The executive order, issued at a recent meeting chaired by Deputy Prime Minister Truong Hoa Binh, stated that the provinces of Ha Tinh, Quang Binh, Quang Tri and Thua Thien-Hue should complete payments in the next three months.
Various ministries and the government office have also been urged to send inspection teams to check and assist the compensation process.
Vietnam is still tying up the loose ends of what was considered one of the worst environmental disasters in the country's history, almost a year after the event.
Last month, Vietnam publicly named 11 government, provincial and industry officials responsible for the incident.
It named ex-environment minister Nguyen Minh Quang, former vice minister Bui Cach Tuyen and former chief of Ha Tinh's provincial Communist Party unit Vo Kim Cu, along with eight other officials, saying they should be disciplined or face review.
Formosa Ha Tinh Steel, which runs an $11 billion steel plant, polluted more than 200km (125 miles) of coastline in April 2016, killing more than 100 tons of fish and devastating the environment, jobs and economies in four provinces.
The Taiwanese company admitted to having discharged untreated waste into the sea, and agreed last June to pay $500 million in compensation.
The environment ministry said that the affected region is expected to take a decade to completely recover from the incident, while experts predict that the disaster may set Vietnam’s economy back for years to come.