How to Fully Calculate Worker Wages by Grade, Regime, and Specialized Industry

Vũ Khôi

Author at Wotech Electronics Blog

Payroll calculation is a business obligation meant to fairly compensate employees for the value they contribute. It is a periodic, mandatory task that demonstrates a company's compliance with labor law obligations toward its workers. Payroll is therefore an extremely important process that demands accuracy and punctuality — both to reflect the company's professionalism and to protect employees' entitlements. In the following article, we will explore an effective payroll process, payroll calculation criteria, payroll methods, and a guide to calculating wages in full across different industries and according to work performance.

What Does an Effective Payroll Process Look Like?

A payroll process is considered effective only when it guarantees accuracy, information security, on-time execution, and compliance with agreements made with employees as well as current regulations. Depending on the specific industry, sector, and company, worker wages may be calculated using a variety of processes and standards. However, businesses still need to cover the following tasks and meet the criteria below to calculate worker wages in a standardized way.

What Tasks Does Payroll Calculation Involve?

The payroll process runs from the moment the timekeeping system records an employee's working hours until the accounting system has completed the posting of all wage payment expenses. In overview, a complete payroll process consists of the following basic steps:

• Timekeeping tracking: Carried out daily to serve as the basis for month-end payroll calculation.

• Consolidating attendance and performance evaluations: The HR and administration department consolidates the timesheets and collects performance evaluations from department managers in order to determine the payroll coefficient.

• Determining bonus and penalty factors: Compiling award nominations and any deductions for disciplinary violations (if any).

• Preparing the payroll sheet and calculating wages: Creating the payroll sheet for employees based on timekeeping results, evaluations, and accounting documents, then calculating wages (total income and net pay after deducting advances, taxes, insurance fees, etc.).

• Announcing and finalizing the payroll sheet: After wages are calculated, the accounting department reports to the Director for approval of the payroll sheet and notifies each employee so that errors and complaints (if any) can be addressed before submitting the payment request.

Following the payroll process comes the wage payment process. Using the payment method agreed upon with employees (cash or bank transfer), the HR and administration department is responsible for paying wages correctly, in full, and on time.

Essential Payroll Calculation Criteria

To motivate employees while maintaining fairness in the compensation policy, businesses need to establish clear measurement standards, for example:

• Attendance: Ensuring full working hours and the required number of working days.

• Work performance: Based on job performance metrics such as KPIs, on output volume or targets to be met, and on the number of products that meet quality standards or are defective or faulty.

• Overtime hours: Recording workers' overtime hours and hours worked on public holidays to adjust wages in accordance with the Labor Law (Regular days: 150%; Sundays: 200%; Holidays and Tet: 300% × overtime hours).

• Reward factors (if any): Project bonuses, performance achievement bonuses, KPI-exceeding bonuses, and company allowances (birthday, marriage, maternity, etc.).

• Violation factors (if any): Attendance penalties (lateness, unexcused absence), late-delivery penalties, etc.

Common Payroll Calculation Methods

Pay by Grade

A salary grade is an index that reflects the difference in pay levels between different positions and job ranks based on qualifications and skill level.

Pay-by-grade calculation follows this general formula: Salary = Base salary × Salary coefficient. The base salary is set according to the regional minimum wage, while the salary coefficient varies by employee grade as stipulated by legal documents.

Pay by Regime

• Basic salary: The fixed salary agreed between the employer and the employee, excluding allowances, bonuses, and other benefits.

• Probationary salary: At least 85% of the salary for the official position (depending on company policy, within the framework of the law).

• Lump-sum salary: Wages paid to workers on seasonal contract work.

• Allowance and subsidy pay: Supporting wages agreed upon and stipulated in the Labor Contract depending on each company's policies (for example, fuel, commuting, telephone, work equipment, etc.).

Pay by Working Time

• Monthly pay: The amount paid for one month of work, based on the labor contract.

• Weekly pay: The amount paid for one week of work, calculated as monthly salary × 12 divided by 52 weeks.

