DOES PERFORMANCE BONUS INCLUDE COMPULSORY SOCIAL INSURANCE AND PERSONAL INCOME TAX?

In order to motivate employees to work effectively, businesses have implemented fixed salaries and KPI salaries. So is performance salary (KPI) required to pay social insurance or not? Let’s find out with Pham Consult through this article!

What is a work performance bonus?

Bonuses are regulated in Article 104 of the 2019 Labor Code as follows:

Bonus

1. Bonus is the amount of money or property or in other forms that the employer rewards the employee based on production and business results and the level of work completion of the employee.
2. Bonus regulations are decided by the employer and publicly announced at the workplace after consulting with the employee representative organization at the grassroots level for places where there is an employee representative organization at work.

Based on the above regulations, performance bonuses are understood as additional salaries that employees will receive after successfully completing set work goals; At the same time, save maximum costs for businesses (time, resources, finance…).

Does performance bonus include compulsory social insurance contributions?

The monthly salary for compulsory social insurance payment is decided by the unit in Clause 2, Article 6, Procedures for collecting social insurance, health insurance, unemployment insurance, insurance for labor accidents and occupational diseases; issuance of social insurance books and health insurance cards issued by Vietnam Social Insurance together with Decision 595/QD-BHXH in 2017, in which:

Monthly salary paid for compulsory social insurance according to the provisions of Article 89 of the Law on Social Insurance and its guiding documents, specifically as follows:

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2. Salary is decided by the unit

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2.3. Monthly salary paid for compulsory social insurance does not include other benefits and benefits, such as bonuses as prescribed in Article 103 of the Labor Code, initiative bonuses; Mid-shift meal; Subsidies for gasoline, telephone, transportation, housing, child care, and child care; Support when employees have relatives who die, employees whose relatives get married, employees’ birthdays, allowances for employees in difficult circumstances when suffering from work accidents, occupational diseases and Other supports and allowances are recorded in a separate section in the labor contract according to Clause 11, Article 4 of Decree No. 05/2015/ND-CP.

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On the other hand, also according to the provisions of Clause 2 and Clause 3, Article 30 of Circular 59/2015/TT-BLDTBXH (amended by Clause 26, Article 1 of Circular 06/2021/TT-BLDTBXH) as follows:

Monthly salary for compulsory social insurance

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2. From January 1, 2018 to December 31, 2020, the monthly salary paid for social insurance is the salary, salary allowances as prescribed in Clause 1 of this Article and other additional amounts as prescribed in Point a, Clause 3, Article 4 of Circular No. 47/2015/TT-BLDTBXH.

From January 1, 2021 onwards, the monthly salary paid for social insurance is the salary, salary allowances and other supplements specified in point a, item b1 point b and item c1 point c Clause 5 Article 3 of Circular No. 10/2020/TT-BLDTBXH dated November 12, 2020 of the Ministry of Labor, War Invalids and Social Affairs detailing and guiding the implementation of a number of articles of the Labor Code on the content of contracts Labor, Collective Bargaining Council and occupations and jobs that adversely affect reproductive and child-rearing functions (hereinafter abbreviated as Circular No. 10/2020/TT-BLDTBXH).

3. Monthly salary paid for compulsory social insurance does not include other regimes and benefits such as bonuses as prescribed in Article 104 of the Labor Code, initiative bonuses; Mid-shift meal; Subsidies for gasoline, telephone, transportation, housing, child care, and child care; Support when employees have relatives who die, employees whose relatives get married, employees’ birthdays, allowances for employees in difficult circumstances when suffering from work accidents, occupational diseases and Other supports and allowances are recorded in a separate section in the labor contract specified in item c2, point c, clause 5, Article 3 of Circular No. 10/2020/TT-BLDTBXH.

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Thus, as for bonuses for employees based on work performance, this amount is not stable and employees will not receive it every month. Therefore, performance bonuses for employees cannot be considered a basis for calculating compulsory social insurance contributions.

Are performance bonuses subject to personal income tax?

Cash or non-cash bonuses in any form, including stock bonuses, are subject to personal income tax as prescribed in Point e, Clause 2, Article 2 of Circular 111/2013/TT-BTC (amended). , supplemented by Article 11 of Circular 92/2015/TT-BTC) includes:

Taxable income

According to the provisions of Article 3 of the Law on Personal Income Tax and Article 3 of Decree No. 65/2013/ND-CP, income subject to personal income tax includes:

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2. Income from salaries and wages

Income from salaries and wages is the income the employee receives from the employer, including:

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1. e) Cash or non-monetary bonuses of any kind, including stock bonuses, except the following bonuses:

e.1) Bonuses accompanying titles conferred by the State, including bonuses accompanying emulation titles, forms of reward according to the provisions of law on emulation and commendation, specifically :

e.1.1) Bonuses accompanied by emulation titles such as National Emulation Soldier; Emulation soldiers at the level of ministries, branches, organizations at the Central, provinces and centrally run cities; Grassroots emulation soldiers, advanced workers, advanced soldiers.

e.1.2) Bonuses accompanied by other forms of reward.

e.1.3) Bonuses accompanied by titles awarded by the State.

e.1.4) Bonuses accompanying awards given by Associations and organizations belonging to political organizations, socio-political organizations, social organizations, socio-professional organizations of central and local levels awarded in accordance with the charter of that organization and in accordance with the provisions of the Law on Emulation and Commendation.

e.1.5) Bonuses accompanying the Ho Chi Minh Prize and State Prize.

e.1.6) Bonuses accompanied by medals and badges.

e.1.7) Bonuses accompanied by Certificates of Merit.

The authority to make reward decisions, bonus levels accompanying emulation titles, and forms of reward mentioned above must be in accordance with the provisions of the Law on Emulation and Commendation.

e.2) Bonuses accompanying national awards and international awards recognized by the State of Vietnam.

e.3) Bonuses for technical improvements, inventions, and inventions recognized by competent State agencies.

e.4) Rewards for detecting and reporting violations of law to competent State agencies.

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Based on the above regulations, the performance bonuses that employees may receive do not fall into the cases of personal income tax exemption on bonuses. Therefore, performance bonuses are still considered income subject to personal income tax according to the provisions of law.

So, through the article on Pham Consult, you have learned more about work bonuses and whether this bonus is included in the mandatory social insurance payment or not. Hope the above information helps your work.