FOREIGN TRADE UNIVERSITY FOREIGN TRADE UNIVERSITY FACULTY OF BUSINESS ADMINISTRATION Major International Business Management *** GRADUATION THESIS Thesis title EMPLOYEE COMPENSATION AT THE HO CHI MINH[.]
INTRODUCTION
Statement of the Problem
Payment to employees, including salaries, wages, and bonuses, is of great social and economic importance because these payments often serve as their primary income to support their families For businesses, payroll expenses represent a significant portion of total costs and can influence labor productivity—appropriately aligned payments motivate employees, while misaligned payments may reduce motivation Constructing a sound payroll system and choosing suitable payment methods are essential to ensure that compensation acts as both a meaningful reward and a strong motivator for employees, while also being a reasonable expense for the company.
Payroll issues remain a common challenge, with existing deficiencies affecting the accuracy and fairness of salary, wage, and bonus payments Addressing these gaps is crucial, especially in State-owned enterprises, to ensure employees receive equitable and reasonable compensation Improving payroll systems not only promotes fairness but also enhances overall business profitability and operational efficiency.
Objectives of the Study
The dissertation has three objectives:
This article aims to enhance the background understanding of payroll by clarifying key concepts such as salary, wage, and bonus It explores the determinants of these compensation elements and examines their efficiencies across various payment systems.
This article examines how State-owned enterprises in Vietnam, exemplified by Ho Chi Minh Museum Construction JSC, manage employee payments It highlights the company's payroll practices, illustrating both their successes and limitations By analyzing Ho Chi Minh Museum Construction JSC’s approach, we gain insights into the effectiveness of payroll systems within Vietnamese state companies, revealing opportunities for improvement to ensure timely and accurate employee compensation.
To improve the payment regime at Ho Chi Minh Museum Construction JSC, several potential solutions are proposed, which could also be implemented across other State-owned companies nationwide These improvements aim to enhance transparency, efficiency, and fairness in payment processes, ensuring better financial management and project execution Implementing these strategies can serve as a model for reforming payment systems in similar organizations, promoting overall industry standards and accountability.
Subject of the Study
Subjects of the Study: Salary, wage, and bonus – their definitions, impacts, constructions, and reflections in different payment systems.
Scope of the Study
The Study provides analysis and evaluation of the payrolling at Ho Chi Minh Museum Construction JSC, a State construction company.
Structure of the Dissertation
This study is structured into five key sections: an introduction to the subject, an overview of the theoretical background of payroll systems in state construction companies, the data collection and methodology used, the key findings and results, and finally, the conclusions drawn from the research.
This article begins by highlighting the significance of salary, wages, and bonuses in employee compensation, emphasizing their role in motivation and organizational success It outlines the primary objectives of this study, which include analyzing payment structures and their impact on employee satisfaction Additionally, the article details how the study will explore various components of remuneration, providing insights into effective compensation strategies to enhance overall organizational performance.
The literature review explores various theories related to salary, wages, and bonuses, focusing on their payment models within State-owned enterprises, particularly in the construction industry It examines both academic perspectives—such as socialist and traditional economic theories—and practical viewpoints from entrepreneurs and employees Additionally, the review includes key formulas for calculating payments, which help to clarify the underlying logic and monetary valuation of compensation systems.
This article outlines the data methodology, detailing how research is conducted and how the results are analyzed in Part Three It provides clarity on the empirical findings discussed in the fourth section of the study, ensuring a comprehensive understanding of the research process and its key outcomes.
Part four, empirical findings, addresses the core objectives outlined in section 1.2 of this study by analyzing the case study of Ho Chi Minh Museum Construction Company, a historic and reputable state enterprise in Vietnam The investigation provides valuable insights into the company's operational strategies, challenges, and successes within the context of Vietnam's construction industry These findings enhance understanding of how long-standing state companies contribute to national development and serve as a benchmark for similar organizations.
Finally, in the last chapter, recommendations will be given, together with a conclusion for the Study.
LITERATURE REVIEW
Overview of Salary and Wage
2.1.1 Definition of Salary and Wage
According to Marxism, the key to initiating production lies in the combination of two fundamental factors: labor and capital Labor refers to the work performed by humans, distinguished from other factors like land and capital itself While some theories have introduced the concept of human capital—highlighting workers’ skills rather than their immediate output—counter-arguments within macroeconomic systems challenge this notion, viewing human capital as a contradictory concept (Johnson et al., 2005).
Capitals is owned by a segment of the population in the society, while other segments of the population, due to having no
1 Karl Marx, 1995 The Capital vol 1 [Online] s.l.: Marx/Engels Internet Archive
Available at: http://www.marxists.org/archive/marx/works/1867-c1/
2 Dr Paul M Johnson et al,, 2005 A Glossary of Political Economy Terms [Internet] Alabama:
Available at: http://www.auburn.edu/~johnspm/gloss/human_capital
Accessed 11 March 2011 capital, have to offer their own labor power to those with capital for an amount of money in return, which is known as wage.
