Understanding the definition of net salary and knowing how to calculate net salary, and fees to pay when receiving net salary will help employees feel secure and assure their benefits.
Before officially starting work, the employee and the enterprise will sign a labor contract with an agreement on the salary and welfare payment form. At that moment, many workers wondered what net salary is and how to calculate net salary, and what fees they have to pay when receiving net salary. The following information from Navigos Search will answer these problems!
1. What is net salary?
Net salary is the actual salary received by the employee after deducting all insurance costs and personal income tax.
The concept of net salary is not recognized by legal documents but it is often used by businesses when negotiating wages with employees.
Find out about the concept of net salary
2. How to calculate net salary accurately
Currently, net salary is calculated according to the following formula:
Net salary = Gross salary - Compulsory insurance costs- Personal income tax (if any)
Where:
Gross salary
Is the total amount that the enterprise pays to the employee, including the basic salary and allowances, commissions excluding the compulsory insurance costs and personal income tax (if any).
The employee's compulsory insurance premium will be calculated based on the salary received by the employee. Specifically as follows:
- 8%: the retirement - death benefits.
- 1%: unemployment insurance.
- 1.5%: health insurance.
Personal income tax (PIT):
PIT = (Total income - Exemption - Deduction x tax rate)
Where:
Exemptions include:
Compensation for labor accidents, overtime pay, pensions, etc.
Deductions include:
- Family circumstance deduction level for employees: VND 11 million/month.
- Family circumstance deduction level for dependents: VND 4.4, million/month.
- Voluntary pension and insurance contributions.
- Charitable, humanitarian and study promotion contributions.
Tax rate: According to the partial progressive tax schedule in the table below:
|
Level
|
Assessable income/month (million VND)
|
Tax rate
|
|
1
|
Up to 05
|
5 %
|
|
2
|
Over 05 - 10
|
10 %
|
|
3
|
Over 10 - 18
|
15 %
|
|
4
|
Over 18 - 32
|
20%
|
|
5
|
Over 32 - 52
|
25 %
|
|
6
|
Over 52 - 80
|
30 %
|
|
7
|
Over 80
|
35 %
|
How to calculate net salary accurately
3. Advantages and disadvantages when receiving net salary
Below are advantages and disadvantages when receiving Net salary
Advantages when receiving net salary
For employees
For employees, receiving the full net salary agreed with the enterprise will have an advantage over the gross salary. This makes employees not worry about the problem of reduction, deduction, or difference in the amount received like gross salary.
Employees also do not have to calculate the amount of tax and fee payment. As for the insurance fees, the enterprise will calculate and pay that amount. Thus, employees feel more comfortable and do not need to calculate and check the deduction in their salary.
For enterprises
Enterprises will easily manage the number of employees and the size of the workforce. In addition, businesses are more proactive in calculating amounts payable to employees under the law to save time for other work.
Disadvantages when receiving net salary
For employees
If employees receive the net salary, the enterprise will be responsible for the payment of insurance for the employee. Using all this money for payment will lead to a low premium and fewer benefits. Therefore, the risk in this form is that the employee's insurance benefits will be fewer than the actual benefits received.
For enterprises
Enterprises will have more difficulty in managing the number of employees. It will take longer to process plans on development strategies, year-end financial statements and policies for employees.
The advantages and disadvantages of receiving net salary
4. What employee should know when receiving net salary?
If employees have decided to receive net salary, they should master the following factors:
Does net salary include allowances?
Net salary does not include the entire total salary that employees receive as it depends on agreements, welfare policies, and remuneration regimes that businesses offer their employees.
Allowances such as support for gas, phone, overtime, and lunch will be added to the monthly net salary. Therefore, when negotiating net salary with employers and businesses, employees should propose a net salary that does not include these allowances. If the employer suggests employees receive a net salary, ask clearly whether that salary includes allowances.
Fees employees must pay when receiving net salary
Employees must pay the following amounts when receiving net salary:
Compulsory insurance
According to regulations, when signing a labor contract with the company, the employee is entitled to benefits from social insurance, health insurance, and unemployment insurance. In particular, both employees and businesses are obliged to jointly pay the compulsory insurance premium. The rate of division of fees between enterprises and employees is as follows:
- The social insurance premium to be paid is 22.5%, with employees paying 8% and businesses paying 17.5%.
- The health insurance premium to be paid is 4.5%, with employees paying 1.5% and businesses paying 3%.
- The level of union dues to be paid is 2%. The business is responsible for paying the entire amount.
Personal income tax
In addition to the compulsory insurance premiums paid according to regulations, employees also have to pay personal income tax if they sign a labor contract with a term of 3 months or more. With this form, employees must pay taxes according to the progressive schedule. At that time, the payment of personal income tax depends on the salary and income that the employee has received.
Discuss compulsory insurance premiums
The salary paid for insurance directly affects benefits for sickness, maternity, occupational disease, unemployment, pension, in the future. Therefore, when agreeing on salary, employees should clearly discuss with the enterprise about the amount paid for insurance to know their rights.
Check the monthly social insurance payment of the enterprise
Employees receiving net salary should regularly check their insurance payment process to avoid the avoidance of compulsory insurance of enterprises. If employees find there are errors or problems, they should directly discuss them with the enterprise for a clear answer.
Things to know when receiving net salary
The above is information about net salary and some notes related to employees' rights when receiving net salary. In addition, hot jobs with attractive salaries are regularly updated on Navigossearch's job category, so don't miss it. Or you can actively send us your CV for a chance to become a potential candidate in our candidate database.
Our consultants are experienced recruitment experts who deeply understand the personnel value and the labor market. Based on a methodical working process and client's recruitment requirements, our recruitment specialists will search for appropriate jobs and actively contact you.
After contacting you, our recruitment specialist will support and advise you on the business, the market, and recruitment requirements to help you get the most suitable job position. After being recruited, they will continue to support you during and after the probationary period.
Search for your dream job at Navigos Search
With more than 20 years in recruitment, we are proud to bring quality middle and high-level job opportunities at large enterprises and multinational corporations to job seekers across Vietnam. Don't hesitate to contact us if you are looking for any middle or senior positions.
Navigos Search - Vietnam's leading middle and high-level talent hunting company