Options for enterprises in the period of adjusting the minimum wage in Vietnam

In July 2022 or more precisely at the end of July, the time when enterprises have to pay wages to employees working in July, enterprises will have quite a few options related to paying salaries to their workers. Basically, there are only 2 options: compliance or non-compliance, but considering the actual situation of a legitimate enterprise, they will have 3 options. So, from a legal perspective, what is the legal option for enterprises in the period of adjusting the minimum wage in Vietnam?

There are many enterprises in Vietnam with the number of employees over a hundred and over a thousand. Each enterprise has its own economic conditions as well as its own development direction, so it is difficult to say that the right choice for one enterprise is also suitable for another.

If not considering enterprises that violate the law, enterprises in Vietnam when discussing salary payment for the majority of workers can be divided into 3 types:

1. Enterprises pay wages equal to the minimum wage for workers;
2. Enterprises pay wages slightly higher than the minimum wage for workers;
3. Enterprises pay relatively much higher than the minimum wage for workers.

How enterprises respond to the minimum wage increase

For enterprises that are paying the minimum wage or just slightly above the minimum wage (no more than 6-7%), when the minimum wage increases this July, they will be required to increase wages for all workers at least equal to the new minimum wage.

However, this is also a sensitive period because not all workers are around the minimum wage, but certainly, there will be higher salary ranks, such as engineer, tradesman, manager, group leader, etc.

At this point, enterprises will be able to choose to increase the wages only for those employees who need to increase to comply with the law. However, this method will make the low-wage worker’s group satisfied, but it will make the long-term, experienced, or management-level workers unhappy, easily leading to cracks and negative thoughts about the company.

The second, more expensive way is for enterprises to raise wages for all workers at the same rate as state regulations, including most minimum wage workers and high-level high-wage workers available to create a sense of respect and belonging for the group of workers, senior workers with higher wages, and at the same time do not offend the majority of workers. However, this method is quite expensive and hardly any enterprises with a large number of workers are willing to apply.

The last method can only be applied to the third group of enterprises with the salary paid to workers already high compared to the minimum wage. Accordingly, with the salary already in line with the legal minimum, both before and after this July, enterprises will not have to passively respond to the annual minimum wage change. At this time, if the enterprise situation is favorable, enterprises can completely consider increasing wages for workers without being forced to increase. If the situation is not favorable, the enterprise can postpone the salary increase to another time without pressure.

ASL LAW is the top-tier Vietnam law firm for Employment and Labor Law. If you need any advice, please contact us for further information or collaboration.