The emergence of the labor market and the concept of wages is a direct result of labor becoming a commodity Wages represent the exchange value of labor power in the marketplace, serving as compensation for this labor over a specified period The wage rate reflects the amount earned per unit of time, highlighting its role in the economic dynamics of labor.
In a planned economy, wages do not serve as the price of labor power or goods in either the private or public sector Conversely, in a market economy, wages represent the cash value of labor power, reflecting the price that employers must pay to workers This wage price is determined by market principles such as supply and demand, negotiation ability, and current state laws, which can cause wages to fluctuate above or below the actual value of labor power.
High unemployment typically leads to lower wages, while achieving full employment tends to increase wages, according to supply and demand principles However, wage levels can also be affected by high inflation and consumer taxes, which may reduce real income It is essential to distinguish between nominal gross wages and real wages adjusted for inflation and taxes, including indirect tax burdens, to accurately assess wage changes and economic well-being.
Nominal wage refers to the total amount employers pay workers for their labor, reflecting factors such as working capacity, work efficiency, and experience It is closely correlated with a worker's productivity and overall contribution to the organization Understanding nominal wages is essential for analyzing labor market dynamics and compensation trends.
Real wage reflects the purchasing power of a worker's income, representing the value of consumer goods and essential services that can be bought with their nominal wage The connection between real wages and nominal wages is captured through a specific formula, highlighting how changes in nominal income impact actual purchasing ability Understanding this relationship is crucial for assessing workers' living standards and economic well-being.
Real wage PI wage Nominal
When the price level rises, real wages decline even if nominal wages increase, highlighting that real wages are influenced not only by nominal income but also by the prices of consumer goods and essential services This complex relationship involves changes in nominal wages, inflation, and other economic factors In society, real wages are a primary concern for employees and are directly affected by management policies related to income and living standards.
To achieve business goals, the enterprise should have appropriate
According to R O'Donnell (1987) in "Real and Nominal Quantities" from The New Palgrave: A Dictionary of Economics, policies aimed at increasing workers' real wages are essential for fostering their dedication to the enterprise Raising real wages ensures that employees are motivated and committed, ultimately benefiting the overall productivity and success of the business Implementing strategies to enhance real wages is a key approach to achieving sustained workforce engagement and enterprise growth.
Salary or wages serve as a key indicator of social and economic relations, reflecting both the economic dynamics between employers and workers and the social aspects related to living standards and social order Specifically, wages represent the amount employers pay for labor, highlighting the economic interactions within the labor market Additionally, the unique nature of labor power as a commodity underscores its connection to social relations, influencing living conditions and social inequalities Understanding wages thus provides insight into broader social and economic structures.
Effective wage policies and equitable income distribution are essential for societal stability, as they directly impact relations of production, consumption, and exchange Countries should develop reasonable salary regulations aligned with their economic development to promote balanced growth and social harmony.
In daily operations, salary refers to a fixed amount of compensation paid to an employee by an employer in exchange for work performed, typically covering an entire role or job Employees earning a salary are generally expected to complete their responsibilities in return for this fixed payment In contrast, wages are payments made to workers based on labor or services, usually calculated on an hourly, daily, weekly, or piece-rate basis Understanding these distinctions is essential for effective payroll management and accurate employee classification.
2.1.2 Roles of Salary and Wage
4 Nguyễn Văn Hảo et al 2002, Giáo trình kinh tế chính trị [pdf], Hanoi: Ministry of Education and Training
5 D Usher, 1987, "real income," The New Palgrave: A Dictionary of Economics, v 4, pp 104-05 Hamshire: Palgrave Macmillan.
Employee compensation is a vital incentive that motivates workers to perform at their best, as fair and sufficient salary packages directly impact their productivity and job satisfaction Remuneration not only serves as a reward for labor but also acts as a key indicator of an employee’s skills and professional experience, fostering pride in their achievements Although salary may comprise only a part of their overall income, employees often view high wages as a reflection of their value and may aspire for salary raises to acknowledge their expertise and dedication.
Wages and salaries constitute a significant portion of enterprise production costs and serve as a crucial lever for enhancing business efficiency Fair compensation not only supports the retention of skilled employees but also fosters workforce stability, contributing to the overall growth and long-term success of the company.
Wages and salaries are essential tools for policymakers to manage the economy effectively, as they reflect the quality, quantity, and distribution of labor benefits within enterprises Implementing a reasonable payment regime significantly contributes to promoting both economic growth and social development.
The salary/wage must meet the economic and social goals. And there should be no conflict of interests between: the State, enterprises and the legitimate interests of workers.
Payroll Account
2.2.1 Definition and Roles of Payroll Account
Payroll in an organization refers to the total sum of all compensations owed to employees for a specific period or on a designated date It encompasses all financial records related to salaries, wages, bonuses, and deductions Key components include salary payments, tax withholdings, and other paycheck deductions, making payroll a crucial aspect of managing employee compensation and ensuring compliance with financial and tax regulations.
