How to Calculate Holiday Pay Under the Latest Provisions of the 2022 Labor Code

Vu Khoi

Author at Wotech Electronics Blog

Driven by the need to ramp up production and sales, many businesses often choose to keep operating through holidays. This benefits not only the business but also gives employees a way to earn extra income compared to ordinary days. The question for businesses is how to calculate holiday pay for employees effectively, transparently, and in full compliance with the law. The following article provides information on the payroll process based on working time and a complete, detailed guide to calculating pay for holiday workdays for your business.

What is the payroll process?

Payroll processing is a task of the HR and administration department aimed at fulfilling the obligation to pay employees for their labor on a recurring basis. The payroll process runs from daily timekeeping (standard working hours, overtime, work on holidays), through consolidating attendance and evaluating performance, to the point where the accounting system records the salary expenses to be paid to employees.

Depending on each company's internal rules, the characteristics of its industry, or the nature of the work, the payroll process may follow different standards across companies. However, for a payroll process to be considered effective, the payroll operations of the HR and administration department at every company must meet the following basic criteria:

• Completeness, accuracy, and clear evaluation criteria.

• Confidentiality of salary information.

• Transparency in how overtime pay and holiday pay are calculated.

• On-schedule delivery.

• Compliance with the terms of the labor contract and current legislation.

How to calculate pay based on working time

Working time is one of the most important bases for determining how much an employee must be paid. Based on this factor, there are three cases of pay calculated on working time:

Pay based on standard working hours

This is the method of calculating pay based on the standard working hours and salary levels set out in the labor contract. Typically, a business pays employees on a monthly, daily, or hourly basis; in some cases, pay can also be calculated weekly. Specifically:

• Monthly pay: Governed by the salary for one month of work specified in the labor contract.

• Weekly pay: Calculated as monthly salary x 12, divided by 52 weeks.

• Daily pay: Calculated as the monthly salary divided by the total number of working days in the month (no more than 26 days per month under the law).

• Hourly pay: Calculated as the daily pay divided by the number of working hours per day as regulated.

Calculating overtime and holiday pay

Under Clause 1, Article 107 of the 2019 Labor Code (in effect from January 1, 2021), overtime is defined as time worked outside the normal working hours established by the company's internal rules, the labor contract, and the law.

To employ staff for overtime, a business must satisfy the following conditions:

• The employee consents.

• Overtime hours do not exceed 50% of standard daily working hours, nor more than 40 hours per month and 200 hours per year.

When an employee works overtime, the business is legally obligated to pay overtime wages. Under Article 98 of the 2019 Labor Code, overtime pay is calculated using the unit rate or the actual wage for the job the employee is performing. The specific overtime pay formulas are set out in Articles 55 and 57 of Decree 145/2020, covering the following cases:

• Overtime on weekdays: Pay at least 150% of the rate for an ordinary working day.

• Overtime on the weekly day off: Pay at least 200% of the rate for an ordinary working day.

• Work on a public holiday: Pay at least 300% of the rate for an ordinary working day.

Specifically, overtime and holiday pay are calculated using the formulas below:

• If the employee works overtime during the day

Overtime pay = Base wage x Overtime rate x Number of overtime hours.

Where: Base wage = the actual hourly wage of an ordinary working day

• If the employee works overtime at night

Overtime pay = [Base wage x Overtime rate + Base wage x at least 30% + 20% of the daytime wage of an ordinary working day, weekly day off, or paid day off] x Number of night overtime hours

Key notes on calculating holiday pay

Holidays under the regulations

Under the 2019 Labor Code, employees are entitled to paid leave on the following holidays each year:

• New Year's Day, January 1 (solar calendar)

• Lunar New Year (Tet)

• Hung Kings' Commemoration Day, the 10th day of the 3rd lunar month

• Liberation Day/Reunification Day, April 30

• International Labor Day, May 1

• National Day, September 2

For some holidays (for example, the Lunar New Year), the days off are adjusted each year depending on actual conditions, by decision of the Prime Minister. Businesses should therefore keep an eye on annual changes to the holiday schedule to protect employee benefits and adjust their holiday pay calculations accordingly and accurately.

Rules for calculating pay for holiday work

Under the regulations, employees are entitled to take leave on public holidays and receive full pay as on an ordinary working day. If an employee agrees to work on a holiday (for example, Liberation Day, April 30), holiday pay for April 30 is calculated under Articles 55 and 57 of Decree 145/2020. Under this calculation, the employee receives a minimum of 300% of the rate for an ordinary working day.

Example: calculating pay for the September 2 holiday

Under the Labor Code, National Day on September 2 is an official national holiday. Therefore, holiday pay for September 2 uses the following formula:

Holiday pay = Holiday overtime pay + the actual wage of an ordinary working day.

For example, suppose Ms. A's actual wage for an ordinary working day is 200,000 VND per day (equivalent to 25,000 VND per hour). Because a project must be completed urgently by September 3, Ms. A is asked by the company to work as usual on September 2. Under the rule above, her pay for September 2 is calculated as:

Holiday pay = 200,000 x 300% + 200,000 = 800,000 (VND)

Summary

We hope this article has given you a complete understanding of how holiday pay is calculated and the related overtime regulations. If you have questions or would like advice on accurate, effective payroll software for your business, don't forget to leave a comment below this article or contact SimERP right here!

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