Time-based Salary

Time-based Salary

November 19, 2022

Time pay is the compensation from the employer when an employee works for the benefit of the employer in a certain period of time. This is a common form of payment in businesses today.

The issue of salary payment is an indispensable element in labor relations. Based on business conditions and the value created by employees, enterprises and employees agree on the form of salary payment. Among the popular forms of salary payment, the time-based payment method is being discussed by many businesses. Therefore, the following article will clarify the content related to this form of payment.

1. The definition of salary

One of the fundamental elements to form an employment relationship is the terms of salary. The definition of wage can be expressed as follows:

Salary is the employer’s monetary payment in return for the value of the employee’s labor power. In other words, the wage is the compensation that the employer gives to his employees when they have spent their labor for the benefit of the employer.

Salary can be a regular income by hour, by day, by week, by month which people often call it time – based wage.

2. Regulations on the form of time-based salary payment

The time wage system is the oldest method of wage payment. “Time” is made a basis for determining the wages of workers. Under this system, wages are paid according to the time workers spend, irrespective of the work output done. The wage rates are fixed for an hour, a day, a week, a month, or even a year.

Time-based SalaryTime-based Salary

2.1 How to calculate salary by time: Hourly salary, daily salary, weekly salary, monthly salary

• The calculation of hourly wages is as follows:

Hourly salary = Daily salary / Normal working hours

Note:

Do not work more than 8 hours a day, 48 hours a week.

For particularly arduous, hazardous, and dangerous jobs, it is not required to work more than 06 hours in a day.

• Calculation of daily salary:

Daily salary = Monthly salary / Number of normal working days in a month.

Note: The number of normal working days in the month is chosen by the enterprise:

Fixed (26 days) or

Flexible per month according to the formula: Number of normal working days in a month = Number of days in the month – Number of days off.

• How to calculate weekly salary:

Weekly salary = (Monthly salary x 12 months) / 52 weeks.

Note: Do not work more than 48 hours per week

• How to calculate monthly salary:

The monthly salary is determined according to the level stated in the labor contract or specified in the salary table applicable to that employee.

Monthly salary by title = Basic salary * Salary coefficient rate + Allowances (if any)

The allowances if any here will be calculated according to one of the formulas below:

Allowances = Basic salary * Allowance Rate

This formula applies to allowances that are not calculated according to salary (toxic allowance, mobile allowance, position allowance, leadership allowance).

Or

Allowances = Basic salary * Salary coefficient rate * Allowance rate

This formula applies to occupational allowances, seniority allowances, regional allowances, and special allowances. These allowances are calculated based on salary.

Regular monthly salary = Daily salary according to labor contract * Actual number of working days in a month

2.2 Time wages in some special cases

• Overtime pay

Overtime pay = Regular hourly wage* 150% or 200% or 300% * Actual overtime hours

The level is at least equal to 150% of the normal hourly wage, applied to overtime on weekdays;

The rate is at least equal to 200% of the normal hourly wage, applied to overtime hours on a weekly day off;

The rate is at least equal to 300% of the normal hourly wage, applied to overtime hours on public holidays, New Year’s Day, and paid holidays.

• Wages for working at night

Night-time wages = Regular hourly wages *130% * Night-time hours

• Overtime pay at night

Overtime pay at night = Overtime pay during the day* 130% * Actual overtime hours worked at night

3. Advantages and disadvantages of time-based pay

The biggest advantage of time-based pay is that it’s easy to understand, calculate, and implement.

  • The workers will not find any difficulty in calculating the wages. The time spent by a person multiplied by the rate will determine his wages.
  • Workers are guaranteed minimum wages for the time spent by them. They are not supposed to complete particular tasks for getting their wages. They are sure to set certain wages at the end of a specified period of time spent working.
  • Applying this form of payment makes employees not have to run after the number of products, so they have more time to be creative, and accumulate experience to spend time and effort on the quality of work.
Advantages and disadvantages of time-based pay
Advantages and disadvantages of time-based pay

The drawback, this form of payment may not fully reflect the value of an employee’s labor in a certain period of time. It means that the wages that workers receive are not commensurate with the value they create. Efficient workers create more value in the same amount of time as inefficient persons but the wages they receive over time are the same. This raises the question of accuracy and fairness in this form of payment.

When all employees, irrespective of their merit are treated equally, there is likely to be trouble between management and workers. Those employees, who are not satisfied with this method, may start disobeying orders from their superiors.

4. When is the payment term?

The salary payment term is the content that the employee and the employer agree with each other to suit the business situation of the enterprise. Normally, the salary of the previous month will be paid by the employee between the 5th and the 10th of the following month. Or there may be another period in the month depending on the company’s business habits.

5. Standard payment methods

Time-based pay can be done in two ways:

  • Simple time-based pay (paid according to actual working time, regardless of work attitude and work results)
  • Time-based salary with bonus (including salary based on actual working time plus bonus for exceeding prescribed targets such as: saving labor time, saving materials, increasing labor productivity, etc.) to ensure production needs

This form of payment will stimulate employees to work enthusiastically. On the other hand, it has the effect of encouraging workers to increase labor productivity, save supplies and materials and ensure product quality.

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