Minimum Wage adjustment (increase) spooks many enterprises

Pham Minh Huan, VM of MoLISAVIR, Aug 27 – Sep 2, 2012. While some enterprises are unhappy about the minimum wage hike proposal, Deputy Minister of Labour, Invalids and Social Affairs Pham Minh Huan says his ministry (MoLISA) is determined to raise salaries to improve workers’ living standards.

Enterprises said raising salaries now, under MoLISA’s increased minimum wage proposal to take effect from January 1, 2013, will make them go bankrupt. Is that true?

“Raising salaries as planned will mean by 2015, the minimum wage will meet the employees’ minimum living standards. Currently, the minimum wage just meets about 60-65 per cent of a need of the minimum living standards.

“We understand enterprises’ difficulties and there are two proposed options to increase minimum wages. The lower option aims to share difficulties and ease burdens with businesses in the context of crisis. The proposed hike was calculated based on consumer price index (CPI), wage and payment levels, as well as enterprises’ financial abilities.”

Many enterprises pay workers equal to or even higher than the proposed salaries by the MoLISA. Therefore, if salary grows, burdens will lie on businesses’ shoulders with social insurance payments?

“That is also a reason to gradually raise the minimum wage. If there is no increase in net payments for workers, the increase in social insurance payments is also synonymous with the rise in future pension payments. It is beneficial for workers as well.”

The increase might have bad impacts on employees. Because, according to many firms, raising salaries will hurt enterprises and even make some go bankrupt?

“With the new salaries proposed by the MoLISA, if enterprises paying equal or more than that they will just have to pay an extra amount of nearly VND60,000-70,000 per person per month or under the higher option in zone 1, businesses will have to pay monthly VND119,000 at most for social insurance payment per person. I think this hike will not affect enterprises.

“The government, of course, wants to rescue enterprises, but bankruptcies are inevitable. Not to mention, no policies promulgated can meet all interests. Rather, enterprises should rescue themselves by balancing all operation and production activities, enhancing productivity as well as re-distributing human resources.”

So, will the proposal not be delayed?

“It will go ahead as planned. As far as I am concerned, the current minimum wage is quite low. There is in need an increase in the current minimum wage to gradually ensure employees’ livelihoods.

“At the weekend, there is conference held by the MoLISA in Ho Chi Minh City to collect locality and enterprises’ opinions and then Hanoi will be the next destination. The MoLISA will combine all opinions and submit it to the government in September. The government will officially announce the hike in salaries by which sums and when it will take effect in October after revising carefully all concerned localities and companies’ opinions.”

Source: Wage Hike Spooks Many Entrepreneurs, Vietnam Investment Review, Aug 28, 2012

Additional Background Information

Minimum Wage Adjustment Proposal for 2013, Aug 21~23, 2012

Vietnam''s Minimum Wage 2008 - 2017 (chart)

Vietnam''s Minimum Wage 2008 - 2015 (table)