Circular No. 25/LDTT guiding the distribution of the incentive fund according to the profit-sharing system of enterprises

CIRCULAR

OF THE MINISTER OF LABOUR NO. 25/LD-TT
DATE 26 OCTOBER 1982 GUIDING THE DISTRIBUTION OF INCENTIVE FUNDS UNDER THE PROFIT DISTRIBUTION REGIME
OF ENTERPRISES
OF THE ENTERPRISE

After many years of implementing the incentive system from profits, many enterprises have performed well, contributing positively to motivating workers and officials to complete and exceed state plans. However, there are still many shortcomings such as unclear criteria for awarding incentives, not focusing on key indicators, the amount of money awarded for each level of achievement is still average, not fully reflecting the principle of distribution according to the degree of contribution of effort and effectiveness of each individual, especially for managers. The settlement process to determine the incentive fund is too slow, rewards are not timely, thus the encouraging effect of the incentive system is still limited.

To implement Decision No. 146-HDBT dated August 25, 1982 amending and supplementing Decision No. 25-CP dated January 21, 1981 of the Council of Ministers, after exchanging with relevant agencies, the Ministry of Labour guides the distribution of incentive funds under the profit distribution regime as follows,

I. OBJECTIVES AND PRINCIPLES OF INCENTIVE DISTRIBUTION

Incentive funds extracted from profits are a form of encouragement through material benefits aimed at motivating all workers and officials in enterprises to strive to achieve all production and business activity targets of the enterprise.

This incentive system reflects the unity between the interests of the State, the enterprise, and the individual worker; linking the interests of each person and each production and business unit with the common task of continuously improving the efficiency of the enterprise's production for the national economy and society; strengthening the responsibility of collective management by workers, contributing their efforts to improve production management, achieving savings in human and material resources, tapping all potential within production to complete and exceed comprehensive plans of the enterprise, making the greatest contribution to the common interest of the country.

The principle of distributing incentive funds is that it must be based on the final results of labour contributions of each worker and official to the overall achievements of the enterprise over a quarter or a year of production; those who contribute more and achieve greater results will receive more, those who contribute less will receive less, and those who fail to complete the plan (or assigned tasks) will not be rewarded.

II. METHODS FOR DISTRIBUTING INCENTIVE FUNDS

1. Source of incentive funds: Incentive funds for completing quarterly or annual plans mainly depend on the incentive fund extracted from main and secondary production profits as stipulated in Decision No. 146-HDBT dated August 25, 1982 of the Council of Ministers, and Circular No. 21-TC dated September 1, 1982 of the Ministry of Finance guiding the profit distribution regime. Additionally, other sources of incentive funds according to current regulations that the enterprise has received but not yet distributed or fully distributed are added. Specifically:

- Incentive funds temporarily calculated based on the completion rate of registered profit plans for the quarter or year;

- Incentive funds from the remaining undistributed profits of the previous quarter;

- Incentive funds from the wage fund corresponding to the remaining unused wage fund and completed production tasks for the year (as stipulated in Section C, Point 2 of Circular No. 5-LD/TT dated April 18, 1981 of the Ministry of Labour);

- Savings from the wage fund due to exceeding production and business plans, reducing living labour costs, and increasing labour productivity (if applicable);

- Incentive funds from savings on materials as stipulated in Circular No. 342-TTG dated November 6, 1975 and Decision No. 26-CP dated January 21, 1981 that have not been used;

- Incentive funds for encouraging exports of the enterprise (if applicable).

2. Distribution of incentive funds.

Based on the situation of production and business activities, the enterprise director consolidates the above sources of incentive funds into the end-of-year incentive fund for completing the enterprise's plan and together with the enterprise union develops a plan for distributing the incentive fund as follows:

- Reserve 10% of the temporarily extracted profit incentive fund for awards to outstanding workers, socialist labour teams, advanced labour teams, and unexpected awards for the beginning of the next year.

- With the agreement of the enterprise union, the enterprise director may use part of the incentive fund to reward collective economic units (excluding state-owned enterprises) that have contractual relations with the enterprise and have made substantial contributions to completing the enterprise's annual plan.

- The remaining portion of the incentive fund is distributed collectively based on the achievements of cadres, workers, and officials.

3. Time limit for awarding.

The distribution time of the incentive fund to workers and officials depends on the settlement of the actual implementation of the quarterly or annual profit submission levels of the enterprise. Enterprises that can temporarily extract quarterly should distribute awards quarterly, while the fourth quarter extraction should be combined with the annual summary award. Places that cannot distribute quarterly should distribute once at the end of the year.

III. SCOPE, RECIPIENTS, AND AWARD CRITERIA

1. Scope of application of incentives from the profit distribution regime.

All direct production and business units in the material production sector, and public service units that have implemented independent economic accounting, have profit distribution plans, and are entitled to extract incentive funds from profits according to the prescribed regime are within the scope of this incentive system.