In accounting, payroll refers to the amount paid to employees for services they provided during a certain period of time (Bragg,
2004) Payroll is usually managed by the accounting department of a business Small-business payrolls may be handled directly by the owner or an associate.
Payroll expenses can vary each pay period due to factors like overtime, sick pay, and other variables, making it a significant cost for most businesses Managing payroll efficiently is essential, as it is almost always tax-deductible, providing potential financial benefits Understanding these fluctuations helps businesses plan their budgets better and optimize their overall expenses.
Payroll is a vital component of any company due to its significant impact on financial and operational stability From an accounting perspective, payroll and payroll taxes directly influence a company's net income and must comply with legal regulations Ethically, the payroll department is essential for maintaining employee morale, as timely and accurate payroll payments foster trust and satisfaction among staff Ensuring precise payroll processing helps prevent errors and irregularities, supporting a positive workplace environment and legal compliance.
The primary mission of the payroll department is to ensure that all employees are paid accurately and on time, with correct withholdings and deductions Additionally, it is essential that these withholdings and deductions are remitted precisely, maintaining compliance and financial integrity.
Gilbert B Siegel, 1992, has demonstrated environmental differences in public and private companies in the following tables 7 :
Table 2.1 Diagnosis Criteria for Public and Private
Policy and Administrative Problem and Context
(e.g., What is the character of the environment in which the particular problem is set?)
A Number of relevant actors Low High
B Change of actors/ground rules
7 Gilbert B Siegel, 1992 Public Employee Compensation and Its Role in Public Sector Strategic
Management New York: Quorum Books.
C Independence of actors Low High
(e.g., What is the character of the relationship between the relevant organization and its environment in regards to negotiations around goals and objectives?)
A Preference /goals of relevant actors
B Criteria of goodness Unambiguous Ambiguous
(e.g., What is the character of the technology being employed in doing work within the organization
LESSPROGRAMMABLE on this problem?)
C Decision rules Known Not Known
Table 2.2 Alternative Decision Rules for Public and Private
Problems Bureaucratic and Contingent Action Models
3 Time horizons Long-range Short-range
7 Assumption Organizations persist Persons persist
10 Presumed role/person relationship role → person Person → role
Hard to achieve Hard to avoid
16 Major Inefficiency Catastrophic error presumed risk
Consistency/equity Issue specific/efficacy
The debate over whether public sector and not-for-profit organizations should manage performance and rewards differently from private sector companies remains ongoing While some argue that public and non-profit organizations should emulate private sector strategies, others highlight their unique contextual challenges that require tailored approaches It is important to recognize that common principles of performance management apply across all sectors, but customized strategies are often necessary to address the specific environments in which public and non-profit organizations operate.
In the public sector, long-term careers are highly valued, supported by policies and structures that favor seniority-based compensation This includes direct rewards such as salary and wages, as well as indirect benefits, fostering stability and reward equity Formal role relationships that are relatively permanent serve as a foundation for ensuring fair compensation, where longer tenure results in higher pay, emphasizing the importance of sustained public service.
In the contingent model, individuals act more independently, leading to frequent role mobility, creation, and modification, reflecting organizational risk sharing among employees This approach ties individual and group rewards to the organization's performance, fostering a culture where employees assume greater risk In the private sector, this is exemplified through bottom-line profit sharing, which serves as a basis for performance-based rewards.
However, as the environment has become much more dynamic, competitive and globalized, an increased need to ensure ongoing viability and flexibility has emerged for the public sector.
Public sector organizations face greater legal and regulatory scrutiny compared to the private sector, which makes it challenging for managers to differentiate employee performance effectively This heightened oversight complicates disciplinary actions against poor performers and limits the ability to reward exceptional performance through merit-based pay and incentive programs Consequently, the public sector's accountability and reward structures are inherently different from those of private organizations.
8 Ran Lachman, 1985.Public And Private Sector Differences: CEOs’ Perceptions Of Their Role
Legislatures regulate funding based on available resources, which limits the amounts allocated for rewarding top performers, affecting the implementation of performance-based compensation This structured pay system, constrained by budget restrictions, influences the design of salary packages and restricts the flexibility to offer negotiable or merit-based rewards The control of salary budgets by legislative bodies and councils plays a crucial role in shaping overall compensation strategies within organizations.
Wage rates are determined based on the prevailing socio-economic system In the public sector, the government sets salaries for civil servants and state employees, ensuring standardized compensation Conversely, in the private sector, wages are established through agreements between employers and workers, in accordance with national labor laws.
In Vietnam, there are a number of factors that go into determining this item They include:
The needs and living standards of employees, also the changes in costs of living
The financial situation of the organization, or cumulative capacity of the State’s budget
Job categories and levels of employees
Decree No 204/2004/NĐ-CP, issued on December 14th, 2004, is a key statutory regulation governing payroll in Vietnam It establishes grading systems and salary tables for senior experts, government officials, public regular staff in state-owned companies and organizations, as well as military personnel Additionally, the decree outlines provisions for allowances, bonuses, subsidies, and other welfare benefits for these groups.
