What do businesses think about the decision to increase the regional minimum wage in Vietnam, businesses think about the decision to increase the regional minimum wage in Vietnam, the decision to increase the regional minimum wage in Vietnam, increase the regional minimum wage in Vietnam,

What do businesses think about the decision to increase the regional minimum wage in Vietnam?

There has been a recent agreement by the National Wage Council to increase the minimum wage by 6% from July 1, or 180,000-260,000 VND more according to the current regional minimum wage. This proposal will be reported to the Prime Minister for consideration and promulgation. However, although the employees will be happy to hear the news, what do businesses think about the decision to increase the regional minimum wage in Vietnam?

Besides the direct increase to the employees who are currently at minimum wages or slightly higher but not to the point of a 6% increase compared to the minimum wages, the businesses will also have to pay other costs that are also increased following the official decision.

One of the costs includes the social insurance contribution. It is also the highest amount of payments that businesses will have to deal with, even higher than the direct increase of the salary paid to the employees.

This is because nowadays, most private businesses all applied the lowest level of social insurance contributed to the Social Insurance Fund to pay the lowest possible amount of money. While the employees will only have to pay 10.5% of the social insurance contributions, the businesses will have to pay 20%-21.5% to the Social Insurance Fund in 2022.

What do businesses think about the decision to increase the regional minimum wage in Vietnam?
What do businesses think about the decision to increase the regional minimum wage in Vietnam?

Accordingly, for the easiness of clarification, let’s say that the employee gain 1 level of salary increase following the decision and 1 level of minimum social insurance contributions, the employee will have to pay 1 level of salary increase plus 2 levels of minimum social insurance contributions which result in a total of roughly 3 level loss.

The change might be unnoticeable for small businesses with less than 10 employees but for big businesses with thousands or tens of thousands of employees who are currently at minimum wages, the changes will be magnificent.

Consequently, it’s not strange if the businesses in Vietnam have a rough point of view towards the increase in minimum wages.

However, is that really what they felt?

What do businesses think about the decision to increase the regional minimum wage in Vietnam?

Ms. Ngo Thi Thu Thuy, General Director of Fujiwa Company has expressed her opinions on the increase of the minimum wages: “In difficult times, to implement the Government’s increase salary policy, businesses are very reluctant, but in order to provide enough to live for the brothers (and sisters) at the company, we are very united. We will restructure to reduce the expenses and support the increase of salary.”

Mr. Nguyen Dang Hien, General Director of Tan Quang Minh Company stated: “When the salary increases, it is a big pressure, requiring the business to try its best. (We need to develop) by expanding and developing more business activities, expanding the market, and at the same time saving as much money as possible to spare a necessary amount of money to support salaries for officials and employees.”

Mr. Tran Thanh Son, Head of the Human Resources Department of Song Ngoc Garment Company commented: “If we don’t increase wages, it will be difficult to retain employees because currently there is a shortage of labor in Ho Chi Minh City. In the coming period, we are also planning to expand the production line, therefore, we have to consider how to have a good salary policy and benefits to pull employees back to work.”

While there are many positive feedbacks on the proposal, there have also been some disapproving voices stating that the increase in the regional minimum wage at a time when the country is slowly recovering from the pandemic is not appropriate.

However, according to the Vietnam General Confederation of Labor, the current regional minimum wage only meets 59% of employees’ living standards.

Realizing this fact, Mr. Le Dinh Quang, deputy head of the Policy and Law Department, Vietnam General Confederation of Labor said: “In the context of employees’ lives facing many difficulties, the General Confederation persistently proposed to apply early. July 1 is the time when businesses have overcome difficulties and have made certain development steps, and at the same time, the endurance of employees has also reached its limit.”

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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