employees to take flexible vacation arrangements as long as they complete their work tasks. In addition, measures such as providing childcare support and health management plans can not only improve employee job satisfaction, but also help companies establish a good employer brand image.

The recognition and reward system is a crucial part of non-material incentives, especially in a country like Vietnam that values ​​collectivism and face-saving culture. An effective recognition system can greatly enhance employees’ sense of self-worth and enthusiasm for work. This can range from formal reward programs, such as “Employee of the Month” awards, to everyday recognition, such as public praise at team meetings. Some companies have introduced peer review systems to give employees the opportunity to express their gratitude and recognition to their colleagues. The use of media and internal company communications platforms also provides new channels for employee recognition. It is worth noting that when designing the recognition system, Vietnamese cultural characteristics need to be considered, such as focusing on collective honor and avoiding overly individualistic behavior.

Evaluation and adjustment of incentive plan effects

Evaluation and adjustment of the effectiveness of incentive programs are key to ensuring the continued effectiveness of these measures. In Vietnam, due to rapid changes in the labor market, it is extremely important to regularly evaluate and adjust incentive programs. Assessments can be conducted in a variety of ways, such as employee questionnaires. Some companies have also introduced “pulse surveys,” short form surveys conducted at intervals to capture employee feedback and changes in needs in a timely manner.

There are several factors to consider when adjusting your re-incentive plan. The first is market trends, including what competitors are doing and emerging best practices. The second is a change in company strategy to ensure that incentive plans are aligned with the company’s long-term goals. It is changes in employee demographics, such as an increase in the proportion of younger generation employees that may require more career development opportunities and work-life balance measures. In addition, changes in laws and regulations in Vietnam need to be considered to ensure that all incentives comply with the latest legal requirements.

One successful case is a subsidiary of a multinational technology company in Vietnam. They conduct comprehensive employee feedback collection every quarter, including online surveys and focus groups. Based on this feedback, the company regularly adjusts its non-material incentives. , after discovering the strong demand among young employees for international development opportunities, the company increased the number of places in overseas exchange programs. At the same time, the company has introduced more flexible work arrangement options for employees with families. This continuous evaluation and adjustment not only improves employee satisfaction, but also significantly reduces employee turnover.

Pay scale and performance management

In Vietnam’s salary structure design, salary and performance management not only affect employees’ income and career development, but are also directly related to the company’s talent attraction, retention and motivation strategies. The design of this system requires comprehensive consideration of the hierarchical company’s organizational structure, market competitiveness, internal fairness, and long-term development strategy.

Job evaluation and pay grade design are the basis of the entire system. With the rapid development and increasing internationalization of Vietnam’s labor market, more and more companies are beginning to adopt systematic job evaluation methods. Common methods include point proportion method, hierarchical ranking method and market pricing method. Taking the point weighting method as an example, the company will score each position based on skill requirements, degree of responsibility, working conditions, etc., and then determine the relative value of the position based on the total score. This method can estimate the relative importance of different positions and provide a scientific basis for the design of such salary levels.

After completing the job evaluation, the next step is to design a salary scale. Companies in Vietnam usually set up multiple salary levels, and each level has its corresponding salary range. For example, a medium-sized manufacturing company may set up 10-15 salary grades, from entry-level operators to senior managers. Each grade’s salary range usually has a minimum, median, and maximum. This structure allows room for salary growth within the same grade, while also providing employees with a clear path forward. When designing pay scales, companies need to consider market pay, internal fairness, and the company’s pay levels. Especially in a rapidly changing market like Vietnam, it is important to conduct regular market salary research and adjust salary levels accordingly.

The performance appraisal system is another key component of pay scale and performance management. With the improvement of business management level in Vietnam , more and more companies are beginning to adopt performance evaluation systems. A typical performance review process includes goal setting, mid-term reviews, year-end reviews, and feedback communication. When setting goals, Vietnamese businesses are increasingly adopting the SMART principle (specific, simplified, achievable, relevant and sometimes limited). Not only does this take the assessment a step further, it also helps employees gain a clearer understanding of the company’s expectations.

