Regulations on regional minimum wages in Vietnam, regional minimum wages in Vietnam, minimum wages in Vietnam, statutory minimum wages in Vietnam

Regulations on regional minimum wages in Vietnam

Many people have heard about the term ‘minimum wages’ in Vietnam. However, not all understand the definition of this term and what their rights are. Consequently, many employees may be paid under the minimum wages – a violating action by the employers. Hence, the employees need to know about the regulations on regional minimum wages in Vietnam to best protect their rights and interests.

The definition of statutory minimum wages in Vietnam

According to article 91 of the Labor Law 2019, statutory minimum wages, or minimum wages are minimum wages of workers who do the simplest jobs in normal working conditions that are sufficient to support themselves and their families, and appropriate for socio-economic development.

Statutory minimum wages per month or per hour vary according to region.

Statutory minimum wages shall be adjusted according to:

  • The minimum living standards of workers and their families; 
  • The relation between statutory minimum wages and usual salaries;
  • Consumer price index, economic growth rate; 
  • Labor supply and demand, productivity, and financial capacity of enterprises.

Current regulations on minimum wages in Vietnam

Normally, the minimum wages will be adjusted each year to meet the need of society. However, due to the impact of the Covid-19 epidemic, in 2020, 2021, the regional minimum wage does not increase in Vietnam. This will likely be the same with 2022 as the Covid-19 hasn’t slowed down but instead, speeding up and spreading across the territory of Vietnam, forcing the Government to allocate their budget to spend on the tools needed to fight the pandemic. 

Regulations on regional minimum wages in Vietnam
Regulations on regional minimum wages in Vietnam

Up to the present time, the regional minimum wages are being applied specifically:

  • Region 1 is 4,420,000 VND/month; 
  • Region 2 is 3,920,000 VND/month; 
  • Region 3 is 3,430,000 VND/month; 
  • Region 4 is 3,070,000 VND/month.

Accordingly, within each specific region, the salary paid to employees in normal working conditions must ensure that the employees can basically satisfy the minimum standard of living of employees, provided that the employee performs enough normal working hours in a month and completes the agreed working requirements. Specifically, the salary paid to employees must:

  • Not lower than the regional minimum wage for employees doing the simplest jobs;
  • At least 7% higher than the regional minimum wage for employees who do jobs that require employees who have undergone occupational training or apprenticeship as prescribed.

Principles of application of regional minimum wages by location

The principles of application of regional minimum wages by location is stipulated as follows:

If an enterprise operates in an area, the regional minimum wage rate prescribed for that area shall apply. In case an enterprise has units or branches operating in areas with different regional minimum wages, in the area the unit or branch operates, the regional minimum wage rate prescribed for the locality shall apply.

Enterprises operating in industrial parks or export processing zones located in areas with different regional minimum wages shall apply according to the areas with the highest regional minimum wages.

Enterprises operating in an area that has a change of name or is split up will temporarily apply the regional minimum wage rate prescribed for the area before the name change or separation until the Government has new regulations.

If an enterprise operating in a geographical area is newly established from one area or many areas with different regional minimum wages, the regional minimum wage shall be applied according to the area with the highest regional minimum wage. 

The basis for calculation of other aspects in society

Minimum monthly salary for payment of compulsory social insurance in Vietnam

According to Point 2.6, Clause 2, Article 6 of Decision 595/QD-BHXH dated April 14, 2017, the minimum monthly wages for payment of compulsory social insurance is prescribed as follows:

  • For employees who do the simplest jobs or titles in normal working conditions: Not lower than the regional minimum wage at the time of payment.
  • For employees who do jobs or titles that require occupational training or apprenticeship: At least 7% higher than the regional minimum wage.
  • For employees doing jobs or titles in heavy, hazardous, or dangerous working conditions: At least 5% higher than the salary of jobs or titles of equivalent complexity, working under normal working conditions.
  • For employees doing jobs or titles in particularly heavy, hazardous or dangerous working conditions: At least 7% higher than the salary of jobs or titles of equivalent complexity, working under normal working conditions.

The salary to pay the suspension pay

The regional minimum wage is the basis for employers to pay suspension pay to employees according to the provisions of Article 99 of the Labor Law 2019.

Specifically, if the suspension of work is at the employee’s fault, the employee shall not receive the salary. If this leads to the suspension of work of other employees in the same unit, they shall be paid an amount not smaller than the statutory minimum wages.

According to Clause 3, Article 99 of the Labor Code 2019, in case the suspension of work is caused by an electricity or water supply issue that is not at the employer’s fault, or by a natural disaster, fire, major epidemic, hostility, relocation requested by a competent authority, or for economic reasons, both parties shall negotiate the salary as follows:

a) If the suspension does not exceed 14 working days, the salary shall not fall below the statutory minimum wages;

b) If the suspension is longer than 14 working days, the salary shall be negotiated by both parties, and the salary for the first 14 days must not fall below the statutory minimum wages.

The basis for calculating the compensation of the employee to the employer and the business

When an employee damages tools or equipment or commits other acts that cause damage to the employer’s property, he/she must pay compensation in accordance with the law or the employer’s internal labor regulations.

In case the employee causes non-serious damage due to negligence with a value of not more than 10 months of the regional minimum wage announced by the Government applied at the place where the employee works, the employee must compensate at most: 03 months’ salary and monthly deduction from salary according to the provisions of Clause 3, Article 102 of the Labor Code 2019 and according to Clause 1, Article 129 of the Labor Code 2019.

Minimum salary when transferring employees to work in other positions different from the position stipulated in the labor contract

According to Clause 3, Article 29 of the Labor Code 2019, the employee who changes to a job other than the labor contract will be paid according to the new job.

If the salary of the new job is lower than the salary of the old job, the salary of the old job is kept unchanged for 30 working days. The salary according to the new job must be at least 85% of the salary of the old job but not less than the minimum wage.

The penalties for paying wages lower than the regional minimum wage 

The penalties for paying wages lower than the regional minimum wage can result in a fine of up to 150 million VND.

The minimum wage paid to employees must be at least equal to the regional minimum wage. If the employee is not paid in accordance with regulations, the employer will be sanctioned for administrative violations according to Article 16 of Decree 28/2020/ND-CP:

“3. Fines shall be imposed on employers when paying wages to employees lower than the regional minimum wages prescribed by the Government at the following levels:

a) A fine from 20,000,000 VND to 30,000,000 VND for violations from 01 to 10 employees;

b) A fine from 30,000,000 VND to 50,000,000 VND for violations from 11 to 50 employees;

c) From 50,000,000 VND to 75,000,000 VND for violations of 51 employees or more.”

Thus, depending on the number of employees being violated, the individual employer may have to pay a fine of up to 75 million VND. In case the employer is an organization, the fine will be doubled up to 150 million VND.

In addition, the enterprise is also required to pay the full salary plus the interest on the underpayment calculated at the highest interest rate on demand deposits of state-owned commercial banks announced at the time of sanctioning.

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.

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