Minimum Wage and Trade Unions in Vietnam

The New Year is shaping up for some big changes in Vietnam. Minimum wages are set to increase by approximately 5.7% as of January 1st, 2020. Depending on the industry and geographical region, some minimum wage rates may increase from the current rate of $6 USD to $10 USD.  There have also been some new standards created for those who have received formal, vocational training. In these instances, employees must be paid (at a minimum) 7% more than the minimum salary level available.

With these new increases to the minimum wage structure in Vietnam, it is important to notice that organizations are not permitted to make changes to their scheduling structure to adjust for these new rates. This means that organizations are not allowed to reduce the amount of money paid for overtime hours, night shifts, or any other hardship allowances when the new minimum wages are applied. This will undoubtedly create new issues for many organizations, as they must prepare budgets to accommodate these increased payments.

Even though the minimum wage in Vietnam is being raised quite dramatically, it is still lower than the minimum wage of many other countries in Asia. It is interesting to note that Vietnam’s minimum wage (even with the new increases) will still be less than its neighboring country of Cambodia – despite the fact that Cambodia’s economy is approximately only 10% the size of Vietnam’s economy. This still makes Vietnam a competitive country for foreign investors. As the Vietnamese economy continues to grow, it is predicted that wages will continue to grow, therefore organizations, especially small businesses, should begin preparations to ensure that they can pay their employees the higher rates.

In other developments, the revisions made to the Labour Code in 2019 will now also permit the operations of independent trade unions. Until now, the only trade unions approved to operate were those that were under strict supervision from the Vietnam General Confederation of Labor (VGCL). While these unions are not entirely independent (they must still receive permission to create a trade union from applicable state authorities), it is a step towards increasing democracy within the country.

This new legislation was created based on the fact that “wildcat” strikes are becoming more prevalent in Vietnam and are displaying a strong presence of illegal independent labor unions. In an effort to reduce the number of arrests, and increase the amount of input that individuals have on their working conditions, the government of Vietnam has decided that revisions to the Labor Code were overdue, and new legislation was created to provide guidance and support towards independent trade unions. With more independence comes more responsibility, so it will be interesting to observe how Vietnam’s labor structure changes over the 2020’s.

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