Gross wages refer to the total amount of money an employee earns before any deductions for taxes and insurance are made, as per Vietnamese labor law. In other words, it encompasses all forms of income, including salary, allowances, bonuses, and other additional payments.

Components of Gross Wages

Gross wages not only include the base salary but can also include the following:

• Overtime pay: When employees work beyond the standard working hours (typically 8 hours/day or 48 hours/week), they are entitled to additional overtime pay.
• Bonuses: This is extra pay awarded to employees based on their performance, achievement of targets, or other accomplishments.
• Commissions: This is income earned from sales or other performance metrics, paid in addition to or instead of a base salary.
• Other allowances: Various allowances may be included depending on the employment contract, such as responsibility allowances, hazard pay, travel allowances, etc.

Difference Between Gross Wages and Net Wages (Take-Home Pay)

Gross wages represent an employee's total earnings before any deductions. Net wages, also known as take-home pay, are the amount employees actually receive after all mandatory taxes and insurance contributions are deducted.

For example, an employee's monthly gross wage might be 10,000,000 VND.

Net wages could be calculated as follows:

Gross wages (10,000,000 VND) - Personal income tax (500,000 VND) - Social insurance (800,000 VND) - Health insurance (170,000 VND) - Unemployment insurance (100,000 VND) = 8,430,000 VND

Deductions from Gross Wages

Deductions from gross wages to calculate net wages typically include:

• Personal income tax: The tax rate is calculated based on the employee's taxable income according to Vietnamese law.
• Social insurance: Mandatory contribution by employees to participate in social insurance.
• Health insurance: Mandatory contribution by employees to participate in health insurance.
• Unemployment insurance: Mandatory contribution by employees to participate in unemployment insurance.

How to Calculate Gross Wages

There's a difference in calculation for employees receiving a fixed monthly salary and those paid hourly.

Employees with a fixed monthly salary: Their gross wage is the total amount of salary and allowances specified in their employment contract.

Employees paid hourly: Gross wage is calculated by multiplying the number of hours worked by the hourly rate and adding any allowances (if applicable).

Example: If an employee earns 50,000 VND per hour, works 180 hours a month, and has a 1,000,000 VND allowance, their gross wage is:

(50,000 VND/hour * 180 hours) + 1,000,000 VND = 10,000,000 VND