During employment, allowance regimes constitute an important component intended to recognize and support employees who work under specific conditions or hold certain positions. The below article will provide the current regulations on allowance regimes for employees.

I. The need to understand current allowance regimes

Given the diversity of industries and working conditions, allowance regimes have become an indispensable part of employees’ income structures. Employees are concerned with the types of allowances to which they are entitled, the conditions for entitlement, and the methods of calculation.

Enterprises likewise need to clearly understand the legal regulations on allowances in order to develop appropriate remuneration policies, attract and retain talent, and ensure compliance with labor laws.

II. Legal regulations on allowance regimes

1. What are allowance regimes? How many types of allowances are prescribed by law?

Clause 1, Article 30 of Circular No. 59/2015/TT-BLĐTBXH provides that: Salary allowances as prescribed at Point a, Clause 2, Article 4 of Circular No. 47/2015/TT-BLĐTBXH are salary allowances intended to compensate for factors relating to working conditions, the complexity of work, living conditions, and labor attraction levels that have not been taken into account or have not been fully taken into account in the salary agreed upon in the labor contract, such as position or title allowances; responsibility allowances; allowances for arduous, hazardous, or dangerous work; seniority allowances; regional allowances; mobility allowances; attraction allowances; and other allowances of a similar nature.

Salary allowances form part of wages and may be understood as additional amounts paid by the employer to the employee in addition to the basic salary, in order to compensate for differences in working conditions, the nature of the work, or to incentivize employees.

Under the above regulations, current types of allowances include:

  • Position or title allowances;
  • Responsibility allowances;
  • Allowances for arduous, hazardous, or dangerous work;
  • Seniority allowances;
  • Regional allowances;
  • Mobility allowances;
  • Attraction allowances; and
  • Other allowances of a similar nature.

2. Are enterprises required to apply allowance regimes? If not applied, will they be sanctioned?

Salary allowances are applied based on the agreement of the parties pursuant to Point b, Clause 5, Article 3 of Circular No. 10/2020/TT-BLĐTBXH. Accordingly, allowance levels vary depending on specific circumstances and agreements between employers and employees.

However, if an enterprise has agreed in the labor contract or stipulated in its internal labor regulations or collective labor agreement on the payment of allowances, it must comply with such commitments.

Pursuant to Clause 2, Article 17 of Decree No. 12/2022/NĐ-CP, acts of late payment of wages as prescribed by law, non-payment, or underpayment of wages to employees in accordance with labor contract agreements shall be subject to administrative sanctions at the following levels:

  • From 5,000,000 VND to 10,000,000 VND for violations involving from 01 to 10 employees;
  • From 10,000,000 VND to 20,000,000 VND for violations involving from 11 to 50 employees;
  • From 20,000,000 VND to 30,000,000 VND for violations involving from 51 to 100 employees;
  • From 30,000,000 VND to 40,000,000 VND for violations involving from 101 to 300 employees;
  • From 40,000,000 VND to 50,000,000 VND for violations involving 301 employees or more.

3. When and in what form are allowances paid?

The timing and form of allowance payments are usually agreed upon in the labor contract, collective labor agreement, or the enterprise’s wage payment regulations. In practice, allowances are often paid together with wages; some allowances may be paid quarterly, annually, or by assignment periods depending on their nature. Payments may be made in cash or via bank transfer.

III. Common questions regarding allowance regimes

1. How do allowance regimes differ from benefit or subsidy regimes?

Pursuant to Clause 1, Article 30 of Circular No. 59/2015/TT-BLĐTBXH, salary allowances are intended to compensate for factors relating to working conditions, the complexity of work, living conditions, and labor attraction levels that have not been fully reflected in the salary agreed upon in the labor contract. Salary allowances are paid by the employer based on the agreement of the parties.

Currently, there is no legal document that expressly defines subsidies. In practice, subsidies are typically intended to support employees in special life circumstances (such as illness, maternity, accidents, or hardship). These payments may be made by social insurance agencies or by employers.

2. Which allowances are included in the calculation of benefits under workforce streamlining policies?

Pursuant to Clause 1, Article 10 of Decree No. 29/2023/NĐ-CP, the determination of duration and salary for calculating benefits under workforce streamlining policies is as follows: The current salary is the monthly salary of the month immediately preceding workforce streamlining. The monthly salary used for calculation includes: Salary based on rank, grade, position, title, professional title, or salary as agreed in the labor contract or salary of company managers; position allowances, allowances for seniority exceeding the pay scale, professional seniority allowances, salary and retained salary differentials (if any) in accordance with the law on wages.

Accordingly, the allowances included in workforce streamlining benefits are as prescribed above.

3. Are there any minimum or maximum limits for allowance regimes?

Pursuant to Point b, Clause 5, Article 3 of Circular No. 10/2020/TT-BLĐTBXH, specific allowance levels are subject to agreement between the employer and the employee. Enterprises may proactively develop wage scales, wage tables, and allowance schemes suitable to their financial conditions, provided that they do not contravene the law.

4. Are employees on maternity leave entitled to allowances?

During maternity leave, female employees are entitled to maternity benefits in accordance with the Law on Social Insurance (Clause 2, Article 139 of the Labor Code 2019).

As for enterprise-paid allowances, entitlement during maternity leave depends on the specific provisions of the collective labor agreement, wage payment regulations, or the internal policies of each enterprise.

5. Are allowances included in the salary base for social insurance contributions?

Pursuant to Clause 2, Article 30 of Circular No. 59/2015/TT-BLĐTBXH (as amended by Clause 26, Article 1 of Circular No. 06/2021/TT-BLĐTBXH), the monthly salary used as the basis for compulsory social insurance contributions includes: From January 1, 2021 onward, the monthly salary for social insurance contributions comprises salary, salary allowances, and other additional amounts .

Point b, Clause 5, Article 3 of Circular No. 10/2020/TT-BLĐTBXH specifies: Salary allowances intended to compensate for factors relating to working conditions, the complexity of work, living conditions, and labor attraction levels that have not been taken into account or have not been fully taken into account in the salary agreed upon in the labor contract.

Accordingly, the allowances prescribed above are included in the salary base for compulsory social insurance contributions.

IV. Legal advisory services related to allowance regimes

The above is NPLaw’s article on current allowance regimes for employees. With a team of experienced lawyers and legal specialists, NPLaw provides reputable and professional legal services, ensuring optimal protection of the lawful rights and interests of our valued clients. Should you require legal assistance, please contact NPLaw for consultation and support.