What is contract salary? Latest salary calculation method 2024
Contract salary is a popular form of salary payment today. So what is contract salary ? What forms of salary are there and how to accurately calculate this salary? In the article below, 1C Vietnam will answer all those questions. Let's take a look!
1. What is contract salary?
Fixed salary is a form of salary payment based on the amount of work agreed between the employee and the employer. Accordingly, contract wages are regulated by law in the following terms:
- Clause 1, Article 6 of the 2019 Labor Code: The employee and the employer have agreed on the form of salary payment based on the following factors: By product, by time or by contract.
- Point C Clause 1 Article 54 of Decree 145/2020/ND-CP stipulates as follows: Fixed wages are paid to employees at a certain time as agreed in advance and based on volume and quality. amount of work and completion time to determine whether the employee is entitled to the full salary amount mentioned in the contract or not.
Although there is no official concept of what a piece salary is, in reality, this form of salary payment is being widely used, especially for seasonal and temporary jobs.
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2. Formula for calculating salary
Contract salary is one of the basic salary calculation formulas that many businesses have been applying. To calculate contract wages, businesses will rely on the amount of work and the quality of work completed by employees.
The salary will be calculated using the following formula:
Contract salary = Agreed contract salary x Percentage of job completion.
3. Example of calculating salary:
For each project, contractors often charge customers a fixed fee to complete a large-scale project.
For example: Ms. A was hired to make handmade necklaces with the requirement that she must complete 1,000 necklaces in 1 month to receive a salary of 3,000,000 VND. However, during the exchange period, Ms. A could only make 900 chains, which means achieving 90% of the delivered output as agreed.
So the income she will receive is: 3,000,000x90%= 2,700,000 VND.
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4. Forms of salary payment
This form of salary payment helps businesses easily pay salaries, while motivating employees to work effectively and increase productivity. There are two main forms of salary: Hourly pay and output-based pay.
3.1 Pay a fixed salary based on working hours
The formula for calculating salary based on working hours will usually be specified in each individual's labor contract or according to the business's regulations. Thereby, labor contracts based on working hours will include the following forms:
- Weekly salary: Is the salary paid by the business for 1 working week. If the contract stipulates a monthly salary, the employee can calculate the weekly salary using the formula:
Weekly salary= (Monthly salary x12)/ 52
- Pay by working day: Employees will receive a salary after 1 working day. This form is calculated using the formula:
Daily salary = Monthly salary / number of hours worked (in 1 month).
- Hourly pay: The amount of pay calculated based on working hours will have a minimum level as prescribed by law. In Hanoi and Ho Chi Minh City, the minimum hourly wage is set at 22,500/hour.
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3.2 Pay according to product
This is a form of salary payment that depends on the output of products that workers produce and meets the standards required by the business.
In general, each business will have a different way of paying salaries, either in cash or through the employee's personal account. In particular, the employer must pay fees related to opening a personal account and transferring salary when choosing to pay salary through the employee's personal account.
5. Some questions about salary that workers often encounter
In addition to analyzing the concept of what a contract wage is, 1C Vietnam also added a number of questions related to contract wages that many businesses and workers still have questions about.
4.1 Do I need to pay social insurance when receiving a piece salary?
According to regulations, if an employee is hired by the employer to do a certain amount of work according to a labor contract for a certain period of time, the salary that the employee receives will still be calculated for social insurance contributions.
However, in cases where a contractor who is not required to participate in social insurance is hired by the employer to do contract work under a civil contract, that salary is the remuneration paid per head. assigned job, so social insurance contributions will not be counted.
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4.2 Is receiving a flat salary subject to personal income tax?
The answer is yes. Personal income tax payment will be divided into two cases as follows:
- Case 1: Individual/business signs a contract with an individual without a business license. At this time, businesses will have to deduct tax at 10% of total income before paying employees according to regulations.
- Case 2: If you are not an enterprise, business household or individual trading goods, so you are not subject to VAT or required to declare VAT, then the state will not issue invoices in this case.
Thus, 1C Vietnam has shared with your businesses what the concept of contract salary is , how to calculate contract salary and important regulations on contract salary. To help businesses' salary and bonus management process take place effectively, 1C Vietnam provides 1C:Company Management software. This is a comprehensive business management software with many outstanding features, including diverse and flexible payroll support. The software will allow administrators to declare many different types of salary levels and salary calculations; automatically calculate administrative salaries, insurance, and personal income taxes; Track wages to calculate salary accurately;...Contact 1C Vietnam immediately to learn more about this software!
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