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Scheduled to take effect from July 2024, the new regional minimum wage salary increase is expected to support the lives of Vietnamese citizens who are at or near the current mininum wage. The Vietnam Investment Review (VIR) has written an article covering this subject with high-valued opinion from ASL LAW’s lawyer. Specifically:
“Burden balancing ahead for firms in minimum wage shift
A new regional minimum wage scheme to take effect from July 2024 may place pressure on both domestic and foreign employers, while simultaneously helping to ease financial strife for local workers.
The National Salary Council on December 20 gave the green light to lifting the regional minimum salary by 6 per cent. The increase will be submitted to the government for approval. If approved, as is likely, such a hike will take effect on July 1 as is customary.
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Nguyen Tien Hoa, senior partner, ASL LAW (comments on the issue):
Businesses that now make social insurance contributions for their employees based on the previous minimum wage must notify the increase to the social insurance agency to adjust their monthly contributions in accordance with the upcoming 6 per cent rise.
In cases where businesses are already contributing to social insurance for employees above the upcoming increase, they will not be required to increase wages for employees when the minimum wage rises.
However, the Vietnamese government always encourages adjusting wages in line with the minimum wage fluctuation to ensure a decent standard of living for employees.
Given that many businesses are struggling and cutting jobs as the economy gradually recovers, the periodic increase will create some pressure on businesses contributing to social insurance at the minimum wage level.
However, except for particularly difficult times like the peak of the coronavirus pandemic in both 2020 and 2021, the annual minimum wage increase is necessary to safeguard the living standards of workers against factors such as inflation and economic challenges.
For businesses currently facing difficulties in maintaining operations, to ensure the welfare of employees, they need to offset fixed costs through operational streamlining, such as cutting production expenses and adopting new production techniques through scientific and technological development.
However, these structural changes must still ensure the quality of goods entering the market, alongside the rights of the workforce.”
Read the full article here.
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