There are still many queries related to the 13th month salary such as “What is the 13th month salary?”, “Is the 13th month salary different from the Tet bonus?”, or “Is the 13th month salary subject to social insurance and personal income tax?”.
Many workers are still wondering what the 13th month salary is and whether the 13th month salary is a Tet bonus. These are all benefits that employees receive after one year of hard work. Find out more about these issues with Navigos Search through the information below.
1. What is the 13th month salary?
Currently, there is no specific definition of 13th month salary in law. The 13th month salary means the pay that the employee and the employer agree to pay at the end of the year. This number depends on the regulations of each unit.
What is the 13th month salary?
2. Is the 13th month salary a Tet bonus?
After finding out what the 13th month salary is, we continue discovering whether the 13th month salary is a Tet bonus.
As mentioned, there are no legal documents regulating the 13th month salary. Many businesses include a clause on the 13th month salary in the labor contract while many ones do not. If the labor contract includes a provision on the 13th salary, the enterprise must pay this salary.
Many workers still think that 13th month salary is a Tet bonus, but this is not true.
Pursuant to Article 104 of the Labor Code 2019 promulgated on November 20, 2020, effective from January 1, 2021:
1. “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.
2. A bonus regulation shall be decided and publicly announced at the workplace by the employer after consultation with the representative organization of employees (if any).”
Thus, in essence, what is a 13th month salary? The 13th month salary is not a Tet bonus. A Tet bonus is an amount of money decided by the enterprise to reward employees when the business has high revenue or the employees complete the assigned tasks.
What is the common feature of the Tet bonus and 13th-month salary? They are all distributed at the end of the year and decided by the user. Employers (enterprises) use the 13th-month salary as the pay to attract workers and talents or motivate their employees to try harder at work.
What is the common feature of Tet bonus and 13th month salary?
3. How to calculate 13th month salary
As there is no specific regulation on the 13th-month salary, each enterprise will have its own 13-month salary calculation. Typically, the 13th month salary depends on the employee's monthly salary with two following calculation methods:
Method 1: Calculating the 13th month salary according to the average salary
For employees who have worked 12 months or more:
13th month salary = 12-month average salary
For employees who have worked for less than 12 months:
13th month salary = working time in year/12 x average salary
Method 2: Calculating 13th-month salary according to 12th-month salary
Many businesses apply the 13th month salary calculation according to the 12th month salary as follows:
13th month salary = 12th month salary
What is the exact calculation of the 13th month salary?
4. Is it mandatory to pay the 13th month salary to employees?
Currently, there are no legal documents stipulating that enterprises must be required to pay a 13th-month salary to employees. However, under Article 104 of the Labor Code, enterprises have to pay a 13th-month salary if:
- The enterprise has publicly issued the bonus regulation specifying the regulation of the 13th-month salary at the workplace.
- The employee has been eligible for the 13th-month salary under the enterprise's regulations.
What is the mandatory requirement for businesses to pay 13th month salary?
5. How will businesses be if they don't pay the 13th month salary to employees?
If the enterprise does not pay the employee despite the cases mentioned above , the law does not have any sanctioning provisions.
Currently, the labor law only stipulates two administratively sanctioned violations related to bonus issues. Specifically, at points a and e, clause 1, Article 16 of Decree 28/2020/ND-CP:
A fine of between VND 2 million and VND 5 million shall be imposed on the employer who commits one of the following:
- Failure to publicly announce the bonus regulations at work;
- Do not consult with the representative of the labor collective when formulating bonus regulations.
This is only the fine level for individuals. The one for organizations will be two times higher than the level for individuals.
Regulations on fines for businesses that do not pay 13th month salary
6. Does 13th month salary count social insurance and personal income tax?
Do social insurance and personal income tax be charged on the 13 month salary?
According to Clause 2, Article 89 of the Law on Social Insurance 2014:
“For employees who pay social insurance premiums according to the employer-decided salary regime, their monthly salary on which social insurance premiums are based is their salary plus salary-based allowance as prescribed in the labor law.
Since January 1, 2018, the monthly salary on which social insurance premiums are based will be the salary plus salary-based allowance and other amounts as prescribed in the labor law.
Thus, the 13th month salary is not subject to social insurance.
Does personal income tax be charged on the 13 month salary?
According to point e, Clause 2, Article 2 of Circular 111/2013/TT-BTC, an employee's 13th month salary is taxable income.
However, if the 13th month salary is available after deducting deductions such as family circumstances, insurance premiums, voluntary retirement funds, charitable contributions, humanitarian contributions, and study promotion, it has to be paid personal income tax.
The 13th month salary is not subject to social insurance.
The above article has explained what the 13th-month salary is and provided information related to the 13th-month salary. Hopefully, this information has helped employees better understand the nature of the 13th-month salary. When signing a labor contract, employees should pay attention to the terms in the contract to negotiate the highest possible bonus.
If you still don't know how to negotiate salary with employers, our recruitment specialists will be companions during the job search, the interview process, during and after probationary.
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