National Wage Council Established in Vietnam, Minimum Wage Rises
Jul. 16 – Last month, Vietnamese Prime Minister Nguyen Tan Dung approved Decree 49/2013/ND-CP, which commissioned the establishment of a National Wage Council to oversee national wage levels throughout the country.
The National Wage Council, which was officially established this week, will replace the Ministry of Labor as Vietnam’s minimum wage oversight body and will ensure wage compliance by Vietnamese companies. The council will also conduct studies to assess the socioeconomic position of domestic workers and forecast subsistence level wages for each region in Vietnam.
Furthermore, the National Wage Council will be tasked with addressing the concerns of minimum wage earners as they work to develop a sustainable and equitable framework for future minimum wage decisions. The findings will be presented each year to the government along with any proposed changes to the country’s minimum wage rates.
Vietnam’s Deputy Labor Minister Pham Minh Huan will chair the 17-member committee. The committee is made up of representatives from the Vietnam General Confederation of Labor, the Vietnam Associations of Small and Medium Enterprises, the Vietnam Chamber of Commerce and Industry and the Vietnam Cooperative Alliance , with each committee member serving a term lasting five years.
Vietnam’s general minimum wage rate was increased from VND1.05 million to VND1.15 million per month (US$55 dollars) this month. The increase was implemented after a study by the Vietnam Labor Union found that a properly sustainable diet, which is defined as a diet of about 2,300 calories a day, costs approximately VND900,000 per month to fund.
Furthermore, at a conference held by the National Assembly’s Social Issues Committee, officials estimated that the previous minimum wage rate covered just 70 percent of the cost of basic necessities.
“Why do workers at footwear, garment and construction companies become skinny after three or four years?” asked Labor Union representative Dang Quang Dieu prior to the wage hike. “Because they work too hard without being able to afford meals that provide a minimal amount of nutrition,” he concluded.
Vietnam has increased its minimum wage ten times since 2003, with the real minimum wage increasing over 100 percent from 1994 to 2008. Despite the steady climb in the country’s minimum wage rates, inflation has consistently worked to erode the gains made by low-skilled workers.
Vietnam’s annual inflation rates topped out at more than 20 percent in 2008 and 2011, and are projected to hover around 7 percent in 2013.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
You can stay up to date with the latest business and investment trends across Vietnam by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.
Human Resources for Foreigners in Vietnam
In this issue of the Vietnam Briefing Magazine, we take a look at foreign workers in Vietnam: how to hire, the legal obligations a company bears (including withholding and paying personal income tax and social insurance), and finally a common dilemma – the housing situation.