2. Recipients of awards.

All regular workers and officials in production and business units, those in probationary periods, those working under fixed-term contracts, and vocational students accompanying production with achievements contributing to the completion of the enterprise's plan are eligible for awards.

The following cases are not eligible for awards:

- Those who fail to regularly complete assigned work plans or tasks due to personal shortcomings;

- Persons who have violated labor discipline or infringed upon socialist property and have been disciplined with a warning throughout the enterprise or higher, or persons who have violated the law and are awaiting trial;

- Persons responsible for causing fatal workplace accidents or serious injuries to workers.

3. Criteria for awarding bonuses and ranking achievements.

Based on the functions, tasks, and scope of responsibility of each individual, the director decides the targets and conditions for awarding bonuses for each type of cadre, worker, and employee in the enterprise. Each target must be accompanied by one or two bonus conditions; if the targets are completed but the conditions are not met, there will be no bonus or a reduced bonus level.

When establishing targets and conditions for awarding bonuses, it should not rely on too many targets; only a few key targets directly related to the results of production activities and work contributions to the completion of the unit's plan should be used. For example:

- For workers:

The criteria for awarding bonuses are completing and exceeding the quotas assigned to individuals quarterly or annually, such as production volume, working days, etc., the conditions for awarding bonuses are ensuring material consumption levels, etc.

- For enterprise leadership cadres:

The criteria for awarding bonuses are completing the plan for the value of product output, implementing profit plans, and labor productivity plans.

The conditions for awarding bonuses are strictly adhering to product submission discipline and financial discipline.

- For workshop and production team leadership cadres:

The criteria for awarding bonuses are completing the quarterly or annual production plans of the workshops and production teams they oversee, complying with economic and technical standards.

The conditions for awarding bonuses are ensuring material consumption levels and product quality.

- For technical, professional, and administrative cadres:

The criteria for awarding bonuses are fully implementing the work programs and plans for each quarter or year according to the functions and responsibilities assigned to each department, such as quota officers must fully implement plans and measures to improve labor organization, establish labor standards, and regularly review and revise outdated standards.

The conditions for awarding bonuses are ensuring the quality of the established standards.

When setting targets, unrelated production targets such as study sessions, meetings, planned births should not be included as criteria for awarding bonuses.

Based on the results of achieving the targets and conditions for awarding bonuses for each type of cadre, worker, and employee, and depending on the amount of achievement, departments, offices, groups, and production teams rank achievements as follows:

Class A: For those who exceed their assigned targets and tasks quarterly.

In the case of annual achievement awards, the condition is to be a model soldier or advanced worker for two periods.

Class B: For those who complete the assigned targets and conditions quarterly.

In the case of annual achievement awards, the condition is to achieve advanced worker status for one period.

Class C: For those who complete the assigned targets but do not fully meet the conditions for awarding bonuses.

The bonus coefficient for each achievement class A, B, C is calculated as follows:

Class A: Coefficient from 1.2 to 1.4

Class B: Coefficient from 1.0 to 1.2

Class C: Coefficient from 0.8 to 1.0

Based on the degree of achievement of each subject within the class, the bonus coefficient within the stated range is determined to encourage those who excel comprehensively in all targets and tasks.

For those who fail to achieve the ranking due to objective reasons (illness, childbirth, etc.) but do not commit any shortcomings as specified in the award recipient criteria, may be considered for encouragement bonuses, with the bonus coefficient not exceeding 30% of Class C.

IV. METHOD OF CALCULATING BONUSES FOR INDIVIDUALS

Based on the actual achievement ranking bonus fund of the enterprise, the director together with the trade union secretary approves the bonus level for each individual.

The bonus level for each individual is determined through the following steps:

1. Converting the new basic salary fund (referred to as the basic salary) according to the achievement coefficient:

Based on the basic salary fund of each achievement category, calculate the converted basic salary fund using formula I, as follows:

2. Calculating the bonus fund for each achievement category using formula II as follows:

3. Calculating the bonus level for each individual:

Based on the bonus fund of each achievement category (A, B, C), calculate the individual bonus level using formula III as follows:

For individuals eligible for encouragement bonuses, the director and trade union secretary determine the bonus level uniformly, independent of the individual's salary level.

V. ORGANIZATIONAL GUIDANCE FOR IMPLEMENTATION

Based on the bonus fund, the enterprise director establishes a distribution plan for bonuses for cadres, workers, and employees after reaching consensus with the local trade union executive committee. Specifically, for the Director, Deputy Director, Chief Accountant, Party Secretary, and Trade Union Secretary, when awarding bonuses, they must be reviewed by the direct superior unit.

- Based on the above principles, each unit proceeds to organize the establishment of specific bonus regulations suitable for its own subjects.

- Organize timely rewards to motivate and stimulate workers strongly in production and work.

This Circular applies to all state-owned enterprises and joint ventures nationwide, replacing Circular No. 1-LD/TT dated January 18, 1978 of the Ministry of Labor.

Ministries, sectors, People's Committees of provinces and centrally-administered cities shall issue detailed guidance documents for subordinate units to implement.