Consultation on building salary scales and payroll for businesses

Building salary scales and payroll is the responsibility of the employer. This is an effective tool for businesses in managing and paying salaries to employees. To develop a suitable payroll and salary scale for each business, let’s explore the process and procedures for this construction with Long Phan.

What are salary scales and payroll?

A salary scale is a system of salary groups (salary grades) and pay scales (salary coefficients) predefined by a business as a basis for paying and regularly reviewing salary increases for employees, reflecting transparency and fairness.

Payroll is a document summarizing the actual salaries that a business must pay to its employees, including items such as basic salary, bonuses, allowances, and other support amounts over a specific period.

The purpose of establishing salary scales and payroll is to create transparency and fairness in the salary system. This allows employees to understand how their actual income matches their capabilities. Consequently, it creates a strong motivation for employees who want to achieve higher salaries through continuous effort and striving on their own.

Through payroll, business leaders can systematically and effectively manage salaries. Additionally, it provides a basis for accurately determining whether each employee’s salary corresponds with their position and seniority.

Furthermore, salary scales and payroll serve as tools for businesses to study and compare with the labor market, thereby ensuring competitive salaries that attract employees

Principles for building salary scales and payroll

According to the provisions of Article 93 of the Labor Code of 2019, when building salary scales and payroll, enterprises must adhere to the following principles:

• Based on the organization’s production and labor structure, businesses independently develop and decide on salary scales, payroll, and labor norms to serve as a basis for recruitment, negotiation, and salary payment to employees.
• Consulting with the representative organization of employees (if any) during establishment of the pay scale, payroll and labor productivity norms.
• The salary scales and payroll shall be publicly posted at the workplace.
• There is no need to submit the salary scales and payroll to the Department of Labor, Invalids and Social Affairs; businesses should keep and explain these documents when requested by competent authorities.

Process of building salary scales and payroll

Registration dossier for building salary scales and payroll

• Salary scale and payroll system;
• Decision to establish the salary scale and payroll;
• Minutes of consultation on the salary scale and payroll (for businesses with an employee representative organization);
• Table of conditions and standards for positions.
• Regulations on salary, bonuses, and allowances.

Note: Since January 1, 2021, businesses are no longer required to register salary scales and payroll with state agencies but are only required to develop them independently. This is one of the new features of the Labor Code of 2019 that has helped businesses reduce administrative procedures.

Procedures for building salary scales and payroll

  Step 1: Establish the structure of job titles and positions

Determine the structure of job titles and positions in detail and clearly, requiring high accuracy to develop appropriate job title groups for each position. There are a number of ways to do this: using job descriptions to accurately determine the appropriate title for each position.

Job descriptions provide information about the importance of the position in the organization and detail the responsibilities and authorities of the person holding the position. Through the job description, the required capabilities of the person holding the job can also be identified. In this way, the necessary titles can be determined within an organization based on the described job content.

Step 2: Ranking and grouping job titles

In this step, we will rank the job titles to determine the corresponding salary levels. A common method is to use a job evaluation panel to rank the jobs from high to low. This panel may include people experienced in evaluating job positions.

To ensure accuracy, each member of the panel can be assigned a weighting in the value of their evaluation score. Those with long-term experience and higher job titles will have a higher weight compared to others.

After completing the rankings, we proceed to divide the job titles into corresponding salary groups within the system.

Step 3: Determining the differential factor between groups

To determine the differential factor, different bases can be used:

• Based on the current salary structure of the organization if there is an existing salary system. If not, you can refer to salary levels in the market within the same industry.
• Calculate the differential factor by dividing the highest salary by the lowest salary within the same job title group.
• Consult experts or individuals who have worked in similar positions to ensure the suitability of the differential factor with the organization’s finances.

Step 4: Determining the number of salary grades and the distance between grades

This step involves the builder determining the number of salary grades and the distance between them to suit your organization.

Step 5: Finalizing the payroll

After completing all the above steps, you will have a complete and suitable salary scale system for your organization.

Note when building salary scales and payroll

Building salary scales and payroll is a mandatory responsibility of the employer—it forms the basis for recruiting and employing labor, negotiating salary levels, and paying reasonable wages. To build appropriate salary scales and payroll in line with the organizational structure of human resources, businesses need to be aware of the following regulations:

• The law does not limit the maximum number of salary grades but requires at least two grades to be established. The number of grades depends on the complexity of management, job level, and titles.
• The salary for Grade 1 must be equal to or greater than the regional minimum wage (condition: it must not be lower than the regional minimum wage).

The salary recorded at each grade is the salary according to the job or title in the employment contract. According to clause 2 of Article 90 of the Labor Code of 2019, this salary must not be lower than the minimum wage.

Thus, the regional minimum wages are applied according to Decree 38/2022/ND-CP as follows:

• Current legislation no longer requires a minimum gap of 5% between two adjacent salary grades, so companies can actively decide the distance between salary grades based on their actual situation.
• Decree 38/2022/ND-CP no longer requires that the wages of workers who have undergone vocational training must be at least 7% higher than the regional minimum wage. Therefore, businesses established from July 1, 2022, onwards do not need to add at least 7% to the wages for jobs that require vocational training when constructing their salary scales and payroll. If a business was established before July 1, 2022, and has agreements in the employment contract, collective labor agreements, or other agreements, then the business will continue to apply those agreements (unless other agreements are made).
• When there is a change in the regional minimum wage due to adjustments from the Government, businesses need to update to amend, supplement, and reconstruct the new salary scales and payroll.

Services for building salary scales and payroll for businesses

Building salary scales and payroll is a mandatory procedure when setting up a company. The development must be carried out carefully and fairly to ensure competitive and attractive salary levels in the labor market. To address the above issues, Long Phan offers the following support services to our clients:

• Consulting support to address inquiries related to documents and paperwork for building salary scales and payroll for businesses.
• Advice on the procedures for establishing salary scales and payroll for businesses.Solutions for violations of procedures in building salary scales and payroll.

Thus, building salary scales and payroll is a complex process to ensure the rights of businesses and workers. While the building salary scales and payroll is flexible, it must follow legal frameworks. We hope the information shared here is necessary and useful to our clients. For more detailed information, clients can contact Long Phan with a hotline at 0906.735.386 for the best advice and support.