Circular No. 02/2005/TT-BTC guiding the determination of requirements, sources, and methods of expenditure for implementing salary reform for cadres, civil servants, public officials, and armed forces personnel.

CIRCULAR

Guidelines for determining the need, sources, and methods of expenditure to implement salary reform for cadres, civil servants, public officials, and armed forces personnel.

Pursuant to Decision No. 128/QĐ-TW dated December 14, 2004 of the Politburo on the salary system for cadres, civil servants, and public officials of Party agencies, People's Front organizations, and mass organizations;

Pursuant to Decree No. 204/2004/NĐ-CP dated December 14, 2004 of the Government on the wage system for civil servants, public officials, and armed forces;

After receiving unified opinions from the Central Organization Commission in Circular No. 5949/CV-TCTW dated December 13, 2004, the Ministry of Home Affairs in Circular No. 3205/BNV-TL dated December 14, 2004, and the Ministry of Labor, Invalids, and Social Affairs in Circular No. 4157/LĐTBXH-TL dated November 30, 2004, the Ministry of Finance guides the determination of financial needs, sources, and methods of expenditure for implementing salary reform as follows:

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. This Circular stipulates the determination of the need, sources, and methods of expenditure for implementing salary reform for state agencies, state-owned public institutions; agencies and units under the armed forces; Party agencies, political-social organizations, and occupational-political social organizations, social organizations, social-occupational organizations, non-governmental organizations, projects, and international organizations located in Vietnam with cadres, civil servants, and public officials assigned by the State to work within the state budget and receiving salaries according to the salary table prescribed by the State.

2. Based on the results of salary adjustment that have been reviewed and appraised, Ministries, ministerial-level agencies, agencies under the Government, and central-level agencies (hereinafter referred to as Ministries and central-level agencies) and centrally-administered provinces and cities are responsible for organizing, guiding, and compiling the financial needs and sources of funds to implement salary reform for their agencies, units, and subordinate levels, and submitting them to the Ministry of Finance and the Ministry of Home Affairs in accordance with specific provisions set forth in this Circular.

3. Ministries and central-level agencies, People's Committees at all levels, budgetary units at all levels, and budget-using entities are responsible for determining and allocating sources to implement salary reform and budgetary support (if any) to pay new salaries to cadres, civil servants, and public officials of their units in accordance with prescribed regulations and the provisions set forth in this Circular.

4. The implementation, accounting, and settlement of funds for implementing salary reform shall be carried out in accordance with prescribed regulations, salary reform regulations, and specific provisions set forth in this Circular.

II. SPECIFIC PROVISIONS

1. Regarding the financial needs for implementing salary reform:

1.1. The total number of cadres, civil servants, and public officials to determine the financial needs for implementing salary reform is the actual number present at the time of reporting the financial needs for implementing salary reform and does not exceed the total number of positions allocated or approved by the competent authority.

The total number of positions allocated or approved by the competent authority is specified as follows:

1.1.1. Positions of Ministries and central-level agencies:

a) Positions of the National Assembly Office, Supreme People's Court, Supreme People's Procuracy: In accordance with the Resolution of the Standing Committee of the National Assembly.

b) Positions of the President's Office: In accordance with the Decision of the President.

c) Positions of central-level Party agencies and political-social organizations: Announced by the Central Organization Commission.

d) Positions of the Ministry of Defense and the Ministry of Public Security: In accordance with the Decision of the competent authority.

e) Positions of other Ministries and central-level agencies:

- Administrative positions of the state: In accordance with the Decision of the Minister of Home Affairs.

- Public service positions: In accordance with the Decision of the Minister, head of the central-level agency, and head of public service units as prescribed by law.

