The Importance Of Building Salary Regulation

The Importance Of Building Salary Regulation

October 12, 2022

Regulation on salary payment is an important document to ensure the operation and development of an enterprise. It is necessary to go through many detailed steps to build an effective salary regulation.

While employees always want to get the best benefits of salary on their side, employers want to spend fewer salary costs in return for good quality work results. To balance the advantages of both parties, a company needs to develop its own salary regulation that clearly stipulates the contents related to salary and bonuses. To better understand this, take a look at the following content.

What is salary regulation?

Salary regulation – also referred to as compensation plans or pay structure – is a collection of steps, policies and practices employers use to pay employees for their work.

Salary and bonus regulation is one of the indispensable documents in any business. The main content of this document is all regulations on salary and other remuneration packages such as allowances, bonuses, and other support benefits…that employees working in the company will receive. In addition, the method of calculating salary is a form of salary payment and payment period.

The salary regulation is like the law of salary issued by the employer after considering the fairness, accuracy and reasonableness of this regulation, which will be applied within the framework of the company.

The salary payment regulation must adjust all the following contents:

Salary/Wage: a fixed amount of money agreed every year as pay for an employee, usually paid directly into his or her bank account at a certain time (every month, year…)

Bonus and Incentive: an extra amount of money that is given to employees as a present or reward for good work as well as encouragement

Allowances: The amount of money that the employer supports the employee to compensate for the factors of working conditions, the complexity of the work, the living conditions, etc., which have not been taken into account or are not fully included in the salary.

The importance of building salary regulationThe importance of building salary regulation

The importance of building a salary regulation

Salary and bonus is a complex and sensitive field. Therefore, Employers must build an accurate and fair salary regulation in order to properly solve related issues.

The most vital reasons for a company building a salary regulation are:

  • Ensuring basic living standards for employees in the company to help them feel secure to work and work.
  • Motivate and encourage employees to both complete outstandingly their work and target and continue to improve their own ability to create better work performance
  • Help employees understand clearly about their promotion path when dedicating to the company.
  • There is a transparent and clear process on how to calculate salary and pay employees according to the labor law.

Steps to build a salary regulation

Steps to build a salary regulationSteps to build a salary regulation

Regulation on salary payment is an important document to ensure the operation and development of an enterprise. It is necessary to go through the following construction steps with the aim of having proper and reasonable regulation:

Step 1: Determine revenue, profit and salary fund

The Board of Directors of the Company will work with the Director of Human Resources or Head of Human Resources to calculate the ratio between revenue and salary expenses to estimate a total salary fund before developing the salary and bonus regulations.

Step 2: Determine the form of payment

The company needs to determine the form of payment for employees, whether it is time-based, product-based or piece-based… Different methods of payment can be applied to different job positions as long as it ensures rationality.

Fixed salary can be applied to administrative positions, Piece wage for positions that directly produce products or generate revenue. Or apply both of these two forms of salary for a certain job position to take advantage of both forms.

Step 3: Build a title system

List and group all of the job positions with the same level of complexity and responsibilities into a group. This requires a detailed job description for each position according to criteria such as:

  • The level of training, professional experience, knowledge and skills required to perform the job.
  • Responsibility and pressure in the actual work undertaken.

Step 4: Build and evaluate work completion for each position

In order to ensure the incentive and fairness of the salary regulation, it is necessary to develop standards of work completion. This requires the job description to be formulated with clear, measurable criteria.

The level of work completion can be converted into coefficient levels or based on errors in work such as quality, quantity or completion time with corresponding deduction points.

Step 5: Issue, apply, and adjust salary regulation

  • Before officially issued, it is necessary to have a meeting to disseminate and collect the opinions of employees

In many companies, who gets what and why is the cause of conflict and disunity. The clearer and more transparent is the salary regulation, the higher is the morale and motivation of employees.

  • When applying the new salary and bonus regulations, it is necessary to listen to feedback from employees to continuously review, improve and adjust until it is acceptable by all the employees in the company.

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