KPI is known as a key performance indicator. Salary subject to KPI is the amount paid according to the employee’s work performance. Currently, many businesses have applied KPI salary in addition to a hard (fixed) salary to promote the working efficiency of employees.
- How does the law prescribe salary ?
Pursuant to Article 90 of the Labor Code 2019: A salary is an amount the employer pays the employee under an agreement for a work, including base salary, allowances and other additional amounts. The base salary must not fall below the statutory minimum wages.
- Are salaries subject to KPIs required to social insurance payment?
Clause 2, Article 5 of the Law on Social Insurance 2014 stipulates: The compulsory social insurance premium rate shall be calculated based on an employee’s monthly salary.
In addition, Clause 2, Article 17 of Decree 115/2015/ND-CP stipulates: the monthly salary as the basis for social insurance payment will be the salary, salary-based allowance, and other additional amounts mentioned in the labor contract as prescribed in the labor law.
And in Circular 06/2021/TT-BLDTBXH, other additional amounts to be calculated as social insurance premiums are: Additional amounts, which can be determined as specific amounts in addition to the wage level agreed upon in the labor contract, and are regularly paid in each period of wage payment.
Meanwhile, salary subject to KPIs is paid according to the work performance achieved by employees. On the other hand, KPIs may not be achieved by employees every month or achieved without the same results in every month. Therefore, the amounts paid according to the KPIs of each month may also be different.
Thus, the money achieved from KPIs for employees are other regimes and welfares stipulated in the company’s bonus regulation and is also the bonus as prescribed in Clause 2 of the Article 103 of the Labor Code. In addition, KPIs bonus is specified differently by each company in its regulations and labor contract. The amount of KPIs is paid according to the work performance of each employee, so every month, such amounts cannot be received by the employee, or received with a different amount of money each month.
In short, salary subject to KPIs is an income that can be determined as specific amounts but paid irregularly in each period of wage payment. It depends on the level of work completion and performance of the employee. Thereby, the KPIs salary shall not be included in the employee’s salary as the basis for social insurance payment.
- Are salaries subject to KPIs required to personal income tax payment?
According to the Law on Personal Income Tax 2007, incomes liable to personal income tax include: salaries, wages, and amounts of similar nature, and allowances.
Point b, Clause 2 of the Law on Personal Income Tax stipulates allowances NOT LIABLE FOR PERSONAL INCOME TAX include: those paid under legal provisions on preferential treatment of persons with meritorious services; defense or security allowances; hazard or danger allowances for persons working in branches, occupations or jobs at places where exist hazardous or dangerous elements; allowances for attraction of laborers to work in certain branches or in certain regions specified by law; allowances for sudden difficulties, allowances for laborers having labor accident or suffering from occupational disease, lump-sum maternity or child adoption allowances; allowances for working capacity loss, lump-sum retirement allowances, monthly survivorship allowances, severance and job loss allowances specified in the Labor Code, other allowances paid by the Social Insurance, allowances for combat of social evils, and allowances not of the nature of salary and wage according to the Government’s regulations.
Thereby, it can be seen that KPIs salary is NOT included in the list of allowances exempt from Personal Income Tax. Therefore, the salary subject to KPIs shall be the income liable for PIT and the employee shall be responsible for paying tax in accordance with the law.