What is the salary fund? What does the total salary fund include? Regulations on salary fund, payment, salary reserve, salary fund planning…
I. What is a salary fund?
A salary fund is a fund established by an organization, unit, or enterprise in accordance with the law. This fund is used to pay salaries and wages when due for all employees managed by that organization, unit, or enterprise.
The wage fund mainly includes wages paid to employees during actual working time.
II. Regulations on salary fund
1. What does the total salary fund include?
To serve the purpose of calculating salaries in enterprises, the total salary fund can be divided into two types:
➨ Main salary fund
Includes items such as:
- Fixed salary is calculated based on time, product and piece rate;
- Bonuses during work: usually KPI, commission…;
- Regular bonuses: diligence bonuses, monthly bonuses, quarterly bonuses, etc.;
- Allowances: lunch money, gasoline, overtime allowance, nighttime overtime, weekend overtime, weekday overtime, holidays…
➨ Additional salary fund
Is the amount of salary payable to employees in:
- Time for social service;
- Leave time that employees are entitled to under the regime;
- Time to be sent to study according to assignment and requirements of organization, unit, enterprise.
2. Regulations on salary payment and salary reserve fund
The salary fund of an organization, unit or enterprise must be spent according to the stated purposes.
In addition, based on Point 2.6 Clause 2 Article 4 Circular 96/2015/TT-BTC:
- Except in cases where the enterprise has set aside a reserve fund to supplement the salary fund of the following year, if the enterprise has accounted for the salary, wages, and allowances of the year (for example, 2023), but by the deadline for submitting the annual tax settlement dossier (March 31, 2024), the enterprise has not yet paid. Therefore, the expenses for salaries, wages, and allowances that have been accounted for will be excluded and not included in deductible expenses when determining taxable income for corporate income tax (CIT);
- The annual reserve level will be determined by the enterprise but must not exceed 17% of the actual salary fund. The reserve fund must be set up to ensure that the enterprise does not incur losses after setting up;
- If the enterprise has set up a salary reserve fund but after 6 months it has not been used or has not been fully used, the enterprise needs to calculate the reduction in costs for the following year.
See also:
>> Salary reserve fund provision – Detailed instructions, with examples;
>> Deductible expenses when calculating corporate income tax;
>> Payroll services (internal payroll accounting, outsourced accounting) – full package from 1,500,000 VND.
III. Basic factors affecting the salary fund
1. Number of employees
Human resources are one of the important factors that help maintain and develop the production and business activities of the enterprise. When factors such as production volume, work volume, and working hours change, the number of employees will also increase or decrease. Therefore, the increase or decrease in the number of employees will have a significant impact on the salary fund.
2. Average market salary
High or low average salary is also a factor that greatly affects the enterprise’s salary fund.
In fact, the average salary of each position and industry is not fixed but will always change based on the needs and market trends in each region and locality.
For example: Currently, the average salary of production workers in Hanoi is about 6 – 8 million/month, and in Ho Chi Minh City it is about 5 – 7 million/month.
In addition, salary increases according to the law or salary increases and allowances based on work experience… also cause the average salary of employees to increase or decrease, affecting the salary fund.
3. Business goals
When the business goals and direction of the enterprise change according to the general economic situation, to match the set goals, the enterprise may increase or reduce personnel and salaries. This leads to the salary fund also changing accordingly.
IV. How to plan a salary fund
1. Step 1 – Build a planned salary fund
To proceed with building the salary fund for this year, the accounting department will need to plan the salary fund from the previous year and submit it to superiors for confirmation and approval.
When building a planned salary fund, the accounting department needs to conduct a market survey based on the factors that affect the salary fund mentioned above. Based on the results, the accounting department will create a salary plan that is consistent with the goals that the business has set for the coming year.
The finance department relies on this plan to budget for necessary expenses in the following year.
Note: It is important to ensure that the spending category does not exceed the business budget.
2. Step 2 – Complete the salary fund
At this step, the salary fund will be completed based on the number of employees, the actual situation of the business and the construction of the latest salary scale at that time. This will be the official salary fund after going through the adjustment period, completing according to the plan.
The accounting department will then evaluate and learn from this year’s results to plan the payroll fund for next year.
V. Some frequently asked questions about salary fund
1. Are businesses required to set up a salary reserve fund?
The establishment of a salary reserve fund is not mandatory. This work is only to ensure the source of salary payment to employees on time, fully and without interruption. Especially to reserve when the business is in difficulty.
Accordingly, depending on the business’s operating situation, it is necessary to determine whether or not to establish a salary reserve fund.
2. Where can the salary reserve fund be drawn from and what is the maximum amount?
Salary reserve fund is deducted from pre-tax corporate income tax profit.
According to Point 2.6 Clause 2 Article 4 Circular 96/2015/TT-BTC dated June 22, 2015:
- The annual salary reserve must not exceed 17% of the actual salary fund;
- Must ensure that the business does not incur losses after making the provision. If the business incurs losses, it cannot make the full 17% salary provision.
3. What documents are required for setting up a salary reserve fund?
Salary reserve fund establishment file includes:
- The establishment of a salary reserve fund must be clearly stated when it is necessary to establish it and the expected level of establishment in the financial regulations or salary and bonus regulations of the enterprise;
- The report summarizing the salary fund implemented during the year and the salary payment plan for the coming year will require the salary reserve fund;
- Payment voucher and decision of the board of directors on the provision (the decision must specify in detail the provision level and usage plan).