What is salary coefficient? How to calculate and practical application

What is the salary coefficient - an important concept in the salary system in Vietnam, especially in the public sector. Understanding the salary coefficient not only helps employees grasp their rights but is also a key factor for agencies and organizations to establish fair and transparent salary and bonus policies. 1C Vietnam will guide you on how to calculate the salary coefficient and its practical application in this article.

1. What is salary coefficient?

Salary coefficient plays an important role in the salary system in Vietnam, especially in the public sector.

Salary coefficient is a specific number specified for each position and job title, used to calculate the basic salary of employees. This number represents the relative value of the job, reflecting the level of expertise, experience and position in the organization's hierarchy.

In the history of Vietnam's economic development, the salary coefficient system was formed during the subsidy period and has undergone many reforms to adapt to the market economy. The main purpose of applying the salary coefficient is to create a fair and transparent salary mechanism and encourage workers to improve their qualifications and develop professional skills.

2. How to calculate basic salary according to salary coefficient

Calculating salary by coefficient is a basic process that every cadre, civil servant, and public employee needs to understand in order to understand their income.

The formula for calculating basic salary according to salary coefficient is as follows:

Basic salary = Basic salary × Salary coefficient

In there:

• Basic salary: Is the salary regulated by the State, adjusted according to each period of socio-economic development. Currently, the applied basic salary is 1.8 million VND/month (from July 1, 2023).
• Salary coefficient: Is a number specified for each rank and level of civil servants and public employees, showing qualifications and job position.

The table illustrates how to calculate salary coefficients for some groups of employees:

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3. Factors affecting salary coefficient

Many different factors go into determining salary ranges, from education to work experience.

3.1. Education and professional skills

Education and professional qualifications are the most important factors when determining the salary coefficient of employees. Specifically:

• Professional qualifications (secondary, college, university, postgraduate) directly affect the starting salary and salary level.
• Professional certificates such as foreign languages, information technology, and state management can help increase the allowance coefficient.
• Political theory, especially in the public sector, is also an important factor when considering salary coefficient increases.

3.2. Work experience and labor performance

Seniority and work performance play a decisive role in increasing salary coefficient:

• Working time: Normally, salary coefficient will increase periodically every 2-3 years if qualified.
• Annual performance review results: Only those who perform well are eligible for salary increases.
• Special achievements: Employees with outstanding achievements may be considered for an early salary increase.

3.3. Legal regulations and labor market

Legal regulations and market trends also strongly impact the salary coefficient system:

• Decrees and Circulars on wages are periodically updated, changing the calculation method and applying the wage coefficient.
• Market demand for different occupations affects the adjustment of salary coefficients.
• Macroeconomic conditions, such as inflation or GDP growth, affect the adjustment of the base salary, thereby indirectly affecting the value of the salary coefficient.

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4. Difference between public and private sector salary coefficients

The application of salary coefficients differs significantly between the public and private sectors.

4.1. Salary coefficient in the public sector

Salary coefficients in the public sector are strictly regulated according to legal documents:

• Apply uniformly to civil servants and public employees according to the system of ranks and levels.
• Divided into groups such as: administration, career, education, health, military.
• Each rank and level has a specific salary coefficient, ranging from 1.86 to 8.00 depending on position and level.

Salary coefficient table for some industry groups in the public sector:

4.2. Salary coefficient in private enterprises

Private enterprises have a more flexible approach to salary coefficients:

• It is not mandatory to apply the salary coefficient system like the public sector.
• Usually build separate salary scale based on organizational structure and human resource strategy.
• Many companies replace salary coefficients with grades or salary ranges.

4.3. Visual comparison between two areas

5. Salary reform according to Resolution 27-NQ/TW

Salary reform is one of the important policies that greatly impacts the current salary coefficient system.

Resolution 27-NQ/TW marks a turning point in reforming wage policy in Vietnam, with the following important changes:

• Abolish the current basic salary and salary coefficient, replace them with a new basic salary according to job position.
• Build a new payroll system with 5 payrolls corresponding to 5 areas: administration, career, armed forces, business and contract.
• Switch from the current allowance regime to a new, more streamlined and efficient allowance regime.
• Increase transparency and fairness in salary policies.

The impact of wage reform on workers includes:

• Increase real income for the majority of cadres, civil servants and public employees.
• Reduce inequality in pay policies between industries and sectors.
• Difficulty in transitioning and adapting to the new system.
• The challenge of accurately assessing job value when developing a new salary schedule.

6. Benefits of applying salary coefficient system

Despite the challenges in implementation, the salary coefficient system brings many practical benefits.

• Ensuring fairness in salary payment: Salary coefficient creates a unified scale, helping employees with the same qualifications and positions receive equivalent salaries.
• Increase transparency in human resource management: A clear salary coefficient system helps employees understand how their salary is calculated and their career development path.
• Encourage professional development: When salary is linked to education and skills, employees are motivated to continuously learn and develop.
• Creating a solid legal basis: The salary coefficient system regulated by law helps minimize labor disputes and protect the rights of both employees and employers.
• Easy to adjust income: When the economy changes, simply adjusting the base salary can change the income for all workers without changing the entire system.

Thus, 1C Vietnam has shared in detail what the salary coefficient is and how to apply it. With new reforms, the salary coefficient system is moving towards more fairness, transparency and efficiency. Don't forget to update the latest salary information on the 1C Vietnam website!