Types of Employee Allowances Workers Can Receive

Key takeaways

• Employee allowances aren’t mandatory but serve as strategic tools to retain talent and boost productivity during labor shortages.
• Five critical allowance types: hazardous work allowances, performance-based allowances, meal subsidies, uniform provisions, and travel reimbursements.
• Allowances listed in employment contracts count toward social insurance contributions, unlike subsidies that only apply during special circumstances.
• Current regulations allow employers and workers to negotiate allowance rates freely, creating flexibility for competitive compensation packages.

What exactly are employee allowances? These are supplemental payments companies provide to workers to compensate for specific job conditions, work complexity, or living circumstances that base salaries don’t fully address. For manufacturing companies, understanding and properly implementing current allowance types isn’t just about legal compliance—it’s the key to building a loyal, high-performing workforce.

Understanding the mandatory nature of employee allowances

Vietnam’s labor laws don’t mandate that companies provide every type of allowance to workers. According to Article 104 of the 2019 Labor Code, which allowances to apply and at what rates depends entirely on agreements between companies and employees, or internal company policies.

However, once agreed upon, allowances become mandatory content that must be clearly stated in employment contracts per Article 21, Section 1(d) of the 2019 Labor Code. This ensures transparency while protecting both parties’ interests and preventing unnecessary disputes.

Notably, allowance agreements give companies complete autonomy in designing compensation packages that fit their financial conditions and HR strategies. This flexibility helps CEOs balance costs with effectiveness in attracting and retaining talent.

Key allowance types for workers in manufacturing environments

With skilled labor shortages and fierce competition for quality workers, selecting the right current allowance types becomes a critical factor determining company competitiveness. This is especially important since wages for factory workers in Vietnam face intense competitive pressure, requiring smart allowance strategies.

Hazardous, toxic, and dangerous work allowances

This represents the most important allowance type in manufacturing, playing a crucial role in attracting and retaining workers in health-hazardous conditions.

The primary purpose is compensating for risks and hardships workers face daily. According to Circular 59/2015/TT-BLĐTBXH, this allowance compensates for factors that base salaries don’t account for or don’t adequately cover.

Applicable positions include:

• Machine operators in high-noise environments
• Workers in extreme temperature conditions
• Staff exposed to toxic chemicals
• Equipment operators with high safety risks

Providing these allowances not only demonstrates company concern for worker health but also creates competitive advantages in recruiting hard-to-fill positions. This helps reduce turnover rates and strengthen loyalty, thereby reducing recruitment and retraining costs.

Responsibility and job performance allowances

This is the most powerful tool for directly linking income to performance—something every CEO cares about when optimizing labor productivity.

Purpose is recognizing responsibilities of positions like team leaders, line supervisors, or encouraging workers to meet and exceed production targets. Performance allowances create direct motivation for workers to improve work quality and quantity.

Calculation formula from sample regulations:

Performance Allowance = (Standard allowance for position) × (% job completion rate) × (Actual working days / Working days in month)

This formula ensures fairness since allowances proportionally reflect individual results. Importantly, companies need transparent evaluation systems with clear criteria for work quantity and quality to avoid disputes and create positive motivation.

Lunch allowances (meal breaks)

This basic benefit has significant psychological impact, demonstrating company care for worker health and wellbeing.

The primary purpose is ensuring workers have sufficient energy for effective work, especially important for physically demanding manufacturing jobs. Lunch allowances also help minimize unnecessary break time and increase employee satisfaction.

Reference rates: companies can pay a fixed 700,000 VND/month, added directly to salaries. This rate is calculated based on actual working days with salary in the month, ensuring reasonableness and fairness.

The economic benefit of this allowance also shows in reducing workers leaving premises for lunch, saving time and strengthening work discipline.

Material support (uniforms, work tools)

While not cash payments, these supports have significant practical value, helping reduce workers’ financial burden and enhancing company professionalism.

The primary purpose is ensuring workplace safety, building professionalism, and reducing workers’ expense burden. Providing uniforms and work tools also demonstrates company investment in product quality and brand image.

Reference provision schedule:

• Uniforms: 4 sets/year for technical staff and workers, distributed twice in January and July
• New employees: Receive uniforms upon signing employment or trial contracts
• Responsibilities: Workers must maintain properly, return upon resignation, compensate if lost or damaged

Maintenance and return responsibility regulations help companies control costs and ensure discipline, creating balance between rights and obligations.

Position-specific allowances (fuel, business trip expenses)

Though not applicable to all workers, these allowances are crucial for positions requiring high mobility and directly affecting operational efficiency.

Purpose is supporting costs for mobile work like equipment maintenance, material handling, or project supervision. These positions often play key roles in ensuring continuous and efficient production operations.

Reference support rates:

1. Fuel allowances: 200,000 – 800,000 VND/month depending on travel frequency and distance
2. Business trip allowances:

• Neighboring provinces: 500,000 VND/day
• Ho Chi Minh City and Central/Southern regions: 2,000,000 VND/day
• Same-day trips: 150,000 VND/day

This flexible support structure allows companies to optimize costs based on actual needs, ensuring workers don’t bear personal expenses when performing company duties.

Do allowances require social insurance contributions?

According to Official Letter 1734/BHXH-QLT 2017, salary allowances with specific amounts paid regularly each pay period must be included in social insurance contribution calculations. This includes position allowances, responsibility allowances, hazardous work allowances, seniority allowances, regional allowances, and similar allowances.

Conversely, support payments like meal subsidies, fuel support, phone allowances, travel expenses, housing allowances listed as separate items in employment contracts don’t count toward social insurance contributions. This creates cost optimization opportunities when designing compensation packages and salary structure components.

How are allowance payment rates determined?

Current laws don’t specify fixed payment rates for any allowance types. According to Circular 10/2020/TT-BLĐTBXH, payment rates are entirely negotiated between companies and workers and must be clearly recorded in salary regulations or employment contracts.

This flexibility allows companies to adjust allowance rates according to financial conditions, HR strategies, and labor market conditions. To ensure competitiveness, many companies reference comprehensive salary survey reports to determine market-appropriate allowance rates.

Distinguishing allowances from subsidies – are both employee benefits?

Allowances are tied to work processes, paid regularly with salaries to compensate for specific job factors (like hazardous work allowances, position allowances, meal allowances). Subsidies only arise when workers face special circumstances (illness, maternity, unemployment), are temporary support, and typically paid by social insurance agencies according to legal regulations.

Both are benefits but differ fundamentally: allowances are voluntary benefits companies decide, while subsidies are legally mandated benefits. Importantly for CEOs, allowances typically count toward social insurance contributions while subsidies don’t—creating cost optimization opportunities when designing compensation packages.

In increasingly fierce competition for skilled labor, smart allowance systems have become critical competitive weapons. Current allowance types aren’t just expenses but high-ROI investments through talent retention and productivity enhancement.

Wise leaders should immediately review and optimize salary regulations, potentially consulting professional payroll services to ensure compliance with key payroll compliance principles while maintaining competitive power to attract core workers who create real value for the business.