• Daily pay: The amount paid for one day of work, calculated as the monthly salary divided by the total number of working days in the month (capped at no more than 26 days) as required by law.

• Hourly pay: The amount paid for one hour of work, calculated as the daily wage divided by the actual number of working hours in the day as stipulated by the Labor Law.

Pay by Performance

Wages are calculated based on the level of task completion in terms of quantity and quality, or on the output rate of tasks completed per unit of time. This is a compensation method widely adopted by businesses to motivate employees to improve their work performance.

Guide to Calculating Worker Wages

How to Calculate a Worker's Basic Salary

Under the regulations, a worker's basic salary must not fall below the regional minimum wage prescribed by law at the time the Labor Contract is signed. Notably, workers who have completed vocational training must receive at least 7% above the minimum wage.

Under Decree 145/2020/ND-CP of the Government, effective January 1, 2021, the basic salary levels are set as follows:

• Region I minimum wage: 4,420,000 VND/month.

• Region II minimum wage: 3,920,000 VND/month.

• Region III minimum wage: 3,430,000 VND/month.

• Region IV minimum wage: 3,070,000 VND/month.

Thus, a worker employed in Region I holding a vocational qualification (intermediate or college level) would receive a minimum wage of: 4,420,000 × 107% = 4,729,400 VND/month.

How to Calculate Wages for Workers in Specialized Industries

For each industry, manufacturing worker wages are calculated using the salary coefficient specific to that trade. Under current State regulations, the salary scale for workers and employees in direct production is divided into two code groups, A and B (Decree 205/2004/ND-CP), comprising:

• Code A includes the 7-grade – 7-coefficient salary scale (A.1) and the 6-grade – 6-coefficient salary scale (A.2), divided into 3 groups according to the heaviness and complexity of the work.

• Code B covers 15 industries, each with a different number of salary grades and coefficients.

Accordingly, the wages of workers in some specific industries are calculated as follows:

How to Calculate Construction Worker Wages

Code A.2 applies (6-grade – 6-coefficient salary scale), used for the food and foodstuff processing industries; textiles, leather tanning, and footwear; agriculture, irrigation, and fisheries; forestry; construction; oil and gas; and underground mining. Specifically:

• Group I: grade coefficients of 1.55 – 1.85 – 2.22 – 2.65 – 3.18 – 3.8

• Group II: 1.67 – 2.01 – 2.42 – 2.9 – 3.49 – 4.2

• Group III: 1.78 – 2.13 – 2.56 – 3.06 – 3.67 – 4.4

For example, a construction worker classified in Group II currently receiving a Grade VI salary with a coefficient of 4.2 and a monthly allowance of 700,000 VND would have a monthly wage of:

Monthly wage = (1,300,000 × 4.2) + 700,000 = 6,160,000 VND/month

How to Calculate Garment Worker Wages

Code A.2 applies (6-grade – 6-coefficient salary scale). For example, if a garment worker is classified in Group I and receives a Grade V salary with a coefficient of 3.18, plus a monthly allowance of 800,000 VND, the monthly wage is calculated as follows:

Monthly wage = (1,300,000 × 3.18) + 800,000 = 4,934,000 VND

How to Calculate Worker Wages by Product Output

Piece-rate pay is a wage calculation method adopted by many businesses, especially those in manufacturing and production. Under this method, wages are determined by the unit price of the assigned product and the quantity and quality of output (total products completed, products completed per hour, or the percentage of products meeting quality standards, etc., depending on company policy). In essence, piece-rate wages are calculated as follows: Wages = Product output × Unit price per product.

Conclusion

Preparing payroll sheets and calculating wages is a critical HR and administration function that directly affects the entitlements of every employee. If the payroll process is not well-designed and reliable, numerous errors and complications will arise. Therefore, finding and implementing a payroll software system suited to the company's needs and size is an indispensable requirement in a business's operations in the 4.0 era.

We hope the information above has provided a useful overview of how to calculate worker wages for your business. For prompt consultation and support regarding an effective worker payroll software solution, please contact the SimERP team or leave your question in the comments section below!

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