Wages are one of the most important factors in labor relations. Determining the appropriate form of compensation helps businesses manage costs effectively and motivates employees to perform well. Among the popular forms of wage payment today, time-based pay is a widely used method, especially in companies and businesses where the nature of work is based on hours, days, weeks, or months. This method provides transparency in income calculation and helps workers easily track and assess their earnings. So, what is the time-based wage payment method, and how is this wage calculation applied? Let’s explore the details with KMC in the article below!

The Concept of Time-Based Pay

Time-based pay is a form of compensation that businesses use to calculate employees’ wages based on actual working hours and the previously agreed-upon salary. These forms can include monthly salary, weekly salary, daily salary, or hourly wage, depending on the conditions and agreements of the company. According to legal regulations, if both parties agree to apply the time-based wage payment method, employees will receive payment at least once every 15 days or once a month, depending on the agreement between both parties.

Trả lương theo thời gian là hình thức doanh nghiệp tính toán mức lương cho người lao động dựa trên thời gian làm việc thực tế

Trả lương theo thời gian là hình thức doanh nghiệp tính toán mức lương cho người lao động dựa trên thời gian làm việc thực tế

Calculating wages based on time helps ensure fairness in employee compensation while also allowing companies to be more flexible in calculating personnel costs. The monthly salary payment method is the most common nowadays; however, companies can also choose to pay weekly, daily, or hourly depending on job requirements and agreements with employees.

Advantages and Disadvantages of Time-Based Pay Methods

Paying wages based on time is a method of calculating salaries according to the actual working hours of employees, including the working hours stipulated by law or agreed upon by both parties. This form can be divided into types of wages based on monthly, weekly, daily, or hourly rates. Each type has its own advantages and disadvantages.

Monthly Salary Payment

  • Advantages: Easy to manage for both the company and employees, creating stable monthly income and simplifying salary and tax calculations.
  • Disadvantages: Does not encourage high work morale, as income does not vary with work performance, and it may not accurately reflect the productivity of each employee.

Weekly Salary

  • Advantages: Offers flexibility in adjusting working hours, encouraging employees to manage their own work.
  • Disadvantages: More complex salary and tax calculations, making monthly income harder to predict.

Daily Wage Payment

  • Advantages: Offers flexibility and convenience for shift or project-based work.
  • Disadvantages: Salary calculations can be difficult, especially with overtime, and monthly income may not be predictable.

Hourly Wage Calculation

  • Advantages: Flexible for jobs with fixed or changing hours, and can encourage employees to work overtime.
  • Disadvantages: Complex salary and tax calculations, potentially causing anxiety about the stability of employees’ income.

Some Regulations Regarding Time-Based Wage Payment

The hourly wage system is becoming increasingly popular in today’s labor market. This method determines salary based on actual working hours, skill level, and the employee’s ability to perform the job.

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How to Calculate Hourly Wages

* Hourly Wage: The hourly wage is calculated using the formula:

Hourly wage = Daily wage / Number of working hours in a day.

Note that working hours should not exceed 8 hours per day and 48 hours per week. For hazardous or heavy jobs, daily working hours should be limited to 6 hours.

* Daily Wage: The daily wage is calculated using the formula:

Daily wage = Monthly wage / Number of working days in the month.

The number of working days can be determined by the company, either fixed or flexible, depending on the company’s regulations.

* Weekly Salary: Weekly wages are calculated using the formula:

Weekly salary = (Monthly salary x 12 months) / 52 weeks.

The maximum working hours per week must not exceed 48 hours.

* Monthly Salary: The monthly salary is determined based on the labor contract or salary scale. The formula for calculating monthly salary is:

Monthly salary = Basic salary * Salary coefficient + Allowance (if any).

Allowances are calculated based on the allowance rate or salary coefficient, depending on the type of allowance.

Wages for Overtime in Special Cases

* Overtime Pay: The pay for overtime hours is calculated at the following rates:

  • 150% of the normal hourly wage for overtime on weekdays.
  • 200% of the normal hourly wage for overtime on weekly rest days.
  • 300% of the normal hourly wage for overtime on holidays, Tet, or paid leave days.

* Night Shift Pay: The pay for night work is calculated as:

Night shift pay = Regular hourly wage * 130% * Number of night working hours.

* Overtime Pay at Night: The overtime pay for night work is calculated as:

Daytime overtime pay * 130% * Number of nighttime overtime hours.

Limitations of applying the time-based compensation system

The time-based compensation system is adopted by many companies; however, there are still some disadvantages in terms of management and labor efficiency compared to performance-based compensation:

  • Lack of Work Motivation: Employees may focus on completing hours rather than improving work quality.
  • Does Not Encourage Productivity: This pay method is not directly linked to efficiency or results, leading to stagnation.
  • Difficult to Control Labor Efficiency: Without strict supervision, businesses may face irresponsible employees.
  • Reduced Flexibility in Management: This model is not suitable for industries that require creativity or high performance.
  • Increased Management Costs: Businesses need additional resources to monitor working hours, diverting attention from work outcomes.
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Professional and Reputable Payroll Services in Vietnam

KMC Consulting Co., Ltd. specializes in supporting foreign enterprises and foreign-invested businesses in Vietnam through effective payroll management solutions. Understanding the importance of accuracy and legal compliance in payroll management, we offer specialized services to optimize the payroll process over time.

  • Timekeeping and Payroll: Handling detailed timekeeping records, calculating salaries, allowances, bonuses, and other payments for employees.
  • Prepare Payroll: Issuing detailed and clear payslips for each individual.
  • Payroll Confirmation: Cross-checking payroll data with the company’s records to ensure accuracy.
  • Employee Support: Responding to salary-related inquiries via email or phone promptly.
  • VssiD User Guide: Assisting employees in checking insurance declaration information on the VssiD application.
  • Payment Consulting: Offering appropriate solutions for social insurance, trade union fees, and personal income tax (PIT).
  • Insurance Management: Carrying out social insurance procedures for new or departing employees.
  • Reports on Social Insurance, Health Insurance, and Unemployment Insurance: Preparing insurance reports and submitting them on time as required.
  • Labor Usage Report: Completing and submitting periodic reports on labor conditions to the relevant authorities.

Let KMC help you optimize the payroll process over time, ensuring that all transactions are carried out accurately and transparently. Contact us today to receive detailed advice and enhance the efficiency of your company’s human resource management!