2016 Wage Increase: Still Many Disagreements About Minimum Living Standards

The changes to the Law on Social Insurance, which took effect in 2016, will have a significant impact on the wage policies of enterprises. Deputy Minister of Labor, War Invalids and Social Affairs, Chairman of the National Wage Council Pham Minh Huan answered an interview about the issue of negotiating and agreeing on wages and bonuses between enterprises and employees.

Deputy Minister Pham Minh Huan predicts that the negotiation process to increase regional minimum wages will become increasingly fierce.

Social insurance costs expected to increase by 10-12%

- 2016 is a year of many changes in social insurance policies, especially the fact that businesses have to increase social insurance costs. So, in your opinion, will this affect the salaries of employees this year?

Deputy Minister Pham Minh Huan:2016 is the first year of implementing the amended Law on Social Insurance, the amended content has changed the social insurance contribution rate. If previously, the Law on Social Insurance only regulated social insurance contribution based on the contract salary, from 2016 the contribution rate is based on salary and allowances, and by 2018 additional payments must be made.

Currently, there is a gap of 30-60% between income (including salary and other allowances and supplements) and the salary level for social insurance contributions. According to the new regulations, the Ministry of Labor, War Invalids and Social Affairs calculates the total cost of social insurance contributions of enterprises depending on different production models, the cost of contributions will increase differently, it is expected that the increase in social insurance contributions will increase by about 10-12%.

The increase in social insurance premiums will have a double impact on social insurance premiums and corporate salary costs. Especially in the context of the 2016 roadmap of continuing to adjust the regional minimum wage, the increase in social insurance premiums will impact the increase in the regional minimum wage.

Must negotiate early

- Regarding the roadmap for minimum wage increases, 2015 was a year of fierce negotiations on minimum wage. With changes in social insurance contributions, 2016 promises to have even more conflicting opinions, so how does the National Wage Council plan to work and negotiate wage increases this year?

Deputy Minister Pham Minh Huan:In fact, the higher the adjusted salary is, the closer it is to the minimum living needs, the more it will affect the business's costs, especially for businesses that employ a large number of workers, where salary adjustment is difficult.

In 2015, the negotiation of the minimum wage increase was quite difficult. Therefore, in 2016, the negotiation will be carried out earlier. At the beginning of the year, the National Wage Council will meet to set out the plan. In my opinion, the most important thing is that the technical departments of the three-party representatives coordinate to calculate the bases for adjusting the minimum wage.

Currently, all sides have different opinions on how to calculate the minimum living standard as a basis for calculating appropriate wage increases. Experience from other countries shows that it is very difficult to agree on a calculation method. The problem is that we must narrow this gap as much as possible.

The National Wage Council announced the 2016 wage increase plan.

- Besides salary, bonus is also an issue that many workers are concerned about. