Circular Joint No. 28/LB-TT guiding additional implementation of the new salary system for workers and officials in enterprises.

CIRCULAR

JOINT MINISTRY OF FINANCE - LABOR, INVALIDS AND SOCIAL AFFAIRS

GUIDELINES FOR IMPLEMENTING THE NEW WAGE REGIME

FOR WORKERS AND STATE EMPLOYEES IN ENTERPRISES

Implementing Decree No. 26/CP dated May 23, 1993 of the Government on the temporary wage regime in enterprises, the Joint Ministry of Labor, Invalids and Social Affairs and Finance issued Circular No. 12/LB-TT dated June 2, 1993, Circular No. 20/LB-TT dated June 2, 1993, and Circular No. 21/LB-TT dated June 17, 1993 to provide detailed guidance on implementation. To date, during the process of implementation at various ministries, sectors, and localities, there remain some issues that need to be resolved reasonably; following the conclusion of the Prime Minister in Document No. 264-TB dated October 29, 1993 of the Government Office, the Joint Ministries hereby supplement certain specific points as follows:

I. TRANSITION FROM OLD TO NEW WAGES

1. Objectives:

a) Supplement the subjects subject to transition to new wages: Domestic joint ventures, joint ventures with foreign countries under business cooperation contracts not operating under the Law on Foreign Investment in Vietnam, according to Decree No. 233/HĐBT dated June 22, 1990 on labor regulations for foreign-invested enterprises and Decree No. 389-HĐBT dated November 10, 1990 on rental housing and labor leasing regulations for foreigners and overseas Vietnamese residing in Vietnam.

b) Supplement the subjects not subject to transition to new wages as follows:

- Those who are on leave awaiting retirement, disability retirement, or those who have stopped working awaiting social insurance resolution;

- Those who have stopped working awaiting termination benefit resolution pursuant to Decision No. 176-HĐBT dated October 9, 1989;

- Those who have stopped working awaiting job placement.

For workers in other economic sectors employing ten or more workers, the agreed wage level recorded in the labor contract must ensure at least the state-prescribed wage level for the occupation or position.

2. METHOD OF TRANSITION FROM OLD TO NEW WAGES:

For managerial staff (from department heads and below), professional, technical, administrative, and service staff in enterprises currently receiving a salary grade higher than the prescribed function or rank stipulated in Decree No. 235-HĐBT, they shall be adjusted to the correct position and salary scale, then the number of years from when they received the highest grade within the scale until now will be calculated to convert to the percentage of seniority allowance exceeding the scale and reclassified into the new salary grade. The conversion and reclassification method is as follows:

a) Method of calculating the percentage of seniority allowance exceeding the scale to reclassify into the new salary grade according to the wage reclassification table attached to Circular No. 12-LB/TT dated June 2, 1993:

- Holding the highest grade within the scale from before 1989 for five years (60 months) counts as 5%, thereafter each additional year (12 months) adds 1%.

- Holding the highest grade within the scale from 1990 onwards for three years (36 months) counts as 5%, thereafter each additional year (12 months) adds 1%.

b) Method of transferring the percentage of seniority allowance exceeding the scale into the new salary grade:

For professional, technical, administrative, and service positions listed in the old wage reclassification table attached to Circular No. 12-LB/TT dated June 2, 1993, which did not specify the percentage of seniority allowance exceeding the scale into the new salary grade, this is now supplemented. The method of transferring the percentage of seniority allowance exceeding the scale into the new salary grade for positions currently receiving seniority allowances as specified in Circular No. 11-LĐ/TT dated October 2, 1986 of the Ministry of Labor and the cases mentioned above is as follows:

- Positions with a coefficient of the first grade of 1.78 or higher, if having a ratio of 5-7% are classified into the next highest grade within the scale, 8-10% into the subsequent grade, and every additional 3% into the next grade up to the highest grade within the scale.

- Positions with a coefficient of the first grade below 1.78, if having a ratio of 5-6% are classified into the next highest grade within the scale, 7-8% into the subsequent grade, and every additional 2% into the next grade up to the highest grade within the scale.

3. SOME CASES TO BE NOTED WHEN TRANSITIONING FROM OLD TO NEW WAGES:

a) For managerial staff, leadership staff, professional, technical, administrative, and service staff when transitioning from old to new salary grades according to Decree No. 26-CP dated May 23, 1993, Circular No. 12-LB/TT, and the above guidelines, if the salary coefficient plus the position allowance (if applicable) according to the new enterprise category determined by the competent authority is still lower than the old salary level transferred horizontally according to the administrative scale as guided in Circular No. 10 for Directors, Deputy Directors, and Chief Accountants, and Circular No. 12 for other positions, the enterprise management body may consider the salary history, professional qualifications, and internal balance to classify into the next grade within the scale with an equivalent coefficient. If already classified into the highest grade within the scale plus the position allowance (if applicable) and it is still lower, the implementation committee at all levels may consider allowing the staff member to receive an additional retention coefficient to equalize with the old salary level transferred horizontally. The retention coefficient is included in production costs or circulation expenses. The retention coefficient is a fixed coefficient used to calculate salaries and social insurance benefits. If the new salary grade after changing scales or the enterprise being upgraded has a higher coefficient than the old scale plus the retention coefficient, the retention coefficient is discontinued. Such retention shall not be applied to cases where the enterprise fails to maintain its category from now on.

b) For enterprises that do not specify the use of senior specialists and equivalent positions and chief specialists and equivalent positions, if the work actually requires such positions, then it must be agreed upon by the Ministry of Labor, Invalids, and Social Affairs for senior specialists and equivalent positions; and by the relevant ministries, sectors, or local authorities for chief specialists and equivalent positions.

c) Some examples:

Example 1: The head of a technical department at a first-class mechanical factory was assigned a salary level of 100 dong from 1982, which was increased to the highest level of the salary scale for heads of departments in first-class mechanical factories, 438 dong, in 1985. By 1987, according to regulations, he had met the requirements for the additional seniority allowance exceeding the scale (5%), but was instead assigned a salary level of 474 dong. In 1990, his salary was raised to 505 dong, and in 1992, it was further increased to 550 dong. Now, when transitioning from the old salary to the new salary, he must revert back to the salary level of 438 dong and be considered to have maintained this level since 1982, thus earning the 5% seniority allowance exceeding the scale from 1987. After 1987, each year adds an additional 1%, reaching 11% by 1993. Referring to the salary adjustment table attached to Circular No. 12-LB/TT dated June 2, 1993, and the method of adjusting the percentage of the seniority allowance exceeding the scale mentioned above, he should be classified as a fourth-grade chief specialist with a salary coefficient of 4.10 and an additional leadership position allowance of 0.4 (the factory still retains its first-class status), totaling 4.50 (4.10 + 0.4). Compared to the salary of 550 dong transferred to a second-grade senior specialist with a coefficient of 4.86, the difference in coefficients is 4.86 - 4.50 = 0.36, corresponding to the retained salary from April 1, 1993, being 321,000 dong - (273,000 + 30,000) = 18,000 dong/month.

Example 2: An assistant director of business operations at a second-class coal mine was assigned a salary level of 374 dong from 1987 to 1990, according to regulations, meeting the requirements for the 5% seniority allowance exceeding the scale, but was instead assigned a salary level of 425 dong. In 1992, his salary was increased to 463 dong. Now, when transitioning from the old salary to the new salary, he must revert back to 374 dong and be considered to have earned the 5% seniority allowance exceeding the scale from 1987 to 1990. After 1990, each year adds an additional 1%, reaching 8% by 1993. Referring to the salary adjustment table attached to Circular No. 12-LB/TT dated June 2, 1993, and the method of adjusting the percentage of the seniority allowance exceeding the scale, he should be classified as a sixth-grade specialist with a salary coefficient of 2.98 and an additional leadership position allowance of 0.20 (the coal mine still retains its second-class status), totaling 3.18 (2.98 + 0.20). Compared to the salary of 463 dong transferred to a third-grade chief specialist with a coefficient of 3.82, the difference in coefficients is 3.82 - 3.18 = 0.64, corresponding to the retained salary from April 1, 1993, being 258,000 dong - (208,000 + 14,000) = 36,000 dong/month.

Example 3: A specialist was assigned a salary level of 596 dong, but in reality, the job at the enterprise does not require a senior specialist level, so he must be reassigned to the sixth grade of chief specialist with a coefficient of 4.66. If he is decided to receive a differential coefficient retention, this coefficient would be calculated as: 5.15 (transfer coefficient) - 4.66 = 0.49, corresponding to the retained salary from April 1, 1993, being 340,000 dong - 308,000 dong = 32,000 dong/month.

4. For categories of worker and staff directly involved in production and business activities; professional and administrative staff who have not been included in the scope of application of wage scales and pay tables, they will now be supplemented as follows:

II. ENTERPRISE CLASSIFICATION

Based on the general provisions of Circular No. 21-LB/TT dated June 17, 1993, the Ministry of Labor - Invalids and Social Affairs and the Ministry of Finance provide specific guidance as follows:

1. Non-state-owned enterprises, if they have the need for classification, may base on the enterprise classification standards guided by relevant ministries and sectors to classify themselves.

2. Enterprises that do not meet the conditions to register establishment according to Decree No. 388-HĐBT dated November 20, 1993 on the issuance of regulations on establishment and dissolution of enterprises but have not yet been dissolved and are still operating, the relevant ministries, sectors, or localities may consider applying temporary classification standards of relevant ministries and sectors to classify them as Class IV. In cases where they are currently operating well and have long-term development potential, they may be considered for classification as Class III, but must be reasonably comparable to enterprises meeting the conditions. The maximum duration for temporary application shall not exceed three years.

3. Special enterprises that have not yet developed classification standards may apply wage scales from Class II downwards of enterprises to determine the basis for wage adjustment and position allowances. If applying the wage scale of Class I enterprises, there must be agreement from the relevant ministries. The maximum duration for application shall not exceed three years, after which they must develop standards and classifications in accordance with the prescribed regulations.

4. Enterprises that wish to classify subordinate units must establish standards for classification according to the principles set out in Circular No. 21-LB/TT dated June 17, 1993. Classification as Class I can only be applied to subordinate units that have been decided to be special and must meet the following conditions:

- Organizational structure and scope of operation corresponding to provincial or municipal level.

- Achieving scores of 95 points or more on all indicators.

- Must have agreement from the Ministry of Labor - Invalids and Social Affairs and the Ministry of Finance.

5. Enterprises that do not meet the standard score for classification shall adjust wages for managerial personnel as follows:

a) Directors: (unit of 1,000 VND)

- Coefficient 3.04 - 3.28

- Wage level implemented from April 1, 1993 212 - 226

b) Deputy directors:

- Coefficient 2.85 - 3.04

- Wage level implemented from April 1, 1993 199 - 212

c) Position allowances for department heads, deputy department heads, and equivalents:

- Department heads (including chief accountants)

+ Coefficient 0.13

+ Allowance level implemented from April 1, 1993 9

- Deputy Head of Department

+ Coefficient 0.09

+ Allowance level implemented from April 1, 1993 6

6. Economic organizations in the public service sector operating on the principle of self-financing may base on the guidelines of relevant ministries and sectors for enterprise classification standards to classify themselves. In cases where they do not classify, the relevant ministries, sectors, or localities may consider comparative parity with other subordinate units to adjust wages.

7. For regional construction project management boards and local specialized management boards (as stipulated in Circular No. 11-BXD/VKT dated April 5, 1993 of the Ministry of Construction), the relevant ministries, sectors, or localities may apply wage scales from Class III downwards, Class II upwards, decided by the relevant ministries, sectors, or localities after agreement from the Ministry of Labor - Invalids and Social Affairs, the Ministry of Finance, and the Ministry of Construction.

8. For the superior level enterprises, based on the actual operation, functions, tasks, and internal relations among the Ministries, sectors, and localities in charge, they shall aggregate and propose plans for transferring old salaries to new ones for management officials at the superior level enterprises and submit them to the joint Ministry of Labor, Invalids and Social Affairs - Ministry of Finance for agreement before making decisions.

