In Vietnam’s payroll calculations, multiple deductions — including social insurance (SI / HI / UI) and personal income tax (PIT) — are deducted step by step.
Without a proper understanding of these mechanisms, companies may face incorrect net salary calculations, legal non-compliance, and tax risks.
In this article, we clearly explain the types of deductions, their scope, and the calculation order (flow) from a practical perspective.
Overall structure of payroll deductions in Vietnam
Payroll calculations in Vietnam process the following four types of deductions sequentially.
- Social Insurance (SI)
- Health Insurance (HI)
- Unemployment Insurance (UI)
- Personal Income Tax (PIT)
👉 The key point is that social insurance is calculated before tax.
① How social insurance (SI / HI / UI) works
Social insurance is calculated by applying fixed contribution rates to salary amounts,
and is divided into employee contributions and employer contributions.
※ For detailed eligibility criteria and rules regarding social insurance, please also refer to:
“Social Insurance Eligibility and Contribution Calculation”.
Employee social insurance contribution rates
| Item | Rate |
|---|---|
| Social Insurance (SI) | 8% |
| Health Insurance (HI) | 1.5% |
| Unemployment Insurance (UI) | 1% |
| Total | 10.5% |
② Salary components subject to social insurance contributions
Social insurance does not apply to all types of compensation.
Included wages
- Base salary
- Position and responsibility allowances
- Managerial / title allowances
- Fixed and regularly paid allowances
Excluded wages
- Meal allowances (under certain conditions)
- Transportation allowances
- Irregular bonuses
- Tet bonus (annual bonus)
③ How personal income tax (PIT) works
PIT is calculated based on taxable income after social insurance deductions.
The calculation process is as follows:
- Calculate total gross income
- Deduct social insurance (SI / HI / UI)
- Apply applicable deductions (basic deduction, dependent deduction)
- Apply progressive tax rates to taxable income
④ Deduction calculation flow (overall picture)
The payroll deduction flow proceeds in the following order:
- Total gross salary
- Social insurance deductions (SI / HI / UI)
- Determination of taxable income
- Calculation of PIT (personal income tax)
- Net salary
👉 The most important point is that PIT is calculated last.
Common mistakes and points to note
- Calculating social insurance and PIT at the same time
- Including allowances that are not subject to social insurance
- Applying UI to foreign employees incorrectly
- Failing to reflect updated contribution rates after legal revisions
Ensuring accurate payroll and deduction management
Deduction calculations are closely linked to:
- Payroll item design
- Social insurance regulations
- Tax law revisions
Because these elements are closely interconnected, managing them solely with Excel has clear limitations.
With EST, you can centralize payroll, deductions, social insurance, and PIT management in Vietnam, while staying compliant with legal changes.
👉 Please also refer to “Basic Rules of Payroll Calculation in Vietnam”.
- Social Insurance for Foreign Employees in Vietnam: Eligibility, Exemptions, and Contribution Calculations Explained
- Vietnam Payroll FAQ: Common Questions on Social Insurance, PIT, and Foreign Employees
Author of this article
関連記事
-
Vietnam Payroll FAQ: Common Questions on Social Insurance, PIT, and Foreign Employees -
Allowances in Vietnam and Their Tax & Social Insurance Treatment: A Practical Guide to Included and Excluded Allowances
-
How to Calculate Overtime, Night Work, and Holiday Pay in Vietnam: Premium Rates and Practical Points Explained
-
Basics of Overtime Pay Calculation in Vietnam: What Is Included and Excluded from Wages
-
Basic Rules of Payroll Calculation in Vietnam
-
Common Pitfalls Foreign Companies Face in Payroll Processing in Vietnam
