Joint Circular No. 18/1998/TTLT-BLDTBXH-BTC guiding the determination of the actual wage fund when state-owned enterprises fail to meet budget contribution targets and profit indicators.

JOINT CIRCULAR

JOINT CIRCULAR NO. 18/1998/TTLT-BLDTBXH-BTC OF THE MINISTRY OF LABOR, WAR INVALIDS AND SOCIAL AFFAIRS AND THE MINISTRY OF FINANCE ON GUIDELINES FOR DETERMINING THE WAGE FUND TO BE IMPLEMENTED WHEN STATE ENTERPRISES FAIL TO MEET BUDGET CONTRIBUTION TARGETS AND PROFIT INDICATORS

Pursuant to Clause 2, Article 1 of Decree No. 28/CP dated March 28, 1997 of the Government on wage management reform and income in state enterprises, the Joint Circular of the Ministry of Labor, War Invalids and Social Affairs and the Ministry of Finance provides guidelines for determining the wage fund to be implemented when enterprises fail to meet budget contribution targets and profit indicators as follows:

I. SCOPE OF APPLICATION.

The scope of application includes state enterprises as defined in Circular No. 13/LDTBXH-TT dated April 10, 1997 of the Ministry of Labor, War Invalids and Social Affairs guiding the implementation of Decree No. 28/CP dated March 28, 1997 of the Government on wage management reform and income in state enterprises.

II. DETERMINATION OF THE WAGE FUND TO BE IMPLEMENTED WHEN STATE ENTERPRISES FAIL TO MEET BUDGET CONTRIBUTION TARGETS AND PROFIT INDICATORS

1. When enterprises fail to meet budget contribution targets:

During production and business operations, state enterprises must fulfill their responsibility to pay all actual amounts due to the State budget according to the Law. If enterprises violate this obligation leading to failure to meet budget contribution targets, they will be handled according to the Law on Taxation and other related guiding documents.

2. When enterprises fail to meet profit realization targets:

When realized profits are lower than the previous year, enterprises must reduce the wage fund corresponding to the decrease in profit compared to the previous year, following one of the two methods below:

Method 1: The realized wage fund is calculated using the following formula:

Vth = Vđg - ( Pnt - Pth ) + Vpc + Vbs + Vtg

Where:

- Vth: the realized wage fund of the enterprise;

- Vđg: the wage fund calculated based on the unit price assigned corresponding to the volume of products realized, or revenue (sales) realized, or total income minus total expenses (excluding wages) realized, or realized profit;

- Pnt: realized profit of the previous year;

- Pth: realized profit of the reporting year;

- Vpc: the fund for additional allowances and other benefits (if applicable);

- Vbs: the supplementary wage fund;

- Vtg: the overtime wage fund.

The calculation of Vpc, Vbs, and Vtg (if applicable) is determined according to the provisions at Clause a, Point 2, Part C, Section IV of Circular No. 13/LDTBXH-TT dated April 10, 1997 of the Ministry of Labor, War Invalids and Social Affairs.

Method 2: The realized wage fund is calculated based on the principle that for every 1% decrease in profit compared to the previous year, there is a 0.5% reduction in the adjusted wage fund increase, but the deduction amount does not exceed 50% of the adjusted wage fund increase, and is calculated using the following formula:

Pth

Vth = Vcđ + Vđc - Vđc x { ( 1 - ------ ) x 0.5 } + Vpc + Vbs + Vtg

Pnt

Where:

- Vth: the realized wage fund of the enterprise;

- Vcđ: the wage fund under the system, determined by multiplying the number of employees at the standard quota with the average salary grade coefficient (including all salary allowances) and the minimum wage level set by the Government (in 1998 it was 144,000 VND/month);

- Vđc: the adjusted wage fund increase, determined by subtracting the wage fund under the system (Vcđ) from the wage fund calculated based on the assigned unit price (Vđg as stated in Method 1);

- Pnt: realized profit of the previous year;

- Pth: realized profit of the reporting year;

- Vpc, Vbs, Vtg are determined as in Method 1 above.

Example: Enterprise A had the following performance indicators in 1998:

1997 1998

- Total revenue (million VND) 100,000 110,000

- Realized profit (million VND) 1,000 800

- Approved wage rate for 1998 is: 15 VND/1,000 VND revenue.