III. MANAGEMENT OF WAGES AND BONUSES IN ENTERPRISES

1. Determine the wage fund to be implemented.

Supplement paragraph a, point 1, Section III of Circular No. 20-LB/TT dated June 2, 1993: The wage fund of Party cadres and League of Ho Chi Minh Youth cadres.

- For profit-making enterprises, the Ministries, sectors, and localities must strictly review the wage rates registered by the enterprises, decide on wage rates for important products, closely monitor planned and actual wage funds, ensure reasonable income, link wages with productivity and product quality growth, and service quality improvement. Specifically, for enterprises with extraordinary profits such as alcohol, beer, tobacco production, import-export services, hotels, tourism, restaurants... The enterprises shall develop plans for calculating wage rates and planned wage funds and submit them to the joint ministries if the enterprises are centrally managed (or to the joint departments if the enterprises are locally managed), after which the joint ministries or departments will review and issue agreements for the Ministries, sectors, or departments in charge to decide on wage rates.

All state-owned enterprises must have decisions on wage rates issued by competent authorities as the basis for determining their obligations to pay taxes to the State budget.

- For loss-making or temporarily struggling enterprises in production and business operations, based on financial plans approved by competent authorities, they may pay wages lower than 10% to 15% of the wage levels specified in Decree No. 26-CP dated May 23, 1993 of the Government, but the maximum duration should not exceed one year, after which they must develop plans to reorganize production, labor, organizational cadres, change production and business technology orientation, economic growth, and create sources to ensure wages and income for workers and officials according to the regulations of the State.

For a few loss-making enterprises that objectively need to continue operating, the Government allows the Ministries, sectors, and localities to consider specifically and create conditions for these enterprises to gradually develop and cover their costs. In the initial period, if the wages of workers and officials are too low below the permitted level, living conditions are difficult, the Ministries, sectors, and localities can report to the joint ministries to request the Government to resolve temporary difficulties.

2. The bonus fund of enterprises.

- The bonus fund (reward) of enterprises includes bonuses for specialized positions of the Party and the League of Ho Chi Minh Youth.

For enterprises with effective production and business operations, in addition to the bonus fund (reward) extracted from profits according to Circular No. 20-LB/TT dated June 2, 1993, after paying additional corporate income tax as stipulated in Decree No. 57-CP dated August 28, 1993 of the Government and Circular No. 75A-TC/TCT dated August 31, 1993 of the Ministry of Finance, the remaining profit can be used according to specific guidelines of the Ministry of Finance.

3. Wages and bonuses of General Directors, Deputy General Directors, and specialized staff, and the League of Ho Chi Minh Youth:

- The wages of specialized positions of the Party and the League of Ho Chi Minh Youth are paid according to point 1, Section IV of Circular No. 20-LB/TT dated June 2, 1993 of the joint ministries.

Bonuses for General Directors, Deputy General Directors, Chief Accountants, and specialized staff of the Party and the League of Ho Chi Minh Youth are determined based on production and business performance and fulfillment of obligations to the State.

The income of General Directors includes wages and bonuses, with a maximum not exceeding three times the average income of workers and officials listed in the enterprise's roster. The General Director of the enterprise has the responsibility to establish wage and bonus payment regulations for workers and officials under their management to ensure internal balance and link with production and business performance, encouraging everyone to work enthusiastically to complete their tasks well.

The above are specific supplements to the implementation of the new wage system in enterprises according to Decree No. 26-CP dated May 23, 1993 of the Government. The joint Ministry of Labor, Invalids and Social Affairs - Ministry of Finance requests the Ministries, sectors, provinces, and centrally-administered cities to promptly implement the transfer of salary grades and enterprise rankings as the basis for determining wage rates, managing wage and bonus funds according to the State's policies and regulations. For special industries, the joint ministries will provide specific guidance together with the main managing Ministries and sectors.

This circular takes effect from April 1, 1993. During the process of implementing the new wage system, if there are any difficulties, the Ministries, sectors, localities, and enterprises are requested to reflect them to the joint Ministry of Labor, Invalids and Social Affairs - Ministry of Finance for research and resolution.