Private Sector Minimum Wage Adjustment for 2013

MOLISA issued NGHỊ ĐỊNH QUY ĐỊNH MỨC LƯƠNG TỐI THIỂU VÙNG ĐỐI VỚI NGƯỜI LAO ĐỘNG LÀM VIỆC Ở DOANH NGHIỆP, HỢP TÁC XÃ, TỔ HỢP TÁC, TRANG TRẠI, HỘ GIA ĐÌNH, CÁ NHÂN VÀ CÁC CƠ QUAN, TỔ CHỨC CÓ THUÊ MƯỚN LAO ĐỘNG Decree 103/2012/ND-CP, 4 Dec 2012 Establishing the Minimum Wage for Private Sector.

In summary, the 2013 Minimum Wage levels for the private sector, effective Jan 1, 2013, are:

2.350.000 vnd/month for enterprises in Region I
2.100.000 vnd/month for enterprises in Region II
1.800.000 vnd/month for enterprises in Region III
1.650.000 vnd/month for enterprises in Region IV

For reference, the State Sector Minimum Wage is 1.150.000 vnd/month, effective Jul 1, 2013.

Background

VCCI and key export industry associations proposed 15% private sector minimum wage adjustment annually 2013 – 2015. MOLISA Vice Minister met in HCM City Aug 23 with companies and business associations, employees’ representatives, local authorities, for a full discussion before announcing the decision “in October.” No decision has yet been announced.
VCCI Chairman: 15% Annual Private Sector Minimum Wage Hike 2013-2015, Nov 5, 2012

HA NOI, Aug 21, 2012. The Ministry of Labour, Invalids and Social Affairs (MOLISA) has proposed raising the monthly minimum wage for the private sector by up to 35 per cent – the highest rise ever – to help employees tackle skyrocketing living costs. There is a different minimum wage for the state sector.

In a draft decree, MOLISA introduced two options on raising the minimum wage in Region 1 from the current VND 2 million/month to VND 2.7 million. A second option would be to raise wages to VND 2.5 million/month. Deputy Director of the ministry’s Labour-Salary Department Hoang Minh Hao told Viet Nam News yesterday that the increases were needed because current wages were insufficient to meet basic living standards.

Although the Consumer Price Index so far this year was down on previous years, the rises were needed to make up for earlier price increases, plus anticipated rises next year, Hao said. He also said that the monthly minimum wage would be adjusted from time to time if inflation rose more than expected.

Vietnam's Private Sector Minimum Wage, 2008-2017e @ 130324 table

Vietnam now has different wage rates covering four regions, ranked according to the socio-economic development level of each region. Region One covers urban Ha Noi and HCM City. Zone Two covers rural Ha Noi and HCM City plus urban Can Tho, Da Nang, and Hai Phong. Zone Three covers provincial cities and the districts of Bac Ninh, Bac Giang, Hai Duong, and Vinh Phuc. Zone Four covers the remaining localities.

The chart and underlying table show actual private sector minimum wages 2008-2012, minimum wages in 2013 (at the 2.35 million vnd/month for Region 1 option), and projected minimum wages in 2014-2017 based on the Party Central Committee Decision 23-KL/TW, May 29, 2012 to “Adjust the minimum wage more rapidly in the private sector so that by 2015 the minimum will reach the level of the Basic Needs Wage.” It also shows the private sector minimum wage “road map” propoposed by VCCI and leading export industry associations in an October 2012 letter to the Government.

According to MOLISA in a dialogue meeting with employers and business associations in HCM City on Aug 23, 2012, there are some key guidelines on the minimum wage adjustment policy in the coming years to 2015 and the vision to 2020 (Road Map):

(1) Article 56 of the current Labour Code provides that “when the CPI increased so that the real wages of workers are reduced, then the Government will adjust the MW in order to preserve the real wages;”

(2) Article 57 provides that MOLISA will set the Minimum Wage, … etc., after consulting with VGCL and the “Employers’ Representative;”

(3) Party Central Committee Decision 23-KL/TW, May 29, 2012 concerning “Problems regarding salaries, social insurance, … etc.” provides that “Adjust the minimum wage more rapidly in the private sector so that by 2015 the minimum will reach the level of the Basic Needs Wage.

(4) Art 92 of the revised Labour Code provides for an advisory National Wages and Salaries Council, which, like the “Tripartite Council,” will consist of MOLISA, the VGCL, and the national level employers’ representatives, and will have its responsibilities, procedures, organization, methods, etc. designated by the Government.

All these regional wages are the minimums only. Employers will be encouraged to pay employees more than this wherever possible. However, allowances and social benefits will be calculated based on the minimum wage, in accordance with the existing law.

The draft decree also proposes paying skilled employees at least seven per cent more than the monthly minimum wage.

The Government will announce any changes in October, said the Deputy Minister of Labour, Invalids and Social Affairs, Pham Minh Huan.

If approved, the decree will take effect from the beginning of next year for every private sector company, business, co-operative, farm, household, individual and organisation that hires people. The state sector minimum wage is different, and would take effect from May 1, International Labour Day.

However, Huan acknowledged that any increases might create difficulties for domestic and foreign-direct-investment companies because of the extra payments involved.

Le Thanh Ha, deputy head of the Viet Nam General Confederation of Labour’s Institute of Workers and Trade Unions said that the proposed minimum wage met only 46 per cent of employees’ cost of living in Zone One and 70 per cent in Zone four. Calculations by the institute in May showed that to achieve minimum living standards, the minimum wage should be VND4 million in Zone One (currently VND2 million) and VND3 million in Zone Four (currently VND1.4 million), Ha said. However, he added that it was imperative that a road map be set up to do this.

The Department of Salaries and Wages will meet with companies in August before making its final decision.

The last minimum wage rise was effective in October 2012

Read more …

Wages may rise up to 35%, Vietnam News, Aug 21, 2012

State Sector Minimum Wage Adjustment
Govt says can’t afford state sector minimum wage increase in 2013, Oct 10, 2012
State sector minimum wage increase “will fuel domestic demand and consumption,” Oct 23, 2012
Cut expenses, eliminate waste to increase State sector minimum wage, Oct 24, 2012
State sector minimum wage increase, Oct 25, 2012
National Assembly may postpone state sector minimum wage increase, Oct 29, 2012
State sector minimum wage increase reduced from 24% to 9.5%, delayed two months, Nov 1, 2012
State sector minimum wage hike of 100,000 vnd (to 1.15 million vnd/month) to be effective July 1, 2013, VIR, Nov 6, 2012

Private Sector Minimum Wage Adjustment
Minimum Wage Adjustment for 2013, Aug 21, 2012
Minimum Wage adjustment (increase) spooks many enterprises, Aug 27, 2012
Private Sector Minimum Wage Adjustment Option #3, Oct 16, 2013
Cost Impact: New Labour Code, New Union Law, and Draft Employment Law
VBF Dialogue with MOLISA and MPI re Labour-related issues, Nov 2, 2012
VCCI: 15% Annual Private Sector Minimum Wage Hike 2013-2015, Nov 5, 2012

Economic Research: The Negative Effects of Minimum Wage Laws

Posted: Aug 8, 2012Updated: Nov 25, 2012, Jan 6, 2013, Mar 24, 2013