The Decree No 108/2010/NĐ-CP, issued on October 29th, 2010, establishes regulations on the minimum salary payments for employees across Vietnamese organizations and enterprises, with regional adjustments to ensure fairness Additionally, Circular No 02/2007/TT-BNV from the Ministry of Home Affairs provides guidelines for salary increases when employees are promoted to higher grades.
Also, a very recent instrument is the Decree No 22/2011/NĐ-
CP on April 4th, 2011, valid from May 1st, 2011 raising the minimum salary in public enterprises and organizations to 980,000 VND.
2.2.3.2 Salary structures: Pay grades, pay levels/steps
In Vietnam, the payroll system is officially established by the State and organized based on job roles and sectors It categorizes employees such as elected officials, government staff, public servants, administrators, military personnel, and manual workers, ensuring a structured approach to compensation across various sectors.
Payroll variations across categories are influenced by special arrangements and assigned priorities For instance, military officers and trained soldiers are ranked higher within the payroll system, leading to higher salaries compared to other categories This hierarchical structure ensures that essential personnel, such as military personnel, receive prioritized compensation.
The content of salary payment including: salary pay tables, pay grades, and pay steps
Pay grades: Are the hierarchical pay level within a job category
Pay table: Is a table describing the absolute amount of salary, salary coefficients and grades of the same rank.
Pay steps: Within each grade level, there are smaller pay steps or pay levels.
Salary coefficient: Is the difference ratio between the current level’s amounts with the minimum salary amount legalized The salary coefficient must be gradually increased in the pay scale.
The n-th coefficient of a salary level (Kn) is determined by the following formula 9 :
9 Bùi Nữ Thanh Hà , 2008 Kế toán xây dựng cơ bản Hanoi: University of National Economics pp 34.
Salary and Wages In Construction Companies
Kn-1 is the (n-1)th coefficient
M% is the % of difference among two consecutive salaries in the pay scale, M can be unchanged or steadily increased
The State regulated the minimum salary payment amount; other salary amounts will be determined based on the pay hierarchy 10 n = Statutory minimum salary amount Pay coefficient
Of which: n is a determined salary payment amount
This is the determination for basic salary In addition to the basic pay, workers can also receive different types of allowances, for example mobility allowances or telephone allowances
2.3 Salary and Wage in Construction Companies
As stated by Bui Nu Thanh Ha, there are three main forms of payment in a construction company: Time-based pay, product-based pay, and package contract.
In this model, payment depends on length of service The longer the employee works for the company, the higher pay level
10 Bùi Nữ Thanh Hà , 2008 Kế toán xây dựng cơ bản Hanoi: University of National Economics pp 35-36. he/she would have
A key advantage of this payment system is that it recognizes employees’ length of service, experience, and professional qualifications, leading to fairer compensation It also enables organizations to predict costs more accurately compared to merit-based pay, simplifying budget management By avoiding performance evaluations, this system reduces potential disputes and aligns well with the financial constraints faced by public and non-profit organizations Additionally, its predictability makes it a suitable compensation approach for public sector environments facing external pressures and budgetary limitations (Robert J Greene, 1998).
A major drawback of this system is that it fails to link employee wages with their actual performance, leading to increased costs without corresponding productivity benefits This disconnect sends a discouraging message to employees, suggesting that performance is irrelevant, and encourages a mindset focused solely on longevity rather than contribution As a result, it does not motivate higher productivity or resource efficiency, and often causes high performers to seek opportunities elsewhere where their contributions are appropriately rewarded.
Organizations that have relied on time-based pay for years often face the challenge of a predominantly high-cost workforce, with most employees reaching the top pay rate in the salary schedule This situation can lead to increased labor expenses and reduced cost efficiency Additionally, having many employees at the top pay tier becomes problematic if a significant portion of them are not performing well, highlighting the need for better performance management and compensation strategies to optimize workforce productivity and control costs.
Therefore this system works well for routine jobs where the potential for varying performance is small, and where the workload and quality of performance are not clear to measure.
There are two methods for time-based pay approach: Plain pay over time, and pay timely salary plus bonus (Bui Nu Thanh Ha,
- Time-based pay with bonus:
A blended payment system serves as a transitional approach from time-based to performance-based compensation, integrating salary payments based on length of service with performance bonuses This system rewards employees not only for their tenure but also for exceeding performance targets, promoting productivity and economic efficiency By aligning compensation with performance outcomes, it incentivizes employees to achieve higher levels of performance while ensuring fair remuneration for their experience.
The bonus amount will be determined by looking at the employee’s work period (in a month or quarter), his/her results, and types of the jobs worked on
Product-based pay, also known as performance-based compensation or 'piece work' as termed by Winslow Taylor, is a compensation method where employees are paid based on the quantity of products they produce Winslow Taylor was a strong advocate of this system, believing that monetary incentives are the most effective way to motivate workers and enhance productivity This payment approach directly links compensation to output, encouraging increased efficiency and performance.