In terms of specific evaluation methods, Vietnamese companies commonly use rating method evaluation, 360-degree evaluation method and key performance indicator (KPI) method. Among them, the KPI method is becoming more and more popular in Vietnam, especially in sales, production, etc. For example, a salesperson’s KPI may include sales volume, the number of new customers developed, customer satisfaction, team satisfaction and other indicators. For management positions, in addition to quantitative indicators, soft indicators such as leadership and construction will also be considered. In recent years, more and more Vietnamese companies have begun to adopt online performance management systems, which not only improves efficiency, but also enhances the effectiveness of the entire process. transparency.

Performance is directly related to performance evaluation results. This linkage is usually expressed in several aspects: annual salary increases, performance bonuses and top opportunities. Annual salary increases are usually directly related to the results of performance appraisals. Employees with outstanding performance may. For example, an IT company may classify employees into four grades: A, B, C, and D based on the results of performance appraisals. The corresponding salary increase ratio may be 10 %, 7%, 4% and 0%. Performance bonuses are also tied to evaluation results, often using different coefficients or proportions. For example, top-performing employees may receive a bonus equivalent to 3-4 months’ salary, while average-performing employees may receive only 1 month.

Many companies in Vietnam will set up “promotion committees” to regularly evaluate employees’ performance and ability improvement, and provide promotion opportunities for outstanding employees. Promotion not only means promotion of position, but also directly related to salary adjustment.

However, Vietnamese companies also face some challenges when implementing performance-related bonuses. The first is cultural factors. Vietnam’s collectivist cultural mechanism may prevent some employees from directly linking personal performance with bonuses. Second is the investigative and fair nature of performance evaluation, which requires evaluators to receive professional training and establish an effective grievance mechanism. In addition, overemphasis on short-term performance may cause employees to neglect long-term development and teamwork, so a balance needs to be found between short-term incentives and long-term development.

Digital decision management

Digital payroll management has become a key tool for Vietnamese and even global companies to improve efficiency and optimize decision – making . This trend not only reflects global scientific and technological progress, but also reflects the pursuit of modern management by Vietnamese enterprises. Digital Payroll Management covers the entire process from system selection to data analysis to automated application.

The selection and implementation of payroll systems are considerations for digital transformation. The bottlenecks that Vietnamese companies face when choosing a system are: localization requirements, compatibility with existing HR systems, cost-effectiveness, and future scalability. Many multinational companies choose to localize globally unified systems, while local Vietnamese companies prefer to choose systems that comply with local regulations and cultural characteristics. For example, some systems are capable of automatically calculating Vietnam’s complex social security penalty standards, which is critical to ensuring compliance. During the implementation process, companies usually adopt strategic stages, starting with a small-scale strategy and then gradually promoting it. The key is to ensure that the system can accurately handle Vietnam’s unique compensation structure, such as various allowances and bonuses, while also considering data security and privacy protection.

Its use of data analysis to optimize human resource decision-making has become a practice for advanced enterprises in Vietnam. By collecting and analyzing large amounts of data, businesses can make smarter HR decisions. For example, by analyzing the relationship between human resource levels and employee performance, taxes and turnover rates, companies can find optimal compensation strategies. Some Vietnamese companies have begun to use predictive analytics to predict future labor costs and talent demand relationships for better budget planning. Data analytics can also help companies identify pay disparities and ensure that, for example, a multinational technology company’s branch in Vietnam discovered gender pay inequalities through data analysis and took appropriate measures to eliminate such inequalities.

Of course, there are still some challenges in using data analytics in Vietnam. The first is data quality, with many businesses having incomplete or inaccurate historical data. Secondly, there is a lack of analytical capabilities, and it is necessary to cultivate HR professionals with data analysis skills. To do this, some companies choose to work with external consulting firms or invest in training internal teams.

The application of automation in payroll management is rapidly gaining popularity among Vietnamese enterprises. Automation not only increases efficiency but also reduces human error. For example, automated systems can automatically calculate overtime pay, bonuses and various allowances based on preset rules, minimizing the workload and error rate of manual calculations. In terms of tax and social security enforcement, automated systems can promptly update the latest regulatory requirements to ensure that companies are always compliant. Advanced systems can even automatically generate various reports, such as revenue trend analysis, budget execution, etc., to provide decision-making support for owners.

