The most accurate salary calculation formulas [Updated 2025]

Payroll calculation formulas play an important role in ensuring transparency and fairness in human resource management of every business. Understanding and correctly applying payroll calculation methods not only helps to comply with legal regulations but also motivates employees. From time-based, product-based to revenue-based salary calculation methods, each calculation method has its own advantages and is suitable for different types of businesses. 1C Vietnam will guide you on how to apply the most effective payroll calculation formulas for businesses.

1. Overview of salary calculation formulas

Before going into the details of salary calculation formulas, it is necessary to clearly understand the concept of salary and the factors that affect it.

1.1. What is salary?

According to the Vietnamese Labor Code, wages are defined as the amount of money paid by an employer to an employee for performing work as agreed upon. Wages include wages based on work or position, wage allowances and other additional payments.

Salary plays an important role in:

• Maintain and improve employee motivation
• Ensuring fairness in income distribution
• Controlling the human resource costs of the business
• Comply with labor laws

The main components of a salary typically include:

• Base Salary: Amount paid to an employee based on job position
• Allowances: Additional payments to basic salary such as lunch, travel, housing allowances
• Bonus: Bonus based on performance or holidays

1.2. Factors affecting wages

Many different factors can affect the final salary an employee receives. Understanding these factors helps make calculations more accurate and transparent.

Allowances are an important supplement to the basic salary. Common types of allowances include:

• Lunch allowance: Usually from 20,000 to 40,000 VND/day depending on the size and policy of the business.
• Travel allowance: Can be a fixed amount or based on actual expenses
• Housing allowance: Applicable to employees who have to work away from home or in big cities

Bonus is also a factor that significantly affects employees' income:

• Performance Bonus: Based on work results, can be paid monthly, quarterly or annually
• Holiday bonus: Usually paid on major holidays such as Lunar New Year, April 30 - May 1

Social insurance and personal income tax deductions are mandatory deductions:

• Social insurance, health insurance, unemployment insurance: Employees pay 10.5% of basic salary
• Personal income tax: Apply progressive tax schedule with starting tax rate of 11 million VND/month

2. Common salary calculation formulas

There are many different methods of calculating wages, each with its own advantages and suited to specific types of work.

2.1. How to calculate salary by time

The time-based method of calculating wages is the most common, especially in administrative, office or service jobs.

The time-based salary formula can be applied in several ways:

Monthly salary: Net salary = Basic salary + Allowance + Bonus - Deductions

Daily wage:

• Daily salary = Monthly salary / Number of working days in the month
• Actual salary received = Daily salary × Actual number of working days

Hourly wage:

• Hourly wage = Monthly wage / (Number of working days × Number of working hours per day)
• Net salary = Hourly salary × Actual working hours

Example:

Actual salary = 10,000,000 + 800,000 + 500,000 - 1,050,000 = 10,250,000 VND

Advantage:

• Easy to calculate and manage
• Ensure stable income for workers
• Suitable for stable, repetitive work

Disadvantages:

• Does not encourage productivity
• Difficult to evaluate actual work performance

2.2. How to calculate salary by product

The piece rate method is often applied in manufacturing, processing or jobs where the number of completed products can be measured.

Formula for calculating salary by product:

Actual salary received = Number of completed products × Product unit price + Allowances - Deductions

Example:

Actual salary = 500 × 20,000 + 800,000 - 1,050,000 = 9,750,000 VND

This method should be applied when:

• Work can be measured in terms of the number of products completed.
• Businesses want to encourage productivity
• Product quality can be easily controlled

Advantage:

• Encourage workers to increase productivity
• Fairness based on actual work results
• Easily calculate production costs

Disadvantages:

• May affect product quality if there is no control mechanism
• Unstable income for workers

2.3. How to calculate salary based on revenue

The revenue or commission method of salary calculation is commonly applied in the sales, brokerage, real estate or insurance industries.

Salary calculation formula based on revenue:

Net Salary = Basic Salary + (Revenue × Commission Rate) + Allowances - Deductions

Or in case of commission only: Net salary = Revenue × Commission rate - Deductions

Example:

Advantage:

• Create strong motivation for workers
• Linking income to business performance
• Suitable for sales and service jobs

Disadvantages:

• Unstable income
• Can put a lot of pressure on workers
• It is difficult to control service quality if you only focus on sales.

Note when applying:

• There needs to be a mechanism for evaluating service quality.
• Should be combined with basic salary to ensure minimum income
• Commission rates may vary by rank or sales level

3. How to Calculate Salary in Special Cases

In addition to the basic salary calculation methods, there are special cases that need to be calculated separately to ensure the rights of employees.

3.1. Overtime pay

Calculating overtime pay must comply with the provisions of the Vietnamese Labor Code, ensuring the rights of employees when having to work overtime.

According to the law, overtime pay is calculated as follows:

• Weekdays: at least 150% of regular hourly wage
• Weekly rest day: at least 200% of regular hourly wage
• Holidays: at least 300% of regular hourly wage

Formula for calculating overtime pay:

Hourly wage = Monthly wage / (Number of working days × Number of working hours per day)

Overtime pay = Hourly wage × Number of overtime hours × Overtime coefficient

For example:

• Basic salary: 10,000,000 VND/month
• Number of working days: 22 days
• Working hours per day: 8 hours
• Hourly wage: 10,000,000 / (22 × 8) = 56,818 VND/hour
• Overtime 5 hours on weekdays: 56,818 × 5 × 150% = 426,135 VND
• Overtime 4 hours on holiday: 56,818 × 4 × 200% = 454,544 VND
• Overtime 3 hours on holiday: 56,818 × 3 × 300% = 511,362 VND

3.2. 13th month salary

The 13th month salary is a bonus usually paid at the end of the year, showing recognition of employees' contributions throughout the year.

According to regulations in Vietnam, the 13th month salary is not mandatory by law but is based on the agreement between the employer and the employee, usually stipulated in the collective labor agreement or the company's regulations.

Formula for calculating 13th month salary:

For full-year employees:

13th month salary = Basic salary of the last month of the year

For employees who have not worked enough years:

13th month salary = (Basic salary of the last month of the year × Actual number of months worked) / 12

Example:

3.3. Salary when on leave or off work

Calculating wages when employees take leave or stop working must comply with the provisions of the Labor Code to ensure the rights of employees.

According to the law:

• Paid leave: Employees are entitled to full salary according to the labor contract.
• Stoppage of work due to employer's fault: Employee is entitled to full salary
• Stop work due to force majeure: Salary is agreed by both parties but not lower than the regional minimum wage.

Formula for calculating salary when taking leave:

Leave pay = Daily pay × Number of leave days

Formula for calculating salary when stopping work due to force majeure:

Severance pay = Agreed salary × Number of days off work

For example:

Employee salary 10,000,000 VND/month

Number of working days per month: 22 days

Daily salary: 10,000,000 / 22 = 454,545 VND/day

3 days leave: 454,545 × 3 = 1,363,635 VND

5-day work stoppage due to force majeure (70% salary agreement): 454,545 × 5 × 70% = 1,590,908 VND

4. Compare Payroll Calculation Methods

Each salary calculation method has its own advantages and limitations, suitable for different types of businesses and different nature of work.

Salary calculation formulas play an important role in building a transparent, fair and effective salary system for businesses. From time-based, product-based to revenue-based salary calculation methods, each calculation method has its own advantages and is suitable for each specific type of work. Choosing and applying the right salary calculation formula not only helps businesses comply with legal regulations but also motivates employees, contributing to improving operational efficiency. 1C Vietnam always accompanies businesses in building an effective salary management system, meeting the needs of sustainable development in the digital age.