Vietnam's ministry proposes 6.5% hike in minimum wages

30 Aug '17
2 min read

Vietnam’s ministry of labour, invalids and social affairs has proposed an increase of 6.5 per cent, or VND 180,000-230,000, in the regional minimum monthly wage that is in tune with what the National Wage Council, and representatives of employers and employees have agreed to after negotiations. The wage hike goes into force in early 2018.

The ministry has taken into account job creation, unemployment, production, business conditions, manufacturing costs, the current inflation rate of 4-4.5 per cent and labour productivity growth of 2-2.5 per cent while arriving at the decision, according to media reports in Vietnam.

The rise may raise production costs by 0.55-0.6 per cent but the increase could be 1.15-1.2 per cent in labour-intensive sectors like textile and garments.

A new regulation, which states that those entering into labour contracts of one month or longer must contribute social insurance, has also been taken into consideration. The basis for social insurance contribution will be broadened to include salaries, allowances and others from early next year onwards, making the labour cost burden heavier, according to the ministry.

In addition, the Government has proposed the National Assembly Standing Committee lower the rate of the unemployment insurance fund for employees by 0.5per cent.

The Vietnam Textile and Apparel Association reacted by saying the minimum pay hike would compel companies to cut production costs and invest in new technologies to use less labour.

According to the International Labour Organization (ILO) office in Vietnam, businesses at the lower end of the global supply chain may feel their price competitiveness squeezed, as the high wage increases have not abated in recent years.

Vietnam increases the regional minimum wage every year to meet the minimum standard of living for domestic labourers. It ranks its four regions according to their socio-economic development. (DS)

Fibre2Fashion News Desk – India

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