In Vietnam, automation also extends to employee self-service. More and more companies are beginning to use mobile applications, allowing employees to check their salary information, apply for leave, update personal information, etc. at any time. This not only improves employee satisfaction, but also reduces the workload of the HR department.

However, implementing automation also comes with some challenges. If the investment costs of small and medium-sized enterprises are increased , some older employees may be resistant to the new system. Therefore, businesses need employees to develop a comprehensive change management plan that includes adequate training and ongoing support.

Implementation and adjustment

Implementing a new compensation structure and making ongoing adjustments is a complex and critical process. This process not only involves changes at the technical level, but also requires consideration of organizational culture, employee psychology, market dynamics and other aspects. Effective implementation and adjustment strategies can ensure the smooth implementation of the new advanced structure and continuous optimization in practice to adapt to The special needs and rapid changes of the Vietnamese market.

If a new restructuring policy is implemented , communication is a critical stage in the implementation process. Due to the differences in cultural background and education level with Vietnam , communication needs to be particularly refined and implemented. An effective communication strategy usually includes multiple levels: presentations by senior managers, training by middle managers, briefings for all employees, and one-on-one consultations. During the communication process, the focus should be on how the new salary structure is beneficial to the joint development of employees and the company, and the other is the change in numbers. For example, you could highlight how the new structure provides a clearer career path and better rewards high performance. Or given Vietnam’s collectivistic culture, it’s also important to emphasize how the new structure promotes teamwork and overall company effectiveness. At the same time, in order to avoid deviations in information transmission, detailed FAQ documents can be prepared and a dedicated hotline or email address can be set up to answer employee questions.

A phased implementation plan is an effective way to ensure the transition to a new financial structure. Taking into account the differences between different regions and sectors in Vietnam , phased implementation is urgently needed. A typical phased plan may include the following steps: first, carry out one aspect within a small scope, such as selecting a department or a branch; then, adjust and improve based on key results; then, gradually expand to other departments or regions ;Finally, implement it company-wide. Set clear timelines and goals, and have the resources to support them. For example, at certain stages, more HR support may be needed to handle employee inquiries and feedback. During the full implementation phase, more IT support may be needed to ensure the smooth operation of the system.

When implementing a new salary structure in Vietnam, you also need to pay special attention to changes in Vietnam’s laws and regulations . For example, adjustments to minimum wage standards and changes in social insurance policies may have a direct impact on the salary structure . At the same time, taking into account the increasing rate of economic development in different regions of Vietnam, when promoting the new salary structure nationwide, appropriate adjustments may need to be made based on local conditions.

Continuous evaluation and optimization mechanisms are key to ensuring the long-term effectiveness of the new compensation structure. In Vietnam’s rapidly changing market environment, regular evaluation and timely adjustments are important. An effective evaluation and optimization mechanism usually includes the following aspects:

• Regular data analysis: Use the recruitment management system to collect and analyze relevant data, such as recruitment levels, employee satisfaction, turnover rates, etc. In Vietnam, due to the rapid changes in the labor market, it is recommended to conduct a comprehensive analysis at least quarterly.
• Continuous market research: Conduct market salary research regularly to understand industry salary trends and competitor practices. In Vietnam, some leading companies have even established real-time salary data exchange platforms to respond to market changes faster.
• Employee feedback mechanism: Establish an employee feedback mechanism through multiple channels, such as anonymous donations, focus group discussions, employee representative meetings, etc. In Vietnam, anonymous feedback channels are important due to cultural considerations to encourage employees to provide more honest opinions.
• Flexible adjustment mechanism: Establish a rapid response and adjustment mechanism based on analysis results and feedback. For example, an adjustment committee can be set up to regularly adjust the adjustment strategy and have the authority to make necessary adjustments.
• Scenario simulation: Regularly conduct scenario simulations of pension strategies to evaluate the sustainability of pension strategies under different economic environments. This is extremely important for Vietnam because although its economy is growing rapidly, it is also facing various uncertainties.

