Wage reform in the wings

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The Ministry of Labour, Invalids and Social Affairs (MoLISA) is compiling a draft to the project on reforming wage and bonus management in state-owned corporations and groups, wage and bonus regime applied to state capital management officials in state-backed firms.

Chief of the MoLISA’s Labour-Wage Department Tong Thi Minh said the draft presented scores of positive measures aimed at addressing current labour and wage problems.

Besides, the National Steering Committee of Wage Reform recently convened a meeting to discuss the draft.

Accordingly, the draft recommends create a new payroll in which each work title features a single salary level while actual pay depends on the business performance every year or the wage and bonus regime term of particular organisations and businesses.

The draft allows state-owned enterprises to self-define wages based on specific conditions and it also regulates that the average wage hike must be set lower than average labor productivity growth. For example, if the labour productivity hikes 1 per cent in value, the wage will be surged by at most 0.6 per cent only.

Minh said that new wage calculation methods were to bring the payroll system at state-owned enterprises closer to market practices.

Minh, however, said it would be difficult for the draft to bring immediate changes amid high lending and Vietnam dong-US dollar exchange rates as well as rising input costs.

Minh said businesses’ wage hikes must be based on production and business efficiency. Unprofitable businesses would find it is hard to upwardly revise employees’ wages based on market rules.

“Effective wage reforms must go parallel to business streamlining and workable Vietnamese government’s macroeconomic policies,” Minh said.

In-depth research by consulting firm Macconsult reveals that while the payroll at foreign-invested and private firms was effective and flexible, many problems persisted with current wage policies towards state-owned enterprises, making them difficult to keep talents and promote human resources development.

The state-sector payroll features egalitarianism when wage levels are not merit-based but chiefly depend on seniority. This has distorted the labour-wage relations, undermined work efficiency and caused brain drain phenomena.