1.1.2. Positions of centrally-administered provinces and cities:

a) Administrative positions of the state: In accordance with the Decision of the Minister of Home Affairs.

b) Public service positions: In accordance with the Decision approving the Provincial People's Councils of centrally-administered provinces and cities as prescribed by law.

c) Positions of local Party agencies and political-social organizations: Announced by the Central Organization Commission.

d) Positions of dedicated cadres and grassroots-level civil servants: Within the authorized quota as prescribed in Decree No. 121/2003/NĐ-CP dated October 21, 2003 of the Government on the system and policies for cadres and civil servants at communes, wards, and towns, and Decree No. 184/2004/NĐ-CP dated November 2, 2004 detailing the implementation of the Law on Self-Defense Militia.

For additional positions added during the year compared to the number of positions at the time of reporting the financial needs for implementing salary reform, if within the total quota of positions allocated or approved by the competent authority, the financial needs for implementing salary reform for these additional positions will be included in the financial needs for salary reform in the subsequent period (financial needs for implementing salary reform for additional positions from October 1, 2004 to December 31, 2004 will be included in the financial needs for implementing salary reform in 2005; financial needs for implementing salary reform for additional positions from February 1, 2005 to December 31, 2005 will be included in the subsequent financial needs for implementing salary reform in 2005 if applicable).

For positions exceeding the total number of positions allocated (or approved) by the competent authority, the financial needs for implementing salary reform for these excess positions must be self-funded by the agencies and units in accordance with the provisions of the law; they will not be included in the financial needs for implementing salary reform for Ministries and central-level agencies and centrally-administered provinces and cities.

1.2. The financial requirement for implementing the salary reform as stated in this Circular is determined based on: the basic salary according to rank, grade, and position; the allowance according to the general regulations (excluding night shift wages and overtime pay) and additional contributions according to the regulations (social insurance, health insurance, trade union fees) increased as stipulated in legal documents on salary reform implemented from October 1, 2004, based on the number of staff as specified in point 1.1 above. Specifically, the financial requirement for implementing salary reform for provinces and centrally-administered cities also includes additional funds when implementing Decree No. 121/2003/NĐ-CP dated October 21, 2003 of the Government compared to implementing Decree No. 09/1998/NĐ-CP dated January 23, 1998 of the Government regarding the system and policies for cadres and civil servants at communes, wards, and towns (the reporting of additional financial requirements when implementing Decree No. 121/2003/NĐ-CP dated October 21, 2003 of the Government compared to implementing Decree No. 09/1998/NĐ-CP dated January 23, 1998 of the Government regarding the system and policies for cadres and civil servants at communes, wards, and towns shall be carried out in accordance with the guidance provided in Circular No. 13254/TC-NSNN dated November 15, 2004 or Circular No. 13255 dated November 15, 2004 of the Ministry of Finance).

- Additional salary for workers not under the State's quota of staff and whose salaries have already been included in the unit price of products according to the regulations of public institutions operating in transportation, land administration, geology, etc. fields: The unit shall pay the additional salary for these workers within the annual state budget estimate allocated by the competent authority and retained income according to the regulations for the agency or unit; it shall not be included in the financial requirement for implementing salary reform of central ministries and agencies and provinces and centrally-administered cities.

- Additional salary for workers in public institutions with revenue that fully self-funds their regular operations: The unit uses retained income according to the regulations to pay the workers; if the unit's revenue is insufficient to cover the additional salary according to the national regulations, the shortfall will be covered by the state budget; the financial requirement for implementing salary reform of these units will be aggregated into the financial requirement for implementing salary reform of central ministries and agencies and provinces and centrally-administered cities as prescribed in this Circular.

- Additional salary for workers in administrative agencies that have implemented staffing quotas and administrative management budgets, and public institutions with revenue that partially fund their regular operations: The agency or unit uses the 10% savings from regular expenditures as stipulated in Clause 2.1.2 Part II of this Circular and retained income according to the regulations to pay the workers; if these sources are insufficient to cover the additional salary according to the general regulations, the shortfall will be covered by the state budget; the financial requirement for implementing salary reform of these units will be aggregated into the financial requirement for implementing salary reform of central ministries and agencies and provinces and centrally-administered cities as prescribed in this Circular.