When implementing these evaluation and optimization mechanisms, Vietnamese companies also need to pay attention to several key points. Ensure the transparency of the evaluation process so that employees understand the evaluation criteria and process. When making adjustments, Vietnamese cultural characteristics, such as the emphasis on stability and exposure to sudden changes, should be fully taken into account . Any major adjustments should be accompanied by adequate communication and a transition period to give employees enough time to adapt.

Conclusion and future prospects

The success of Vietnam’s salary structure design is not only related to the company’s talent attraction and acquisition capabilities, but also directly affects its competitive position in the rapidly developing market. Through an in-depth analysis of compensation practices in Vietnam, we can summarize several key success factors.

First, the balance between localization and globalization is crucial. Vietnam’s cultural characteristics, legal environment and market dynamics are significantly different from other countries, so simply copying the internationally accepted infant model often fails to achieve the desired results. A successful infant structure requires a deep understanding of Vietnam’s collectivistic culture, respect for institutions, and rapidly changing market conditions, while also being consistent with the global strategies of multinational companies. For example, in Vietnam, team performance rewards may be more effective than individual performance rewards; and Vietnam’s special regulations on foreign exchange controls and equity are taken into account when designing incentive plans in the long term.

Secondly, flexibility and presets are another key factor in the design of Vietnam’s human resources structure. The Vietnamese market is changing rapidly and there are significant differences between different regions and industries. Therefore, the human resources structure needs to be equipped with sufficient flexibility to cope with these changes. Successful companies usually adopt a graduated salary design that allows for adjustments according to different regions and different ranks. At the same time, a regular and timely review mechanism will be established to ensure that the salary structure can respond to market changes.

Third, compliance is another highlight that cannot be ignored. Vietnam’s labor regulations are complex and frequently updated, and a successful salary structure must strictly adhere to these regulations, especially in terms of social insurance, minimum wage standards, etc. At the same time, more and more Vietnamese employees, especially the younger generation, pay more attention to the restructuring of higher education. Therefore, the restructuring strategy of the restructuring, including the explanation of the restructuring composition and adjustment mechanism, has become an important part of the successful implementation of the restructuring structure.

Looking to the future

Vietnam’s human resources structure design will face new trends and challenges. First, digital transformation will profoundly affect human resource management. More and more companies are beginning to adopt advanced HRIS systems and use big data analysis to optimize human resource decisions. In the future, we may see more applications of AI-based revenue forecasting and optimization tools, which will help companies formulate revenue strategies more accurately.

Secondly, as Vietnam’s economy continues to develop and its level of internationalization increases, competition for talents will become more intense. This means that companies need to design more attractive salary packages, which may include more certain long-term incentive plans and more comprehensive incentive plans. Especially in emerging fields such as high-tech and finance, how to design pay packages that are both focused on international competition and in line with local realities? Compensation plans will become an important challenge for companies.

Third, sustainability and social responsibility will play a more important role in compensation design. More and more Vietnamese companies are beginning to pay attention to environmental, social and governance (ESG) issues, which may be reflected in the design of compensation structures, such as incorporating sustainable development goals into executive compensation assessment indicators and designing incentives to encourage employees to participate in social responsibility projects. Incentive mechanism, etc.

Companies need to adopt active response strategies to these trends. First, increase investment in digital payroll management tools and improve data analysis capabilities. Secondly, establish a more agile salary adjustment mechanism that can quickly respond to market changes. Thirdly, strengthen communication with employees and collect feedback regularly to ensure that the compensation strategy can meet the changing needs of employees.

Finally, companies also pay more attention to the training and introduction of professional talents. As the complexity of recruitment management increases, recruitment experts with data analysis skills, understanding of the latest regulations, and the ability to balance the interests of the business and employees will become increasingly important.

Overall, Vietnam’s future salary structure design will be more complex, dynamic and personalized. Successful businesses need to find a balance between complying with regulations, meeting employee needs, controlling costs and driving business growth. Through continuous innovation and optimization, the salary structure can not only become a powerful tool to attract and retain talents, but also become a strategic lever to promote the company’s continued success in the Vietnamese market.