- Wage fund under the system is: 800 million VND.

- Wage fund (Vpc, Vbs, Vtg) is: 300 million VND

The realized wage fund for 1998 for final settlement is as follows:

* Method 1:

- The wage fund calculated based on the assigned unit price corresponding to the realized revenue (110,000 million VND) is:

110,000 x 15/1,000 = 1,650 million VND.

- The portion of the wage fund reduced corresponding to the decrease in realized profit in 1998 compared to 1997 is:

( 1,000 million VND - 800 million VND ) = 200 million VND.

- The remaining wage fund after reduction is:

( 1,650 million VND - 200 million VND + 300 million VND ) = 1,750 million VND.

* Method 2:

- The wage fund calculated based on the assigned unit price is: 1,650 million VND.

- The adjusted wage fund increase is:

1,650 million VND - 800 million VND = 850 million VND.

- The realized wage fund after reduction is:

800

Vth = 800 + 850 - 850 x { (1 - --------- ) x 0.5 } + 300 = 1,865 million VND

1.000

III. IMPLEMENTATION.

1. Based on the provisions and guidance in this Circular, the Chairman of the Board of Directors (for enterprises with a Board of Directors), the Director or General Director of state enterprises shall determine the realized wage fund of the enterprise when failing to meet profit realization targets to ensure reasonable use of the wage fund without exceeding the prescribed limit, avoiding wage arrears or deficits, affecting the living standards of workers and the production and business plan for the next year, while serving as the basis for annual financial settlement according to Decree No. 59/CP dated October 3, 1996 of the Government and related guiding documents of the Ministry of Finance.

2. For important enterprises producing key products ensuring major economic balances and making significant contributions to the State budget, where the State adjusts policies and mechanisms causing a substantial decrease in realized profits compared to the previous year, significantly impacting wages and income of workers, the Heads of Ministries managing sectors, Chairmen of Provincial People's Committees directly under the Central Government, and Chairmen of Councils of Directors of State Corporations shall examine and issue documents to the Joint Ministries for specific resolution.

3. The effective wage rate for determining the realized wage fund of enterprises is specified as follows:

- For enterprises classified as special category: The Chairman of the Board of Directors decides the wage rate corresponding to the budget contribution and profit indicators of member units, but the total must not exceed the wage rate approved by the Ministry of Labor, War Invalids and Social Affairs.

- For enterprises directly under the Ministry managing sectors: unit wage rate in accordance with the decision of the Head of the Ministry managing the industry or sector, or the Head of the competent authority authorized under the分级管理;

- For local enterprises: unit wage rate in accordance with the decision of the Director of the Department of Labor, Invalids and Social Affairs of the province or centrally administered city, or the Director of the Department managing the industry or sector, or the Chairman of the People's Committee of the district or county, according to the分级管理 at the local level;

- For State-owned corporations established pursuant to Decision No. 90/TTg dated March 7, 1994 of the Prime Minister, which are not classified as special category, the Chairman of the Board of Directors (for enterprises with a Board of Directors) or the General Director (for enterprises without a Board of Directors) shall determine the unit wage rate corresponding to the budget revenue and profit targets of the member units, but when aggregated, it shall not exceed the unit wage rate approved by the Ministry managing the industry or sector, or the Director of the Department of Labor, Invalids and Social Affairs of the province or centrally administered city;

4/ The Ministries managing industries or sectors, the People's Committees of provinces or centrally administered cities, and the Chairmen of the Boards of Directors (for enterprises with a Board of Directors) shall annually be responsible for compiling and reporting the results of determining the actual wage fund of the enterprises under their management to the Joint Ministry of Labor, Invalids and Social Affairs - Finance in the first quarter of the following year.

5/ This Circular takes effect from the date of issuance and shall be applied for finalizing the wage fund from 1998 onwards.

During the implementation process, if there are any difficulties, the Ministries managing industries or sectors, the People's Committees of provinces or centrally administered cities, and state-owned enterprises are requested to reflect them to the Joint Ministry of Labor, Invalids and Social Affairs - Finance for study and resolution.