6 simple and most accurate ways to calculate payroll in 2025

Are you having a headache because you don't know how to calculate payroll for employees quickly, transparently and in compliance with the law? A properly built payroll not only helps businesses manage finances effectively but also creates trust for employees. In this article, 1C Vietnam will guide you step by step to create a payroll with 6 popular methods, from calculating salaries by time to using modern software. Whether you are a small business owner or an accountant, this article will provide detailed information, practical examples and useful tips to optimize the payroll process. Let's explore!

1. What is payroll?

1.1 Definition of payroll

Payroll is an important document in a business, used to record and manage employee salaries based on the work they perform in a certain period (usually a month). This is not only a tool to help businesses calculate personnel costs but also ensures transparency in salary payments, avoiding labor disputes. According to Vietnamese law, payroll must comply with requirements such as regional minimum wages and mandatory deductions (insurance, taxes). A clear payroll not only reflects the professionalism of the business but also helps employees understand their income, thereby increasing motivation to work. Understanding this concept is the first step for you to build an effective salary and bonus system.

1.2 Essential elements for creating a payroll

To create an accurate payroll, you need the following elements:

• Labor contract : This is the legal basis for determining basic salary, allowances and terms related to bonuses.
• Timesheet : Records the actual number of hours or days worked by employees, which is the basis for calculating time-based wages.
• Legal regulations : Enterprises must comply with the regional minimum wage (according to Decree 157/2018/ND-CP) and deductions such as social insurance (SI), health insurance (HI), and personal income tax (PIT).
• Understanding these factors helps ensure that payroll is not only legal but also accurately reflects employee effort.

2. Methods of calculating payroll

2.1 How to calculate payroll by time

This method is popular in office jobs or workers with fixed working hours. The basic formula is: Number of working hours/day × basic salary . For example, an employee working 8 hours/day, 26 days/month with a salary of 50,000 VND/hour will receive: 8 × 26 × 50,000 = 10,400,000 VND. This method is simple and easy to apply but requires accurate timesheets to avoid errors.

2.2 Calculate salary by product

Suitable for manufacturing industry, piece rate salary is calculated by: Number of products × unit price of product . For example, a worker who completes 100 products with unit price of 20,000 VND/product will receive: 100 × 20,000 = 2,000,000 VND. This method encourages productivity but must ensure product quality meets requirements.

2.3 Salary calculation based on revenue

Usually applied to sales staff, the formula is: % of revenue achieved × commission level . For example, an employee who achieves revenue of 100 million VND with a 5% commission will receive: 100,000,000 × 5% = 5,000,000 VND. This is an effective way to boost sales performance.

2.4 Calculating piece rate salary

This method is based on the contract or project value: Contract value × lump sum rate . For example, a project worth 50 million VND with a 20% lump sum rate, the employee receives: 50,000,000 × 20% = 10,000,000 VND. This method is suitable for freelance work or short-term projects.

3. Detailed salary calculation formula

3.1 Total income

Gross income is the amount of money an employee receives before deductions, including:

• Basic salary : Negotiated in the labor contract.
• Allowances : Expenses such as lunch, travel, housing (if any).
  For example, basic salary 8 million VND + allowance 1 million VND = total income 9 million VND.

3.2 Deductions

According to Vietnamese law, mandatory deductions include:

• Personal Income Tax : Calculated according to the progressive tax table (Personal Income Tax Law 2007).
• Social insurance : 8% of basic salary (Decree 115/2015/ND-CP).
• Health insurance : 1.5% of basic salary.
• Unemployment insurance : 1% of basic salary.
  Total deductions are typically around 10.5% of base salary.

3.3 Food received

Formula: Total income – total deductions . For example, total income 10 million VND, deduction 1.5 million VND (10.5% + tax), net salary is: 10,000,000 – 1,500,000 = 8,500,000 VND.

4. Instructions for making payroll on Excel

4.1 Required columns in the payroll

A basic Excel payroll should have:

• Employee information : Full name, code, department.
• Working days : Actual number of working days.
• Allowance : Specify each type (lunch, gas).
• Deductions : Personal income tax, social insurance, health insurance, unemployment insurance.
• Net Salary : Final Total.

4.2 Using Excel formulas

Excel helps automate calculations:

• IF : Calculate bonus if working days > 20, for example: =IF(B2>20, C2*0.1, 0).
• VLOOKUP : Look up basic salary by employee code.
• SUMIF : Calculate total allowance: =SUMIF(D2:D10, "Lunch", E2:E10).
  Salary table example: Column A (Name), Column B (Working days), Column C (Basic salary), Column D (Net salary) = B2*C2*50000

6. Example of how to calculate payroll

6.1 Employees with fixed monthly salary

• Basic salary : 10 million VND.
• Allowance : 1 million VND (lunch).
• Deduction : 1.5 million VND (Social Insurance 8%, Health Insurance 1.5%, Unemployment Insurance 1% + tax).
• Actual salary : 10,000,000 + 1,000,000 – 1,500,000 = 9,500,000 VND.

6.2 Employees working by the hour or by the piece

• Hourly : 160 hours × 50,000 VND/hour = 8 million VND.
• Deduction : 1 million VND (10.5% + tax).
• Actual salary : 8,000,000 – 1,000,000 = 7,000,000 VND.

Payroll calculation is no longer a concern when you understand 6 methods of calculating salaries and how to apply tools such as Excel or specialized software. From understanding the definition, determining the necessary factors to practical application, this article has provided you with a detailed roadmap for effective salary management. Start applying it today to optimize costs and increase employee satisfaction.