3P Compensation

No need to discuss how is important of salary. The issue need to be concerned is the suitability of salary between the businesses and the employees, which is not an easy matter to do. There is an invisible factor but very important participates in salary, which both enterprises and employees are always influenced that is the "market" factor.

When the businesses operate favorably, they want to sublimate and they often make commitments to higher incomes for employees. But when businesses are not favorable anymore, it is difficult for them to withdraw their commitments, for the following reasons:

• Signed commitments in the agreement or announced.
• Labor Code does not create conditions for businesses reduce salary.
• The general mentality of people is that do not want to reduce their income.
• People have individual plans, spend their current salary.

Many businesses have fallen into the above situation, and have been forced to leave the game, because the more business, the more loss. This situation, in Vietnam has happened a lot, during the Covid and post-Covid times.

Currently, in order to be stable and sustainable, the businesses administrators need to restructure, in the form of 3P's of salary.

The 3 P's are:

• P1: Pay for position;
• P2: Pay for person;
• P3: Pay for performance.

P 1: Pay for position is built on the same industry's labor market salary, then balances it with the business's salary fund, to determine the minimum wages, or base salary for each position holding. This salary, also known as a hard salary, is fixed monthly.

P 2: Pay for person is built according to the actual capacity of the individual, responded how many percentage of the job. This percentage, calculated according to the revenue or personal product generated. This salary, also known as a soft salary, is not fixed monthly.

P 3: Pay for performance is built on the results of a working period, usually is a quarter, a year. Good results, high income. This salary is considered as a bonus that the whole group, the whole business works together, and then divided among each person by a specified coefficient.

From the perspective of business, the 3 P salary form has the following advantages:

• Ensuring fairness and transparency.
• The Board of Directors and personnel are both responsible for working together.
• Promoting creativity, promoting innovation, adapting to changing markets.
• Limiting subjective mistakes in payroll.

From an individual perspective, the 3 P salary form has the following advantages:

• The salary you get is your own strength.
• Completely remove emotional factors, emotional bias in co-worker relationships.
• Personal and corporate interests are connected.
• Self-worth is accurately assessed by the collective when nominating for leveling up or rewarding.

In short, everyone wants a high salary, but the salary budget is limited. If the businesses are generous in salary, how much is enough? On the contrary, if the salary does not meet the needs of personnel, the businesses will also come to a standstill.

The salary solution in the form of 3 P has overcome the disadvantages of traditional salary forms. The 3 P salary form has the greatest advantage, is harmonized the interests of the parties, and is similar to the market.