Piece rate payment is a method based on the quantity of products produced, where workers earn a fixed wage per unit regardless of time invested Wages are calculated by multiplying the total number of units produced by the standard unit wage, which is determined through industry benchmarks and worker productivity levels This payment system incentivizes high productivity by directly linking earnings to output quantity.
Piece work incentivizes productive workers by offering higher pay for increased output, motivating employees to improve their work efficiency and effectively utilize time and equipment This system encourages underperforming workers to enhance their productivity to earn more, ultimately boosting overall workplace performance and efficiency.
11 Frederick Winslow, Taylor, 1911, The Principles of Scientific Management [Online] Google Books Available at: http://books.google.com/books?id=HoJMAAAAYAAJ&pg=PA3#v=onepage&fse.
The piece work principle in agriculture, as discussed in the 1865 article by Anon., emphasizes that this payment model helps guarantee consistent production costs per unit, facilitating better planning and forecasting Additionally, adopting this approach provides valuable insights for enhancing company statistics, accounting accuracy, and product quality control, ultimately improving overall operational efficiency.
When paying employees on a piecework basis, it is essential to ensure that the pay rate per piece reflects the required quality standards for the specific plant Producing high-quality finished products generally takes more time, leading to lower output per hour As a result, employees might be tempted to rush production, compromising product quality and material efficiency to meet production targets.
Employees may avoid roles that demand high skill levels, as such positions often make it challenging to surpass sales targets and achieve bonuses, impacting their earning potential.
Thus, to make sure that the product-based pay system works well, the company needs to have good quality control and new product testing processes
There are different branches of product-based pay (Bui Nu Thanh Ha, 2008):
Plain pay is calculated solely by the number of finished products:
Q is the total amount of finished products.
Payment with bonus combines standard product-based compensation with additional incentives or penalties High productivity, quality, and efficiency are rewarded, while poor performance may incur penalties Employers must clearly define reward criteria, earning methods, and sources for the bonus budget to ensure transparency and motivate employee performance.
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Pay to indirect workers (apprentices or helpers): The wage for workers or staff who are indirectly in charge of production, but directly affect the productivity of the main workers
Indirect workers will be paid based on the following formula:
% of product quantity target that main workers complete
If executed well, this settlement will encourage indirect workers to support main workers and thus improve the labor productivity of the group of workers.
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This method is usually employed in construction It is an advanced form of paying by products, and differs from the former that:
- Outputs of package contracts have higher levels of perfection.
- Contracted employees are more closely associated with each other, and more attentive to the final results.
- It helps avoid calculating the volume of work for payment and reducing process in ensuring output quality.
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- The contractor can be a construction company, a building team or an individual
2.3.4 The standards to pay structures
Bonus Payment
To motivate employees effectively, companies provide bonuses and incentives alongside their base pay Bonuses serve to encourage cost-saving behaviors, reward high performance, and foster a sense of ownership by encouraging employees to think like shareholders Implementing these incentives helps create a motivated workforce committed to the company's success.
A bonus is an extra payment awarded for good performance, serving as additional compensation beyond an employee's regular salary According to The American Heritage Dictionary of the English Language, Fourth Edition, a bonus is a sum of money or an equivalent offered to employees as a reward This performance-based incentive can motivate employees and enhance productivity Understanding how bonuses function can help both employers and employees maximize their benefits Incorporating bonuses into compensation packages can improve job satisfaction and retention.
Bonus pay is additional compensation awarded beyond an employee's standard salary or pay rate, serving as a financial incentive or reward It can be distributed unpredictably when the company has the financial capacity to do so, or it may be predetermined and specified by contractual agreements Understanding the conditions for bonus pay helps employees grasp how extra earnings are earned and managed within a company's compensation structure.
Bonus pay serves as a recognition and appreciation tool for employees or teams that achieve significant goals, helping to boost morale, motivation, and productivity As long as bonus pay remains discretionary by the employer, it is not legally considered a contractual obligation; however, if the employer promises a bonus, they may be legally liable to pay it (Susan M Heathfield, n.d.).
There are three main types of bonuses:
Bonus rewarding based on length of service and status could help retain good employees, however could raise uncertainty
13 Susan M Heathfield, nd Bonus Pay About.com Guide [internet] Available at http://humanresources.about.com/od/glossaryb/g/bonus.htm
Accessed 11 March 2011. avoidance – it would be safer to stay within the lines, especially from senior employees
- Annual and other periodic bonus:
Companies typically distribute employee bonuses based on quarterly or annual profits, rewarding performance and contribution They often conduct performance reviews or compile detailed employee lists with corresponding bonus percentages to determine individual bonus amounts This strategic approach ensures fair and motivating incentives tied to business success.
The periodic bonus effect incentivizes employees to achieve the company's annual targets, aligning individual efforts with organizational goals This approach helps the company reduce fixed costs per product and eliminate unnecessary expenses caused by unforeseen changes By motivating staff through bonuses, the company enhances productivity while maintaining cost efficiency and financial stability.
Employees who demonstrate exceptional performance, significantly above average, may be eligible for special recognition or individual performance awards Such outstanding employees showcase ingenuity and proactive thinking, reflecting their dedication and innovation in their work These awards serve to acknowledge their contributions and motivate continued excellence.
An employee can have more than one bonus at a time, if he or she is deemed qualified.
Bonuses serve as an extra PRP (performance-related pay) that directly relates to an employee's work performance, motivating increased productivity Business theorist Frederick Winslow Taylor championed this payment method, emphasizing that monetary rewards are the primary incentive for boosting employee output Effective performance appreciation through bonuses encourages employees to excel, as they are assured their good performance will be recognized and rewarded When properly implemented, this system clearly distinguishes between outstanding, good, satisfactory, and inadequate performances, reinforcing a culture of high achievement.
Recent academic research indicates that performance-related pay systems often fail to produce desired results when applied to cognitive work Studies funded by the Federal Reserve Bank and conducted at MIT, with input from experts at the University of Chicago and Carnegie Mellon, show that while performance-based pay can be effective for purely mechanical tasks, it tends to hinder performance when cognitive skills are involved This evidence suggests that performance-related pay may have counterproductive effects on complex, mentally demanding work.
14 Dan Ariely et al 2005, Large Stakes and Big Mistakes, Working Paper 05-11 Available online at: http://www.bos.frb.org/economic/wp/wp2005/wp0511.pdf
These experiments have since been repeated by a range of economists, sociologists and psychologists 15 with the same results.
Bonus Payment In Construction Companies
Construction companies typically utilize all three types of bonus payments to motivate employees Due to the unique circumstances and demanding working environments within the industry, many firms develop specialized bonus plans tailored to their specific needs, enhancing productivity and performance.
A project-completion bonus serves as an incentive for employees to deliver construction projects on time, rewarding effective work once the plan is successfully completed This bonus encourages both direct and indirect project managers to meet deadlines, ensuring the construction progresses as scheduled Offering such rewards helps minimize delays, reducing the risk of penalties, damages, and additional costs caused by project delays Implementing a project-completion bonus can significantly motivate teams to adhere to timelines and improve overall project performance.
This is also the appreciation of their work done, which should encourage workers to constantly improve techniques, skills and productivity to finish the project
15 Bernd Irlenbusch and Gabriele K Ruchala, 2006, Relative Rewards within Team-Based Compensation Available online at: http://eprints.ucl.ac.uk/14458/1/14458.pdf
METHODOLOGY AND DATA
Research Approach
Research methods in social science encompass three main approaches: induction, deduction, and abduction According to Bryman & Bell (2005), induction involves generating theory from practical observations, emphasizing data-driven insights In contrast, deduction is the most prevalent approach, where researchers test hypotheses derived from existing theories to understand the relationship between theory and practice Understanding these methods is essential for designing effective research studies in social sciences.
In research, the process begins with foundational knowledge and theoretical understanding, leading researchers to formulate hypotheses for empirical testing (Bryman & Bell, 2005) Based on the case study analysis, abduction emerges as the most appropriate research approach, as it allows for flexible reasoning and insight generation According to Dubois & Gadde, the abductive method provides a suitable framework for exploring complex phenomena and enhancing qualitative analysis in academic research.
In 2002, it was noted that combining induction and deduction is a valuable methodological approach rather than a standalone method This combined approach facilitates iterative movement between the theoretical and empirical worlds, enhancing overall understanding Engaging both inductive and deductive reasoning allows researchers to deepen their insights, as relying on only one perspective makes it impossible to grasp the complete picture Therefore, integrating these methods is essential for comprehensive knowledge development in research.
Determining the most appropriate strategy depends heavily on the research question, which guides the overall research approach For this dissertation, a case study approach is deemed most suitable, as it allows for an in-depth investigation of a contemporary phenomenon within its real-life context According to Yin (2003), a case study is "an empirical inquiry that investigates a contemporary phenomenon within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident," highlighting its effectiveness for exploring complex issues in real-world settings.
Ho Chi Minh Museum Construction JSC was selected for detailed examination due to its relevance to the research topic, providing valuable insights into the specific social phenomenon under investigation The choice of a single case study approach aligns with the research objective of understanding a particular social phenomenon, as recommended by Yin (2003) This focused case study enables in-depth analysis and offers meaningful contributions to the existing literature on social dynamics and organizational behavior.
This case study employs a comprehensive research methodology, utilizing multiple data sources including open-ended interviews, observations, and documents or databases, which are detailed further in the subsequent sections Both quantitative and qualitative analyses are conducted, leveraging statistical information to ensure a thorough understanding The primary focus of data analysis is on qualitative interpretation, allowing for in-depth insights into the collected data and supporting robust conclusions.
Data Collection Method
To conduct this dissertation, both secondary and primary data have been used
Secondary data for this research were collected from a variety of sources, including academic literature, popular writings, legal regulations, scholarly studies, and survey results found in research papers, published books, and journal articles Additionally, data were obtained from the World Wide Web to ensure a comprehensive understanding A key source of secondary data was internal documents from Ho Chi Minh Museum Construction JSC, comprising organizational materials such as administrative reports, agendas, letters, minutes, and news clippings, which were carefully gathered and analyzed to support the study.
Primary data were collected mainly through qualitative methods such as participant observations, unstructured interviews, and analysis of secondary information A brief internship in the company's Finance and Accounting Department provided valuable insights into payroll processes by enabling direct observation and interviews with staff, including the Chief Accountant and other employees.
The author can compile comprehensive information on the company's payroll policies, including documentation and implementation processes Additionally, understanding employees' attitudes and perceptions—particularly among white-collar staff—toward these policies provides valuable insights into overall employee engagement and policy effectiveness.
This research employs a case study methodology focused on Ho Chi Minh Museum Construction JSC to provide in-depth insights into payroll management within state-owned enterprises Conducting this case study enhances understanding of the complex payroll issues faced by government-owned companies, while also contributing valuable experience and reinforcing findings from previous research in this field.
This case study offers a detailed analysis of specific events and conditions related to payroll activities within a construction company According to researcher Robert K Yin, the case study research method involves an empirical investigation of a contemporary phenomenon within its real-life context, especially when the boundaries between the phenomenon and its environment are unclear This approach also emphasizes the use of multiple sources of evidence to ensure comprehensive and accurate findings.
Critics argue that studying a small number of cases does not establish reliability or generality; however, case study results can support the development of broader theories, even if they do not specify exact frequencies (Yin, 2003) The Ho Chi Minh Museum Construction JSC was selected as a typical State-owned enterprise in the construction sector with a long-standing payroll policy, making it representative of payroll systems used by Vietnamese public construction companies The primary purpose of this study is to conduct an in-depth analysis of the company's payroll process rather than to generalize findings to other organizations, providing valuable insights into the internal workings of a typical governmental construction enterprise.
EMPIRICAL FINDINGS
Overview of the Ho Chi Minh Museum Construction JSC 37 4.2 Current Payroll Systems At The HCMCJSC
HCMCJSC is an equitized state enterprise that maintains its existing state capital while issuing additional shares to augment its charter capital Despite the increase in shares, the government retains controlling ownership, ensuring continued state oversight and influence.
The Board of Management consists of five members, two of which are senior member of the Board of Directors The Vice Chairman is also Executive Director
The Company’s Headquarter is located at 48A Lang Ha, Dong
Da District, Hanoi Head office is at 381 Doi Can Ward, Lieu Giai,
The Company has representative offices and/or branches in some provinces and cities in Vietnam, as well as in foreign countries in accordance with the law.
Through 35 years of development, Ho Chi Minh MuseumConstruction Company has undergone many changes in its name,legal form and size of the business.
The Ho Chi Minh Museum Construction Company was founded on July 30, 1975, under decision number 389/BXD-TC by the Minister of Construction Initially known as Construction Site 75808, it was part of the Ministry of Construction and was responsible for constructing the Ho Chi Minh Mausoleum.
Renamed in 1977 to Construction Company No.3, the Company remained under the Ministry of Construction, according to Decision No 105/BXD-TC dated July 7, 1977 of Ministry of Construction.
It was renamed again in 1985 to Ho Chi Minh Museum Construction Company, under the Hanoi Construction Corporation, by Decision No 618/BXD-TCCB on April 23, 1985 of Ministry of Construction.
In 1993, the organization was reformed into a State Enterprise under Decree 388/HDBT, reflecting its official status Subsequently, it was renamed the Ho Chi Minh Museum Construction Company based on Decision No 144A/BXD-TCLD issued by the Ministry of Construction on March 26, 1993.
In 2005 it was Ho Chi Minh Museum Construction Joint Stock Company according to Decision numbered 2055/QĐ-BXD, dated October 31, 2005 of Ministry of Construction
The Company has business registry number of 0103010768,given by the Department of Planning and Investing of Hanoi, on
February 9, 2006, recognizing Headquarter at 381 Doi Can, Ba Dinh, Hanoi
The Company was regconized as in Category I by Decision
No 1218/BXD-TCLĐ dated September 21, and Decision No 1554/ QĐ-BXD dated December of the Ministry of Construction
It was certificated ISO 9001 – 2000 by AFQ-ASCERT International on January 9, 2002
Since 1990, the Company has been awarded with 26 Gold Medal of Quality and Quality-Assured Flags for 26 buildings that the Company constructed
Current charter capital is of 60 billion.
Fixed assets are of 92.1 billion VND
Current assets are of 20.41 billion VND.
The Company has specialized in constructing politic and diplomatic structures, including notable landmarks such as the Hall of Ba Dinh, Ho Chi Minh Mausoleum, Ho Chi Minh Museum, Van Phuc Diplomatic Compound, Vietnam Meeting Centre, and Bac Son Martyr Monument It has also engineered academic buildings like the Vietnam Institute of Science and the University of Foreign Languages, as well as commercial and residential projects, including the 25-storey Twin Tower at 191 Ba Trieu (Vincom), the 30-storey Twin Tower of EVN, the 16-storey apartment at Thang Long International Village, and the 25-storey CROWN Plaza Hotel Additionally, the company’s portfolio extends beyond Hanoi, with projects such as the Bac Kan People Committee’s house, the A9-95 building in Thanh Hoa, the People’s Council headquarters, and a 100-meter cement plant in Tam Diep.
The staff of the Company is organized into 10 factories, 1 construction consultancy, 2 condominium management boards, 8 teams and workshops
The below illustration is the organizational chart of theCompany
Figure 4.1: Organizational Structure of Ho Chi Minh Museum
The company currently employs a total of 2,336 individuals, including seasonal workers, with only 124 females, representing just 5.3% of the workforce This low female labor participation rate is understandable given the demanding outdoor working conditions and physically intensive nature of construction work The company's commitment to workforce quality and quantity is further illustrated through detailed staffing data, highlighting its focus on maintaining a capable and appropriately skilled team.
Board of Management Board of Supersivion Board of Supersivion
Deputy Director 2 Deputy Director 2 Chief Accountant
Finance and Accoun- ting Dep.
Finance and Accoun- ting Dep.
Table 4.1: Quantity and Quality of Technical and Management
The scientific and technical staff possess a high level of expertise, with 80.43% holding degrees at the undergraduate, postgraduate, or diploma level, totaling 226 graduates Additionally, 15.66% of employees, or 44 individuals, have completed voluntary schooling, showcasing their commitment to ongoing learning Their extensive experience in construction and engineering significantly contributes to the company's stability and continuous growth.
Table 4.2: Quantity and Quality of Blue-Collar Workers
2 Construction drivers/Heavy equipment operators
II Security staff and general laborers 14 1,36
The company's average craftsmen rate of 4.32 highlights its highly skilled technical workforce, which is a key strength contributing to improved product quality and enhanced competitiveness in the market for HCMC JSC.
Table 4.3: Financial Results of the Company from 2007 to 2009
Despite the global economic crisis in 2008, the company's financial performance remained resilient, with total assets increasing by 30.37% to 130,043,804,896 VND compared to 2007 Revenue experienced a 16% growth, reaching 68,519,127,012 VND, while gross profit rose by 6.23% to 1,641,767,729 VND These results demonstrate the company's ability to effectively increase assets, revenue, and profit despite challenging economic conditions.
In 2007, the Company’s 'Other gains' significantly increased, exceeding three times the amounts recorded in 2008 and 2009, due to the refund of construction warranty deposits from previous projects Additionally, 2007 was the last year the Company benefited from a corporate income tax exemption Consequently, the pretax profit in 2008 declined by 4,613,256,142 VND (23.35%), and the after-tax profit dropped by 6,737,457,920 VND (34.1%), reflecting the impact of the tax exemption's expiration.
By 2009, from numbers in the Table, the performance increased sufficiently compared to which of 2008 Total assets in
In 2009, revenue increased by 110,958,961,069 VND, reflecting a 19.88% growth compared to the previous year Despite this, the overall revenue growth rate was 4.16%, amounting to an increase of 20,893,639,054 VND The rise in construction material prices in 2008 led to higher costs, which subsequently reduced gross profits.
In January 2009, the real estate market experienced a freeze, leading to a sharp decline in construction material prices Despite the cost reductions, net sales increased significantly, resulting in a gross profit of 77,799,472,436 VND—an impressive 177.73% increase compared to the previous year Additionally, after-tax profit surged by 39,436,348,231 VND, reflecting a remarkable 302.91% growth year-over-year.
Apart from financial data, the Company’s performance was also indicated by the following financial ratios:
In 2008, the company's debt ratio increased significantly compared to 2007, indicating a greater reliance on debt financing for its assets Although the debt proportion slightly declined in 2009, overall, the company’s total assets remained predominantly funded by capital liabilities, reflecting sustained leverage levels.
Debt ratios of the Company throughout the years, despite reducing, were still bigger than 1, which ensured the financial stability of the Company.
In 2008, the company's return on total assets and profit margin declined, indicating potential financial challenges It's crucial for the company to identify whether this decline was due to the economic crisis, increased corporate income tax, or other factors Understanding the main causes will enable the company to develop an informed strategy and adopt the right course of action for sustainable growth.
In 2009, the return on total assets and profit margin increased significantly As such, the Company had stabilized its operations and achieved positive business results
In summary, the analysis indicates that the company's 2008 performance declined due to the global economic crisis and the obligation to pay corporate income tax for the first year However, with the right strategic adjustments in 2009, the company successfully recovered and achieved significant improvements.
4.2 Current regime of paying salary/wage and bonus at the Ho Chi Minh Museum Construction JSC.
4.2.1 Regulations on minimum payment of salary/wage and income
The minimum wage refers to the standard pay rate for unskilled or semi-skilled workers performing basic tasks in standard working conditions It applies to general workers engaged in simple, untrained jobs, ensuring fair compensation for their work Setting a minimum wage helps protect vulnerable employees and promotes economic stability in the labor market.
On that basis, the Company has specified the minimum rate of pay as follows: