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Recently, the Vietnamese Ministry of Finance has officially expressed its opinion, proposing to reconsider the proposal to increase pensions and allowances by the Ministry of Labor, Invalids and Social Affairs, citing that the projected funding would exceed 17 trillion Vietnamese dong, surpassing the budget’s balancing capability.
The Ministry of Finance has issued a letter in response to the Ministry of Labor, Invalids and Social Affairs regarding the impact assessment of implementing the new wage reform from July 1, 2024, along with the implementation of social insurance policies.
Specifically, the Ministry of Finance suggests that the Ministry of Labor recalculate the proposed increases in pensions and social insurance allowances to 15%; increase preferential subsidies for revolutionary contributors by 29.2% (from 2,055,000 dong to 2,655,000 dong per month); and raise the standard social allowances by 38.9% (from 360,000 dong to 500,000 dong per month).
Starting from mid-2024, officials and civil servants will be paid based on their job positions instead of the current coefficient system. It is anticipated that from 2025, salaries for officials, civil servants, employees, and armed forces will continue to increase by an average of 7% per year until the minimum salary reaches or exceeds the lowest salary in Zone 1 of enterprises (the current minimum wage in Zone 1 is 4.68 million dong).
With the proposed increases, the total expenditure is estimated to reach 17,276 trillion dong, which is 2.3 times the approved funding by the National Assembly (7,430 trillion dong), surpassing the balancing capability of the state budget for the second half of 2024.
The Ministry of Finance has outlined the challenging situation of the central budget, while many localities have significant surplus resources for wage reform. To alleviate pressure on the state budget and proactively manage financial resources, the Ministry of Finance proposes that the Ministry of Labor report to the competent authorities to allow the use of accumulated funds from the central government and surplus funds from localities after wage reform for these policies.
Starting from July 1, 2024, the base salary regime (currently at 1.8 million dong) will no longer exist, while many regulations for social insurance, health insurance, and social security still rely on the base salary as a basis, such as the maximum compulsory social insurance contribution rate of workers, which is currently 20 times the base salary.
Due to these reasons, the Ministry of Finance suggests that the Ministry of Labor and relevant agencies report to the Government for presentation to the National Assembly at the May session to reconsider the new standard to ensure legality and practical applicability, avoiding budgetary insufficiency and social instability.
Currently, the Government has reserved a fund of 560 trillion dong to ensure wage reform until 2026.
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