- Additional salary for workers in agencies and units that have implemented expenditure quotas (such as Tax agencies, Customs, State Treasury, Vietnam Television, etc.) and where the decision allowing expenditure quotas by the competent authority has stipulated that during the quota period, the unit must arrange within the quota limit to ensure new systems and policies, these agencies and units must self-fund the additional salary within the total budget quota.

- Additional salary for staffing and workers in the trade union system at all levels is paid from the 2% trade union fee revenue; it is not included in the financial requirement for implementing salary reform of central ministries and agencies and provinces and centrally-administered cities.

- The portion of salary corresponding to the minimum wage stipulated in Decree No. 03/2003/NĐ-CP dated January 15, 2003 of the Government (hereinafter referred to as Decree No. 03/2003/NĐ-CP) and the salary coefficient stipulated in Decree No. 25/CP dated May 23, 1993 of the Government (hereinafter referred to as Decree No. 25/CP) for additional staffing each year is paid by the agencies and units from the annual state budget estimate allocated by the competent authority and retained income according to the regulations for the agency or unit; it is not included in the financial requirement for implementing salary reform of central ministries and agencies and provinces and centrally-administered cities.

2. On the source of funds for implementing salary reform:

2.1. Source of funds for implementing salary reform:

2.1.1. Utilize at least 40% of the retained income according to the regulations of public institutions with revenue and administrative agencies with revenue; specifically, public institutions under the health sector utilize at least 35% of the retained income according to the regulations. From January 1, 2005, the health sector utilizes at least 35% of the retained income (after deducting drug costs, blood, transfusion fluids, and chemicals).

- In cases where the common regulation for adjusting revenue among units in the same field of central ministries and agencies and provinces and centrally-administered cities is implemented; in such cases, the revenue source for salary reform funding is determined as follows:

+ The retained income according to the regulations to determine the source for implementing salary reform for administrative agencies and public institutions is the actual income used after adjustment (for units being adjusted).

+ The retained income according to the regulations to determine the source for implementing salary reform for administrative agencies and public institutions receiving adjustments is the actual income used (including received adjustment income).

2.1.2. Utilize the 10% savings from regular expenditure funds (including the 10% savings from regular expenditures of agencies that have implemented quota staffing and administrative management expenses and of units that have implemented the self-financing mechanism applicable to income-generating public service units) excluding salaries, allowances, and other salary-like benefits (contributions under the system; wages; scholarships for students and trainees, etc.), to pay annual membership fees to international organizations, fund national target programs, subsidize prices and transportation costs for policy goods (hereinafter referred to as the 10% regular expenditure savings).

a) Ministries and central agencies shall not retain at the first-level budget unit the 10% regular expenditure savings of ministries and central agencies to create funding sources for salary reform. Ministries and central agencies shall organize guidance for budget-using units to determine the source of the 10% regular expenditure savings to create funding for implementing salary reform within the annual state budget estimate assigned by the competent authority; however, the total amount of the 10% regular expenditure savings of ministries and central agencies for implementing salary reform shall not be lower than the level of savings announced by the Ministry of Finance.

The 10% regular expenditure savings from this sector shall not be used to implement additional salary increases for other sectors within the same agency or unit. (For example: The Ministry of Transport has universities, colleges, and secondary schools under the education and training expenditure sector and budget-using units under the administrative management expenditure sector; in such cases, the 10% regular expenditure savings from universities, colleges, and secondary schools shall not be used to implement additional salary increases for budget-using units under the administrative management expenditure sector and vice versa).

b) Local authorities at all levels shall implement the retention of funds from the realization of the 10% regular expenditure savings of their own budgets (excluding the 10% savings from income-generating public service units that have implemented the self-financing mechanism and the 10% savings from agencies that have implemented administrative expense quotas) to harmonize when handling the salary reform funding sources of agencies and units under their own budgets.

2.1.3. Utilize 50% of the increase in local government revenue according to the estimate assigned by the Prime Minister for the planning year compared to the estimate assigned by the Prime Minister for the previous year, and 50% of the actual increase in local government revenue compared to the estimate assigned by the Prime Minister (excluding revenue sources allocated for infrastructure investment according to the prescribed regulations).

2.1.4. Unutilized sources from the implementation of salary reform in the previous year shall be carried over.

2.1.5. In cases where the sources for implementing salary reform as stipulated in Points 2.1.1, 2.1.2, 2.1.3, and 2.1.4 above are less than the funding needs for implementing salary reform as stipulated in Section 1 Part II of this Circular, the central budget will supplement the shortfall to ensure that ministries, central agencies, and centrally-administered provinces and cities have sufficient funding to implement. In cases where the sources for implementing salary reform as stipulated above exceed the funding needs for implementing salary reform as stipulated in Section 1 Part II of this Circular, ministries, central agencies, and centrally-administered provinces and cities shall use the surplus to continue implementing additional salary increases arising in the current year or the following year upon the State's issuance of new salary regulations according to the salary reform roadmap; this surplus shall not be used for other purposes. In special cases, ministries, central agencies, and centrally-administered provinces and cities shall report to the Ministry of Finance for consideration and resolution according to the prescribed regulations.

2.2. Sources for implementing salary reform each year:

2.2.1. Sources for implementing salary reform in 2004:

- Utilize a minimum of 40% (specifically 35% for the health sector) of the annual revenue retained according to the 2004 regime of agencies and units, after deducting the amount already used to implement additional salaries based on the minimum wage stipulated in Decree 03/2003/ND-CP and the salary coefficient stipulated in Decree 25/CP according to the 2004 staffing plan.

- Utilize the 10% regular expenditure savings for the entire year 2004 increased compared to 2003 and utilize the remaining portion of the 10% regular expenditure savings to implement additional salaries based on the minimum wage stipulated in Decree 03/2003/ND-CP and the salary coefficient stipulated in Decree 25/CP that was not fully utilized.

- Utilize 50% of the actual increase in local government revenue in 2003 (the actual revenue up to December 31, 2003) compared to the 2003 estimate assigned by the Prime Minister (excluding the increase in revenue from reinvestment in the locality from prescribed revenue sources); the specific amount has been notified by the Ministry of Finance to each locality (excluding newly separated provinces) via Circular No. 5150/TC-NSNN dated May 17, 2004.

- In cases where the sources for implementing salary reform as stipulated above are less than the funding needs for implementing salary reform in 2004 as stipulated in Section 1 Part II of this Circular, the central budget will supplement the shortfall for ministries, central agencies, and centrally-administered provinces and cities to ensure sufficient funding for implementation. In cases where the sources for implementing salary reform in 2004 as stipulated above exceed the funding needs for implementing salary reform, ministries, central agencies, and centrally-administered provinces and cities shall use the surplus to carry over to 2005 to continue implementing salary reform; this surplus shall not be used for other purposes.

2.2.2. Sources for implementing salary reform in 2005:

- Utilize a minimum of 40% of the revenue retained according to the 2005 regime (specifically 35% for the health sector, after deducting drug, blood, transfusion fluid, and chemical costs) of agencies and units to implement salary reform, after deducting the amount already used to implement additional salaries based on the minimum wage stipulated in Decree 03/2003/ND-CP and the salary coefficient stipulated in Decree 25/CP according to the 2005 staffing plan.

- Utilize the savings from 10% of regular expenditures (excluding salaries and salary-like payments) in 2005 that increased compared to 2003, and use the portion of the savings from 10% of regular expenditures to implement additional salary increases according to the minimum wage level prescribed in Decree 03/2003/NĐ-CP and the salary coefficient prescribed in Decree 25/CP which have not been fully utilized.

- Utilize 50% of the increase in local budget revenue (excluding the increase in revenue from land use fees), including:

+ 50% of the increase in local budget revenue (the 2005 budget estimate compared to the 2004 budget estimate assigned by the Prime Minister).

+ 50% of the increase in local budget revenue (the actual revenue realized from January 1, 2004 to December 31, 2004 compared to the 2004 budget estimate assigned by the Prime Minister).

- Any remaining sources for implementing the salary reform in 2004 that were not utilized will be transferred to implement the salary reform in 2005.

- In cases where the sources for implementing salary reform as stipulated above are less than the financial needs for implementing salary reform in 2005 as prescribed in Section 1, Part II of this Circular, the central government budget will supplement the shortfall for ministries, central agencies, and centrally-administered provinces and cities to ensure sufficient resources for implementation. If the sources for implementing salary reform in 2005 as stipulated above exceed the financial needs for implementing salary reform as prescribed in Section 1, Part II of this Circular, ministries, central agencies, and centrally-administered provinces and cities shall use the surplus to continue implementing additional salary increases occurring in 2005 or transfer it to 2006 when the State continues to issue new salary regulations according to the salary reform roadmap; this surplus shall not be used for other purposes.

3. Reporting and reviewing requirements regarding the demand and funding sources for implementing salary reform:

Ministries, central agencies, and centrally-administered provinces and cities are responsible for organizing, guiding, and compiling reports on the demand and funding sources for implementing salary reform from their agencies, units, and subordinate levels to submit to the Ministry of Finance and the Ministry of Home Affairs no later than March 15, 2005.

(Reports on the demand and funding sources for implementing salary reform in 2004: Ministries and central agencies shall submit demand reports using Form No. 1 and source reports using Form No. 3 attached; centrally-administered provinces and cities shall submit demand reports using Forms No. 2a and 2b, and source reports using Forms No. 4a, 4b, and 4c attached).

(Reports on the demand and funding sources for implementing salary reform in 2005: Ministries and central agencies shall submit demand reports using Form No. 5 and source reports using Form No. 7 attached; centrally-administered provinces and cities shall submit demand reports using Forms No. 6a and 6b, and source reports using Forms No. 8a, 8b, and 8c attached).

Based on the results of the review and approval of the transition from old to new salary scales as prescribed in the Joint Circular issued by the Ministry of Home Affairs and the Ministry of Finance guiding the implementation of the transition from old to new salary scales for cadres, civil servants, and public officials, the Ministry of Finance shall take the lead in coordinating with the Ministry of Home Affairs and relevant ministries and sectors to review the demand and funding sources for implementing salary reform for ministries, central agencies, and centrally-administered provinces and cities; and report to the Prime Minister to supplement these entities in cases where they have utilized the prescribed sources but still lack funds to ensure the implementation of salary reform.

4. Regarding the method of expenditure for implementing salary reform:

4.1. For ministries, central agencies, and centrally-administered provinces and cities:

a) For units using the budget with funding sources for implementing salary reform (10% savings from regular expenditures; 35-40% of retained revenue according to regulations) greater than the financial needs for implementing salary reform, they may proactively utilize these sources to pay the newly increased salaries for cadres, civil servants, and public officials in their units based on the approved salary scale transition results.

b) For ministries, central agencies, centrally-administered provinces and cities, and budget-using units with financial needs for implementing salary reform exceeding the funding sources for implementing salary reform as prescribed in this Circular:

- While awaiting the decision to supplement the funding sources for implementing salary reform from the competent authority, based on legal documents on implementing salary reform and the progress of reviewing the demand and funding sources for implementing salary reform:

+ The Ministry of Finance will notify provisional allocations to ministries, central agencies, and centrally-administered provinces and cities. On this basis, ministries and central agencies will notify provisional allocations to their subordinate budget-using units, and local finance authorities at all levels will report to People's Committees to notify provisional allocations to their budgetary units and lower-level budgets to implement salary reform (after utilizing the sources for implementing salary reform as prescribed but still lacking funds) for cadres, civil servants, and public officials according to regulations.

