What Is 3P Salary? Formula And How To Build A 3P Salary System

Key Takeaways

• 3P salary is a pay system based on 3 factors: P1 (Position, job value), P2 (Person, individual capability), P3 (Performance, work results).
• General formula: Total 3P salary = P1 + P2 + P3, where P1 is the fixed part by position pay range, and P2 and P3 add on for capability and performance.
• 3P solves three problems at once: internal fairness, market competitiveness and motivation, replacing pay by qualification or seniority.
• Building 3P runs through clear steps: standardise job descriptions, evaluate job value, design pay ranges, build a competency framework, set up KPIs and manage change.
• Implementation typically takes 3 to 6 months for a mid-sized company; the key conditions are clear job descriptions, leadership commitment and market salary survey data.

More and more businesses in Vietnam are moving away from paying by title or seniority toward a 3P salary system to ensure internal fairness and retain talent. So how does the 3P system work, how is it calculated, and what does it take to build one? Let’s find out in this article.

Expressed as a formula, total income under the 3P model is simply:

Total 3P salary = P1 + P2 + P3

Here P1 follows the position’s pay range, P2 follows the capability level and P3 follows the degree to which goals and KPIs are met. The table below contrasts 3P with traditional pay:

Criterion	Traditional pay (qualification, seniority)	3P salary system
Basis for pay	Title, qualification, years of service	Job value, capability, results
Internal fairness	Tends to flatten, by seniority	Differentiates by actual contribution
Motivation	Low, weakly tied to performance	High, bonus tied to KPI, OKR
Transparency	Hard to explain differences	Clear, by pay range and criteria
Best fit for	Stable, low-change models	Businesses professionalising C&B

Compared with a 2P model (usually only P1 plus P2, or P1 plus P3), 3P adds the missing piece, allowing a business to distinguish clearly between pay for job value, for capability and for results.

What is 3P Salary?

3P Salary is a system designed to pay salaries for employees based on three basic factors:

• Pay for position (P1): Pay for the job position.
• Pay for person (P2): Pay for the capacity of the person holding the job position
• Pay for performance (P3): Pay for the results achieved by the person holding the job position.

The salary is the result of assessing employee’s ability based on these above factors. Therefore, the more excellent is employee‘s merit and performance, the higher is his/her salary. Meanwhile P1 is the just a fixed salary for a certain job position.

The purpose of 3P Salary

Salary is important for employees as individuals because the amount of salary reflects the size of the value of their work among the employees themselves, their families, and society. Therefore, It is an important factor to attract and retain employees, create motivation for personal development and help to increase productivity of companies. So with the 3P salary formula, the company can:

a. Ensure internal fairness

3P Salary means different job positions will have different salaries. Or though employees working in the same positions, they may have different amount of salaries. This will be easy to understand because the 3P salary is a remuneration model for employees based on a combination of salary payment according to 3 basic factors: job position, personal capacity and work results. Each individual will be assessed by these factors to determine the suitable amount of salary. This ensures that employees will not feel their ability is underestimated in the working environment.

b. Create competitiveness in the market

The feature of 3P salary is exact assessment of employee’s ability to take on a job position, so it will create a trend and a common standard for fair and commensurate salary.

This is one of the important elements that create the image, reputation and professionalism of the business. This also is an ideal condition for a company to attract and retain talented workers compared to other companies in the market.

c. Motivate personal development and organizational capacity improvement

The combination of these three factors at the same time is aimed at the purpose of businesses paying employees according to their capabilities and values, not one-sided and somewhat bureaucratic like the traditional salary calculation method. According to this, the better ability employee has, the higher chance to increase the amount of their salaries.

Because of the flexibility of 3P salary associated with quality, work achievement, employees are encouraged to be enthusiastic in working and avoiding mistakes. That’s why businesses rarely suffer damage, which is the main factor that increases business’s productivity.

How effective is the 3P salary system?

Applying the 3P salary formula is considered a beneficial wage policy for both parties in the labor relationship, it not only removes the old opinion about criteria of salary calculation as a degree or seniority but also provides employees with opportunities to change promptly the amount of salary in accordance with the employee’s capacity and effort.

For businesses, 3P salary system helps:

• Attract and retain talented workers by salary commensurate with their ability
• Promote and improve work efficiency by meeting the needs of employees through a salary commensurate with the employee’s contribution to the company.
• For employees, 3P salary system helps: Receive income commensurate with the individual’s contribution to the company’s overall results, ensuring their interests.

The basic factors of 3P salary system

a. Pay for position

It is defined as the level of payment that is adjusted to the level of position of each employee. Similarly, a compensation system that automatically determines the level of wages evaluated from each job is implemented into hourly, daily, weekly or monthly wage rates

Three main factors that can be compensated, namely:

• Mental and physical loss: The degree and frequency of heavy work.
• Problem-solving ability and creativity: The ability to analyze, implement and handle tasks arising in the working process.
• Capacity of responsibility: The ability to solve and overcome when mistakes happen to businesses and customers.

Working environment: The level of risk, toxicity or external influence for each job position.

For each criterion, there will be a specified standard process of evaluating and synthesizing for each position, job title.

In practice, P1 is set in two steps following international C&B practice. First, job value is assessed using a point-factor method (in the spirit of Mercer IPE or Hay) to assign each position a grade. The business then benchmarks against market salary survey data to design a min, midpoint and max pay range for each grade. The compa-ratio (actual pay divided by midpoint) helps control internal fairness: below 1.0 usually means a newcomer, around 1.0 is on-target, above 1.1 is for high performers. A well-built salary structure is the foundation of the entire P1 component. 

When setting the floor of the P1 range, businesses must keep it no lower than the regional minimum wage, which rose by an average of 7.2% from 1 January 2026 under Decree 293/2025/NĐ-CP.

b. Pay for Person

Its structure link to the depth of the skills, abilities, competences and knowledge a person acquires and applies to the work. The principle of Person focused pay namely:

Professional competence: All knowledge about professional expertise include understanding and potential action corresponding with each specific job title in the enterprise.

Core Competency: The ability to perform the job in the best way that employees in each position can achieve.

Competency by role: The minimum level that an employee must be able to do when taking on a certain job position.

The salary pay for person also includes some allowances and will be more accurate when attached to the competitive environment of the business.

To keep P2 from becoming a tick-box exercise, a business needs a competency framework with three layers: core competencies for the whole company, leadership competencies for managers, and functional competencies by department. Each competency is described across 4 to 5 levels with observable behaviours. The common logic: P1 sets the pay range by grade, while P2 decides where the person sits within that range, on-target capability sitting near the midpoint and clearly above-standard capability moving toward 110 to 120% of midpoint. Pay for person only works when it is tied to an objective competency assessment tool and a clear development path.

c. Pay for Performance

It is financial reward system for employees where some or all their monetary compensation is related to how their performance is assessed relative to stated criteria or the value they bring to their company.

Normally, the process of calculating salary according to work results will be follows the below stages:

Assign work goals -> Evaluate work performance (complete or not complete) -> Incentive bonus -> Personal development -> Organizational development.

Performance related pay is presented in several forms:

• For individuals: bonus, discount commission, salary by product, salary increase
• Organization (group, department): reward or benefit sharing
• Enterprise-wide: bonus shares, right to buy shares or share profits.

Technically, P3 contains two distinct types of reward. A merit increase adjusts base salary and has a long-term effect on fixed cost, while a variable bonus is a one-off payment tied directly to KPI or OKR for the period. A common design assigns a bonus multiplier to each rating (for example, an outstanding rating at 1.5 to 2.0, an on-target rating at 0.7 to 0.8), then calculates the bonus as: annual base salary times target bonus rate times multiplier times KPI completion rate. The role of KPIs in building the pay and bonus structure is decisive in making P3 both motivating and budget-controlled.

How to calculate 3P salary: formula and a worked example

As noted, total 3P salary equals P1 plus P2 plus P3. The example below is for a mid-level Marketing Specialist (all figures are illustrative only; each business must set its own based on market data and strategy):

Component	How it is determined	Value (illustrative)
P1 (position)	Paid at the midpoint of grade G6	20,000,000 VND/month
P2 (capability)	Above-standard capability, plus 10% of midpoint	2,000,000 VND/month
P3 (performance)	Annual KPI bonus, averaged per month	about 2,178,000 VND/month
Total	P1 + P2 + P3	about 24,178,000 VND/month

In this example, base pay (P1 plus P2) is 22,000,000 VND/month, giving a compa-ratio of 1.1 (110% of midpoint), which shows the employee is in a high-capability zone. When communicating internally, a business should clearly separate the fixed pay (P1 plus P2) from the variable bonus (P3) so employees understand which part is stable income and which part is tied to performance.

How to build a 3P salary system: a step-by-step roadmap

A standard roadmap for companies of a few hundred employees or more usually runs through these phases:

1. Standardise the organisation and job descriptions (JDs): review the org chart and standardise JDs for every position.
2. Evaluate job value and build a grade system (the foundation for P1).
3. Design pay ranges and the pay structure: gather market data, set the pay strategy, build min, midpoint and max.
4. Build the competency framework and the P2 mechanism: competency dictionary, level scales, how to position people within the range.
5. Design the performance management system and P3: cascade KPIs or OKRs, set rating scales, bonus multipliers, and simulate the bonus pool.
6. Consult, communicate and manage change: prepare FAQs, run town halls, train line managers.
7. Pilot and refine: trial in 1 to 2 units before rolling out company-wide.

Common mistakes when implementing 3P salary

• Building 3P without reliable market data, leaving P1 uncompetitive. How to avoid: use a standard salary survey, updated regularly.
• Evaluating job value subjectively, breaking internal fairness. How to avoid: standardise criteria and train the evaluation panel.
• An over-complex competency framework that managers avoid using. How to avoid: start with a lean framework of 10 to 15 key competencies.
• KPIs tied to bonus but not to strategy, pushing employees toward short-term metrics. How to avoid: cascade goals from strategy and test them against SMART criteria.
• Mixing up merit increase and bonus, inflating fixed base-salary cost. How to avoid: clearly separate what affects P1 and P2 from what is a P3 bonus.
• Poor communication during the transition, leaving employees feeling their pay was cut. How to avoid: consult early and explain the principles with concrete examples.
• Treating 3P as a one-off project. How to avoid: set a regular review cycle of 1 to 2 years for the pay structure, competency framework and KPIs.

3P salary consulting at Talentnet

3P salary is not just a pay formula but a way to tie compensation to the real value of each position, person and result; the hard part is the execution, not the formula. Talentnet’s HR consulting services help build your 3P system from job evaluation to the competency framework and bonus mechanism, while payroll services keep every pay run accurate.