Blue-collar wage hike approved

The new scheme was outlined in Decree 103/2012/ ND-CP dated December 4, 2012 on minimum salaries for the private sector to replace Decree 70/2011/ND-CP dated August 22, 2011 on the same content.

Specifically, the geographic regional monthly minimum salaries will be raised from VND2 million ($96.1) to VND2.35 million ($112.9) for area 1, from VND1.78 million ($85.57) to VND2.1 million ($100.9) for area 2, from VND1.55 million ($74.5) to VND1.8 million ($86.5) for area 3, and from VND1.4 million ($67.3) to VND1.65 million ($79.3) for area 4. The average hike is 17-18 per cent.

Deputy Prime Minister Vu Van Ninh last week told the Vietnam Business Forum (VBF) that the government decided to augment the minimum salary for these workers by 17-18 per cent annually from next year,  instead of 15 per cent earlier proposed by the Vietnam Chamber of Commerce and Industry (VCCI) and some foreign business associations.

“The increase means that only 6.6 per cent of enterprises will have to increase salaries. And enterprises’ additional cost from this hike will occupy less than 1 per cent of their total operational cost. The government has seriously studied the minimum salary rise for factory workers. It will not significantly affect enterprises,” Ninh said.

This wage scheme, to be effective from January 1, 2013, is aimed to ensure the income for employees’ minimal living standards.

Earlier, under its Dispatch 2750/LDTBXH-LDTL dated August 9 this year, the Ministry of Labour, Invalids and Social Affairs (MoLISA) requested companies to send their minimum salary opinions.

Accordingly, there were two proposed average hikes - 36 or 25 per cent. The government later stated the planned figures were 22-25 per cent. However, these proposed increases were opposed by most enterprises and organisations, citing  Vietnam’s current economic woes.

Business associations claimed the hike should be  15 per cent, before the government settled on 17-18 per cent.

Quach Thi Nhung, head of South Korea’s 1,600-worker garment maker K.J Vina Company’s Human Resources Section in southern Binh Duong province, told VIR that many foreign firms  in the province were “like a cat on a hot tin roof” due to the 17-18 per cent rise in minimum salaries.

“The new salaries are still high and will burden enterprises, because employers will have to raise not only salaries, but also payments for many other packages like insurance, labour union fees and allowances. These packages are calculated based on minimum salaries.

“The sum for the insurance package will be swollen from the current 17 per cent to 18 per cent of enterprises’ total operational costs, per year, from 2014. Enterprises will also have to earmark 2 per cent of their payroll monthly for labour union fees from 2013,” she said.

However, Nhung noted  that without the minimum salary rise, workers’ lives would remain in difficulty. “The problem here is that the government has to control market price hikes,” she said.
Adam Sitkoff, executive director of the American Chamber of Commerce (AmCham) in Hanoi, told VIR the 17 per cent increase “still far surpasses the rate of inflation this year [expected at 7.5 per cent].” “At the same time, businesses need to see productivity rise as incomes rise.

The enhancement of skills, as well as improved access to training, is necessary to achieve higher productivity and higher incomes in Vietnam over the long-term,” he said.