Vietnam to Increase Minimum Wage from January 2020
- Vietnam will increase minimum wages by approximately 5.7 percent from January 1, 2020.
- The increase varies from US$6 to US$10 depending on living expenses in a particular region.
- Businesses should prepare and incorporate the increase in their budgets for the next year.
Vietnam will increase the minimum wage by an average of 5.7 percent in 2020. The government issued Decree no 90/2019/ND/CP which will take effect on January 1, 2020.
The increase in rates are as follows:
In addition, salaries that are paid to employees who have had vocational training must be paid at least 7 percent higher than the minimum salary level.
Businesses cannot reduce overtime, night shift or other hardship allowances that are provided to employees when applying the new minimum salaries as per the labor law.
The capped salary for unemployment insurance will, therefore, increase as follows:
- Region I VND 88,400,000 million (US$3,800) from the present VND 83,600,000 million (US$3,600);
- Region II VND 78,400,000 million (US$3,380) from 74,200,000 million (US$3,200);
- Region III VND 68,600,000 million (US$2,950) from 65,000,000 million (US$2,800); and
- Region IV VND 61,400,000 million (US$2,645) from 54,400,000 million (US$2,344)
Vietnam sets different minimum wage levels for the four regions to reflect the cost of living in each area.
Wages rising fast but still remain low
According to a survey released by an employment website, salaries in Vietnam are rising faster than other Asian countries but still remain low. Vietnam’s minimum wage hike of 5.7 is higher than last year’s hike of 5.3 percent but lower than in 2018 and 2017.
The average inflation rate in 2018 was 3.54 percent while the Consumer Price Index (CPI) in the first ten months of 2019 rose by 2.48 percent. The Vietnam General Confederation of Labor (VGCL) has stated that the current minimum wages meet approximately 95 percent of workers’ living costs and hope the new increase would help ease challenges faced by workers facing increased living expenses.
The government will also raise wages for civil servants by 7.3 percent in July 2020.
Plan ahead for 2020
As Vietnam’s economy continues to grow, rising wages will be an unavoidable feature of doing business in the country. Nevertheless, Vietnam’s improving business environment, free trade agreements and low costs make it an ideal location for foreign investors looking to relocate.
Businesses should plan ahead and prepare their budgets, operational capacity, and costs for the new year when the new wage hike goes into effect.