Written in August 2014, the below article provides some background for the Minimum Wage 2016 discussion.
For planning purposes, businesses should note that MOLISA’s Vice Minister said “the increases will be greater in 2016 and 2017.” MOLISA is operating on a “Minimum Wage Adjustment Road Map” to 2020, based on (1) Article 56 of the 2012 Labour Code, which provides that “ … then the Government will adjust the MW in order to preserve real wages;” and (2) “Party Central Committee Decision 23-KL/TW, May 29, 2012, which provides that “Adjust the minimum wage more rapidly … so that … it will reach the level of the Basic Needs Wage.”
From companies’ point of view, a 15% increase in MW means a 20~25% increase in labour costs, which may account for 25% or more of total costs of production for an apparel, footwear, or similar company. Phan Thi Thanh Xuan, general secretary of the Viet Nam Leather, Footwear, and Handbag Association said, “While most employers already offer higher wages than the minimum wage regulated by the Government, this level is often used to calculate health and social insurance and allowances. Therefore, for companies, increases in minimum wage lead to increases in many other expenses. A 15 per cent increase in minimum wage means that many companies have to prepare for HR expenses to go up by 20-25 per cent.”
The Tri-Partite Partnership (MOLISA, VCCI, VGCL) representing the Government, Employers, Employees, and the National Wage Council will need to develop “common reference points” as far as CPI changes, GDP growth, Labour Productivity growth, wage levels between large and small enterprises, differences between the “formal sector” and the “informal sector.” In fact, MOLISA has proposed that a research committee of labour productivity be established, to ensure both workers’ living and enterprises competitiveness.
At the April 28, 2014 Prime Minister’s Conference with the Business Community, VCCI Chairman Vu Tien Loc proposed, “6. Regarding Labour Relations: We recommend to further extend the process of the plan for increasing minimum wage to at least 2 years (2014-2015), with the maximum increase is decided based on inflation rate and GDP growth each year, we need to ensure the increase of minimum wage is predictable and appropriate with the increase of labour productivity in order to ease the burden of fast growing costs for businesses.”
Update on Sep 7, 2015
Compare the 2015 Minimum Wage and trend line (above) with the 2016 Minimum Wage and trend line (below). The below chart and table shows the minimum wage from 2011 – 2015 (actual), 2016 (proposed), and 2017-2020 estimates based on an extrapolation of recent trends. Click the images to zoom in .
Read more …
Posted: Aug 28, 2014. Updated: Sep 7, 2015.