Guidance on Payroll Accounting and Salary-Related Deductions for FDI Enterprises

This article provides a comprehensive guide on the payroll accounting process and related deductions for FDI enterprises, ensuring accurate accounting entries and effective verification and reconciliation of payroll data.

Key Accounting Accounts Related to Payroll

Before entering specific journal entries, it is essential to understand the key accounts used for payroll and salary-related deductions. The main accounts include:

• Account 334 – Payables to Employees:
  This account reflects salaries, wages, allowances, bonuses, and other amounts payable to employees.
  • Debit side: Amounts already paid or advanced.
  • Credit side: Amounts payable to employees.
• Account 338 – Other Payables and Obligations:
  This account acts as a “collective account” for payroll-related deductions. Important sub-accounts include:
  • 3382 – Trade Union Fees: Reflects the union fees accrued and utilized.
  • 3383 – Social Insurance (SI): Reflects SI contributions deducted from salaries and payments made to the Social Insurance authority.
  • 3384 – Health Insurance (HI): Reflects HI contributions deducted and paid.
  • 3385 – Unemployment Insurance (UI): Reflects UI contributions deducted and paid.
  • 3386 – Occupational Accident and Disease Insurance: Reflects contributions to this insurance.
  • 3389 – Payables for Social Insurance Benefits (sick leave, maternity): Reflects SI benefits payable directly to employees.
• Account 642 – General and Administrative Expenses:
  Most payroll costs and salary-related contributions for the enterprise’s management staff (Administration, HR, Accounting) are recorded here, specifically:
  • 6421 – Management Staff Expenses: Payroll expenses for management personnel.

Latest Payroll Contribution Rates Applicable for FDI Enterprises

Updating the payroll-related contribution rates is the first and mandatory step to ensure compliance in payroll accounting. The following rates are applied based on the total social insurance (SI) salary fund (according to current legal regulations):

Note: These rates are subject to change according to State policies. FDI enterprises should regularly update themselves with the latest legal documents.

4-Step Payroll Accounting Process for FDI Enterprises

To avoid confusion, the process is divided into four logical and clear steps:

Step 1: Record Accrued Payroll Expenses at Month-End

Based on the Payroll Table and Salary Allocation Table, accountants record accrued payroll expenses for each department.

Journal Entry Schema:

• Debit Account 6421 – Management Staff Salaries
• Debit Account 641 – Sales Staff Salaries
• Debit Account 622 – Direct Production Worker Salaries
• Credit Account 334 – Total Salaries Payable

Practical Example:
ABC Co., Ltd. (Japanese FDI) has a total payroll fund of VND 500 million for January 2025, allocated as follows:

• Management: 150 million
• Sales: 100 million
• Production: 250 million

Journal Entry:

• Debit 6421: 150,000,000
• Debit 641: 100,000,000
• Debit 622: 250,000,000

Credit 334: 500,000,000

Step 2: Record Payroll-Related Contributions as Expenses

From the total payroll fund, the accountant records contributions for SI, HI, UI, TUF, etc., according to the prescribed rates. Employer-paid portions are recorded as expenses.

Journal Entry Schema:

• Debit 6421, 641, 622 (corresponding departments)
• Credit 3383 – 17.5% SI
• Credit 3384 – 3% HI
• Credit 3385 – 1% UI
• Credit 3382 – 2% TUF
• Credit 3386 – 0.5% Occupational Accident & Disease Insurance

Example (using the previous 500 million payroll fund):
Employer portion = 24% (17.5% + 3% + 1% + 2% + 0.5%)

Journal Entry:

• Debit 6421: 36,000,000 (150m × 24%)
• Debit 641: 24,000,000 (100m × 24%)
• Debit 622: 60,000,000 (250m × 24%)
• Credit 3383: 87,500,000 (500m × 17.5%)
• Credit 3384: 15,000,000 (500m × 3%)
• Credit 3385: 5,000,000 (500m × 1%)
• Credit 3382: 10,000,000 (500m × 2%)
• Credit 3386: 2,500,000 (500m × 0.5%)

Step 3: Record Personal Income Tax (PIT) Withholding and Employee Contributions

For FDI enterprises, PIT withholding must be performed accurately. The PIT payable and employee-paid contributions are directly deducted from salaries payable.

Journal Entry Schema:

• Debit 334 – Salaries Payable
• Credit 3335 – PIT Payable
• Credit 3383 – 8% SI (employee)
• Credit 3384 – 1.5% HI (employee)

Credit 3385 – 1% UI (employee)

Step 4: Record Payments (Salary, Insurance, Tax)

• Salary Payment to Employees:
  Debit 334 / Credit 111, 112
• Payment of Insurance & Trade Union Fees to Authorities:
  Debit 3382, 3383, 3384, 3385, 3386 / Credit 111, 112
• PIT Payment:
  Debit 3335 / Credit 111, 112

Guidance on Verifying and Reconciling Payroll Data

To ensure the accuracy of the entire payroll accounting process, including payroll-related contributions, accountants should conduct thorough checks and reconciliations:

• Reconcile the ending balance of Account 334 – Salaries Payable:
  The credit balance of Account 334 at period-end (after deducting salaries and other reductions) MUST match the “Remaining” or “Net Pay” column on the final Payroll Table. If discrepancies arise, review tax deductions, insurance contributions, or salary payment journal entries.
• Reconcile transactions in Debit Accounts 3383, 3384, 3385:
  The total debit amounts recorded in accounts 3383, 3384, 3385 (reflecting amounts already paid) must match the total contributions remitted to the Social Insurance Authority as per declarations and payment vouchers. Additionally, the initial credit recorded when accruals were made should match the total “Employee & Employer Contribution” column in the Payroll Table.
• Reconcile with labor increase/decrease declarations:
  The total SI-contributable salary used to calculate contributions must be consistent with the registered employee list and salary levels declared to the Social Insurance Authority. Any discrepancies must be promptly explained and addressed.

Applying a strict reconciliation procedure after payroll accounting allows the accounting department and the enterprise to promptly detect errors (if any) and provides a solid basis for consolidated tax accounting and corporate tax reporting, especially in the event of inspections or audits.

Key Notes for FDI Enterprises in Payroll Accounting

For FDI enterprises, payroll accounting and payroll-related contributions require particular attention to ensure accuracy and legal compliance. Key points to consider include:

• Accounting for 13th-month salary and bonuses:
  These amounts should be recorded similarly to regular salary expenses (Debit 642, 641, 622 / Credit 334). Attention should be paid to the timing of recognition to comply with accounting principles.
• Accounting for allowances and subsidies:
  Distinguish clearly between allowances included in the SI-contributable salary and subsidies not included in SI-contributable salary (e.g., travel allowance, lunch allowance).
• Accounting for paid leave:
  Paid leave expenses are recorded like regular salaries (Debit 6421, 641, 622 / Credit 334).
• Compliance with international labor regulations:
  FDI enterprises, particularly from Japan, often have their own codes of conduct and labor standards. Payroll accounting must ensure transparency and accurately reflect the company’s commitments to employee welfare and rights in accordance with these standards.

KMC provides detailed guidance on payroll accounting and related contributions. To optimize payroll accounting processes and minimize errors, enterprises require a professional accounting team.

For FDI enterprises newly entering the Vietnamese market or seeking to enhance their accounting system quality, contact KMC for comprehensive professional tax and accounting services, particularly for Japanese FDI enterprises.

With a team of experienced tax and accounting professionals, we guarantee quality – safety – compliance throughout our service. Contact us at hotline: 081 489 4789 for professional accounting consultation with KMC.