Vietnam Tet bonus rules for employers and staff

Vietnam Tet bonus is not a payment the law forces an employer to make. The Labor Code of 2012 treats a bonus as a matter for company rules. If your company has a written bonus rule, it must follow it. If it has none, the law sets no fixed amount. Tet fell on 16 February this year, so many staff are asking about the bonus right now.

Source: Labor Code 2012 (Law No. 10/2012/QH13), Article 103, National Assembly of Vietnam.

What the Labor Code says about bonuses

Under Article 103, a bonus is money an employer gives to staff. It is based on the results of the business and on how well the worker did the job.

The same article gives the employer the power to set the bonus rule. The employer first asks the workers' representative organisation at the workplace for its views. Then the employer announces the rule openly at the workplace.

Notice what is missing. The article names no minimum amount. It does not mention Tet. It does not say a bonus must be paid every year. So the often heard "13th month salary" is a common custom, not a legal duty in itself.

Source: Labor Code 2012 (Law No. 10/2012/QH13), Article 103.

When a Tet bonus becomes a duty

A promise can still bind a company. The duty comes from the company's own paper, not from the Labor Code.

• A bonus rule that the company announced at the workplace.
• A term in the labour contract that sets a Tet or year-end bonus.
• A collective labour agreement that covers bonuses.

If one of these says the bonus will be paid, the company should pay it as written. A worker who is owed it can raise the matter with the employer first. If that fails, the usual next steps are the labour conciliator and then the people's court.

Employers should read their own rules before Tet. A rule that says "bonus at the discretion of management" gives staff little to claim. A rule that says "one month of salary after a full year" gives much more.

Source: Labor Code 2012 (Law No. 10/2012/QH13), Article 103, on the bonus rule.

How employers can set a fair rule

Because the law leaves the design to the employer, a clear rule protects both sides. Good practice has five parts.

• Say what the bonus depends on. It may be company profit, personal results, or both.
• Say who is eligible. For example, staff who joined before a set date.
• Say how a part-year worker is treated. Many firms pay a share based on months worked.
• Say when the bonus is paid, ideally before the Tet break begins.
• Write it down, consult the union where one exists, and post it for all staff.

Change the rule only for the future, and tell staff in advance. Cutting a bonus the staff were told to expect, with no notice, leads to disputes and lost trust.

Source: Labor Code 2012 (Law No. 10/2012/QH13), Article 103.

How the Tet bonus is taxed

A bonus paid for work is part of salary income under the personal income tax rules. The Law on Personal Income Tax (Law No. 04/2007/QH12, amended in 2012) taxes salary and wages, and the guiding Circular 111/2013/TT-BTC lists bonuses among taxable salary income.

In practice the employer adds the bonus to the worker's pay in the month it is paid. The employer then withholds tax from the total. Because the tax rates rise with income, a large bonus can push that month's pay into a higher band.

Workers can lower their taxable income with the family deductions the rules allow. These cover the taxpayer and each registered dependant. Staff with dependants should make sure the employer holds their registration before the bonus is paid.

Some small gifts, such as a hamper of goods for the holiday, may be treated differently from cash. Ask your accountant or your tax office how a gift in kind should be handled.

Source: Law on Personal Income Tax No. 04/2007/QH12, as amended by Law No. 26/2012/QH13, and Circular 111/2013/TT-BTC, Ministry of Finance.

Practical steps for staff and employers

For staff:

• Read your contract and the posted bonus rule. Ask HR for a copy if you cannot find one.
• Ask when the bonus will be paid and how tax will be taken from it.
• Keep your dependant papers up to date.

For employers:

• Decide the bonus budget before the holiday, not at the last minute.
• Pay what the rule promises, and pay on the date you announced.
• Withhold personal income tax and keep a record of each payment.

The Tet bonus is a good moment for plain talk. A clear rule, a fair process and on time payment cost little and keep good staff. This is general information only. Before you set a Tet bonus rule, read the current Labor Code and tax texts, and talk to an HR lawyer or tax accountant about your payroll.

Source: Labor Code 2012 (Law No. 10/2012/QH13) and Circular 111/2013/TT-BTC.

Sources

• Labor Code 2012, Law No. 10/2012/QH13, National Assembly of Vietnam.
• Law on Personal Income Tax, Law No. 04/2007/QH12, and amending Law No. 26/2012/QH13.
• Circular 111/2013/TT-BTC guiding the Law on Personal Income Tax, Ministry of Finance.