+ Based on the aforementioned provisional allocation notifications, finance authorities at all levels will temporarily allocate funds to lower-level budgets to implement.

+ Primary budgetary units are responsible for allocating the aforementioned provisional allocation notifications to their subordinate budget-using units (after utilizing revenue and 10% savings but still lacking funds). Budget-using units will withdraw funds from the State Treasury within the scope of the provisional allocation, along with proactively utilizing retained revenue according to regulations and 10% savings from regular expenditures to pay the newly increased salaries for cadres, civil servants, and public officials in their units based on the approved salary scale transition results.

- After receiving the decision to supplement the funding sources for implementing salary reform from the competent authority:

||| On the basis of the decision to supplement sources for implementing salary reform by the competent authority, primary budget units have the responsibility to allocate and assign budgets to subordinate budget-using units (after using revenue sources and saving 10% of the remaining shortage). Budget-using units withdraw funds from the State Treasury within the allocated amount (the difference between the supplemented amount and the temporarily borrowed amount) to pay salaries to their officials and civil servants based on approved salary adjustment results; at the same time, they coordinate with the State Treasury agency to account for the repayment of the temporarily borrowed amount.

||| If the temporarily borrowed amount exceeds the supplementary decision amount of the competent authority, this difference will be deducted from the budget of the unit for the following year.

||| On the basis of the decision to supplement sources for implementing salary reform by the competent authority, financial agencies at all levels have the responsibility to provide support funding (the difference between the supplemented amount and the temporarily borrowed amount) from their own budget to the lower-level budget to implement salary reform according to the implementation progress; at the same time, they account for the recovery of the temporarily borrowed amount.

||| If the temporarily borrowed amount exceeds the supplementary decision amount of the competent authority, this difference will be deducted from the expenditure budget for support from the upper-level budget to the lower-level budget.

||| c) For Ministries, central agencies, provinces, and centrally-administered cities that have funding sources for implementing salary reform greater than the funding needs for implementing salary reform:

||| - Ministries, central agencies, provinces, and centrally-administered cities direct and guide units and subordinate budgets with funding sources for implementing salary reform greater than the funding needs for implementing salary reform to proactively use these sources to pay additional salaries to their officials, civil servants, and employees based on approved salary adjustment results.

||| - Provinces and centrally-administered cities proactively use increased local government revenue, save 10% of regular expenditures (the retained portion), to supplement sources for implementing salary reform for budget units at the same level and subordinate budgets lacking sources for implementing salary reform, following a similar process as mentioned in point b above.

||| 4.2. Depending on the nature of each source, financial agencies at all levels or budget-using units shall handle the transfer of unused sources for implementing salary reform in the current year to the next year for continued salary reform expenditures, not to be used for other purposes.

||| 4.3. Accounting and settlement: The accounting and settlement of funds for implementing additional salaries and social allowances shall comply with the provisions of the State Budget Law and current legal documents.

III. IMPLEMENTATION

1. ||| Based on the provisions of this Circular, Ministries, central agencies, and People's Committees of centrally-administered provinces and cities are responsible for organizing and guiding agencies, units, and subordinate levels to determine the funding requirements for implementing salary reform and the funding sources for implementing salary reform in 2004 and 2005.

||| Based on the specific situation of their agencies and regions and the provisions of this Circular, Heads of Ministries, central agencies, and People's Committees of centrally-administered provinces and cities shall stipulate the reporting deadlines and formats for units and subordinate budget levels.

2. ||| Determining, submitting reports, reviewing funding requirements, and implementing payments for increased pensions, social insurance benefits (for those receiving pension benefits guaranteed by the state budget), and additional preferential allowances for persons with meritorious service under the Persons with Meritorious Service Ordinance shall be guided by a separate circular.

3. ||| This Circular takes effect 15 days after its publication in the Official Gazette. During implementation, if there are difficulties, units are requested to report to the Ministry of Finance for timely resolution./.