What is 13th month pay a bonus in Vietnam?

In many companies, receiving a 13th month pay has become an essential part of the annual income stream alongside regular monthly wages. Employees are typically paid a 13th-month salary in addition to their regular monthly pay, usually towards the end of the year - near the Tet holiday. This has led to a misconception: Is 13th month pay a bonus? In this article, we will delve into the details of the 13th-month salary and the answer to the 13th-month bonus in Vietnam.

Is 13th month pay a bonus in Vietnam?

What is the 13th-month salary?

13th month salary is an additional payment given to employees, typically (but not always) at the end of the year. This additional payment is made in addition to the monthly salary of employees and can be considered as part of their annual income. However, there is no official definition of the 13th month salary in labor law. Instead, the payment of the thirteenth-month salary depends on the agreement between the employee and the employer or may be specified in the internal regulations of the enterprise.

The idea of the thirteenth-month salary in Vietnam originated during tough economic times, known as the subsidy period. Organizations pooled earnings from economic plans, typically led by trade unions, to create a fund. This fund was then distributed at the end of the year to provide extra money for employees to celebrate Tết - the Lunar New Year. Over time, this has caused misunderstandings, with many people mistakenly believing that the 13th-month pay is a bonus.

>>> See more: Average salary in Vietnam

13th-month pay in Vietnam is a year-end supplement often confused as a bonus

Legal regulations regarding 13th month pay in Vietnam

The 13th-month salary is commonly viewed as an "annual bonus" by companies in Vietnam, given to employees with at least a year of service. Those employed for less than a year often receive a prorated bonus. However, there are specific regulations regarding the 13th-month salary that are not widely known. So what are they?

Does Vietnam have 13th month pay?

Yes, and the payment of the 13th-month salary typically depends on agreements between employers and employees or may be outlined in internal company policies:

• The 13th-month salary is not synonymous with Tet bonuses, as they are often distinct in many enterprises, depending on their specific reward policies.
• Employers are not obliged to pay the 13th-month salary; it depends on job performance and the business's performance.
• The 13th-month salary for employees may vary and is not fixed, subject to the policies of individual enterprises and employees.

Who is eligible to receive the 13th-month salary?

Typically, full-time employees entitled to a salary enjoy this form of compensation in countries where it is mandatory. However, certain types of employees may not qualify to receive this benefit. Contractors and part-time employees often do not receive a 13th-month salary.

When is the 13th-month pay bonus given?

The 13th-month salary, often known as a Tet bonus, is an extra payment some companies offer during the Lunar New Year in addition to the regular 12 months of pay. While not mandatory, it is a customary bonus agreed upon between employer and employee or based on annual business performance. Employers decide when and if to pay this bonus, typically before the Lunar New Year, aligning with the Tet holiday season, either in advance or together with the regular salary payment.

The 13th-month salary is regarded as a Tet bonus in Vietnam

Is 13th month pay a bonus mandatory?

Providing a 13th-month salary is not a common practice but is widely accepted in some countries. Depending on the country, the additional payment may be a legal requirement and protected by local labor laws, forming part of the employee's contract or simply a customary practice. Some countries also mandate a 14th-month salary.

Is 13th month pay a bonus?

No, the 13th-month pay is not technically classified as a bonus. It's a supplementary payment given to employees, usually at the end of the year, which may be mistaken for a bonus due to its timing. However, it's not explicitly defined as a bonus in labor laws or regulations.

13th-month pay vs other bonuses

Below is a comparison table of common types of supplementary payments that employees typically receive:

Criteria	13th-month salary	Holiday bonuses	Achievement bonuses	Birthday bonuses
Timing	End of the year	During holidays	Periodically	Employee's birthday
Purpose	Enhances annual income	Supports holiday expenses and adds joy to festivities	Motivates and recognizes individual or team achievements	Provides a special feeling and motivation for the employee
Mandatory	Depends on company policies	Depends on company policies	Depends on work performance and achievements	Depends on company policies
Frequency	Once a year	Once per holiday season	Varies based on work performance	Once a year, on the employee's birthday
Calculation method	Typically based on annual income or company regulations	Usually based on business results, profits, or company regulations	Based on individual or team performance evaluations	Usually a small, fixed amount or based on company policies

 

The 13th-month salary helps motivate employees

How to calculate the 13th-month pay?

The 13th-month salary helps motivate employees and boost morale by providing an additional financial incentive. As per Article 104 of Labor Law No. 45/2019/QH14, companies are not required to provide a 13-month salary, and there are no specific regulations on how it should be calculated. Therefore, it's up to each company to decide whether to provide it and how to calculate it. Two common methods used are:

Calculating based on the average monthly salary:

• For employees who have worked for 12 months or more:

13th-month salary = Average monthly salary over 12 months

• For employees who have worked for less than 12 months:

13th-month salary = Number of months worked in the year12 x Average monthly salary during the period worked

• Calculating based on the salary of the twelfth month:

13th-month salary = Salary of the 12th-month

How to calculate the 13th-month pay?

Common misconceptions about Vietnam's 13th-month salary

Understanding these misconceptions can help employees and employers navigate discussions and expectations regarding the 13th-month pay more accurately:

• Is it guaranteed by law?

=> Is 13th month pay a bonus compulsory in Vietnam? Many people mistakenly believe that the 13th-month pay is required by law, but in reality, it's not mandated by labor regulations. Whether an employer provides it or not depends on company policies and agreements.

>>> See more: Vietnam labour law

• Is 13th month pay a bonus the same as holiday bonuses?

=> There's often confusion between the 13th-month pay and holiday bonuses. While they might coincide in timing, they serve different purposes and are not necessarily the same thing.

• Is 13th-month pay a bonus?

=> While the 13th-month pay is often seen as a bonus, it's considered a supplementary payment given to employees. It's an additional month's pay distributed at the end of the year.

• Is the 13th-month pay fixed for everyone?

=> There's a misconception that the 13th-month pay is a fixed amount for all employees. In reality, it can vary depending on factors such as length of service, performance, and company policies.

• Is the 13th-month pay tax-free?

=> Is the bonus taxable in Vietnam? Some may assume that the 13th-month bonus is exempt from taxes because “It is a bonus”, but it's subject to the same taxation as regular income, depending on local tax laws and regulations.

There are many misconceptions about 13th-month pay

The role of 13th-month pay in the Vietnamese labor market

Paying the 13th-month salary significantly impacts the labor market:

• Firstly, it is a valuable tool to attract and retain talented employees. Recognition through receiving additional income at the end of the year can stimulate employees' work morale and commitment.
• The 13th-month salary can also promote individuals' personal and professional development. It's not just a bonus, but also a manifestation of fairness and recognition from the employer.
• Moreover, receiving extra income at the end of the year can boost consumption and contribute to the local economic recovery.
• Finally, the 13th-month salary plays a role in maintaining economic and social stability by alleviating financial pressure on households and fostering a more positive business and social environment.

Is 13th month pay a bonus? While many businesses perceive it as an employee reward, in reality, the 13th-month salary reflects a portion of the employee's annual income. In some cases, it is part of the company's welfare policy, used to incentivize and reward employee dedication. It can be seen that labor laws in Vietnam are relatively complex. Therefore, collaborating with headhunters like Aniday is crucial!

>>> See more: Top 10 Headhunter in Vietnam