At the time near the Lunar New Year 2021, "13th month salary, Tet bonus" is one of the issues that employees are most concerned about. So, is the enterprise obligated to pay the 13th month salary to employees? Is the 13th month salary subject to personal income tax and social insurance in accordance with regulations in Vietnam?
Article table of contents
1. Is the employer obligated to pay the 13th month salary to employees?
“13th month salary” is a phrase that is not specified in any legislative documents. It can be understood that the 13th month salary is a bonus at the end of the year that enterprises pay employees as a motivation for employees to actively work, attracting good human resources for the enterprise.
Pursuant to Article 104 of the Labor Code 2019 of Vietnam, “a bonus means an amount of money, a piece of property or item that is provided by an employer for his/her employees on the basis of the business performance or the employees’ performance”.
This regulation does not clearly state that the 13th month salary is a Tet bonus (due to the fact that some companies have both 13th salary and Tet bonus), however, it can be seen that businesses are not required to pay 13th month salary to employees. Payment of the 13th month salary depends on:
(i) Production and business results, the level of work completion of employees
(ii) Is there an agreement on the 13th month salary in the labor contract?
(iii) Is it recognized in the sectoral collective bargaining agreement?
Employees need to pay attention to this regulation, because in case the enterprise makes a loss, the employee does not complete the work as planned, it is very likely that employee will not receive the 13th month salary.
2. Is the 13th month salary subject to personal income tax?
The 13th month salary can be considered as a bonus paid by enterprises to employees. Therefore, employees who receive 13th month salary must pay personal income tax according to the provisions of Point e, Clause 2, Article 2 of the Circular No. 111/2013/TT-BTC of the Ministry of Finance of Vietnam, specifically as following:
Article 2. Taxable incomes
According to Article 3 of the Law on Personal income tax and Article 3 of the Decree No. 65/2013/ND-CP, the incomes subjects to personal income tax (hereinafter referred to as taxable incomes) include:
…
2. Incomes from wages and remunerations.
e) Rewards in cash or not in cash in any shape or form, including rewards in the form of securities, except for: …
However, according to Clause 1 Article 1 of the Resolution No. 954/2020/UBTVQH14:
- Personal exemption: 11 million VND/month (132 million VND/year);
- Dependent exemption: 4,4 million VND/dependent/month.
Thus, the employee only pays personal income tax after deducting family circumstances deduction of 11 million VND/month and 4.4 million VND/dependent/month but still positive.
3. Is the 13th month salary subject to social insurance?
According to Clause 3 Article 30 of the Circular No. 59/2015/TT-BLĐTBXH, the monthly salary paid for compulsory social insurance does not include the other benefits and welfare such as:
- Bonus as stipulated in Article 103 of the Labor Code 2012 (Article 104 of the Labor Code 2019), initiative bonus;
- Meals between shifts;
- Gasoline, telephone, travel, accommodation and child care allowances;
- Assistance upon the death of employees’ relatives, the marriage of employees’ relatives, employees’ birthday, subsidy to the employees in difficult situation in case of work accident, occupational disease and other allowances and assistance recorded in separate items in the labor contract.
Thus, bonuses of employees including 13th month salary, Tet bonus, etc. are not used as a basis for calculating social insurance premiums in Vietnam.
Thu Ba
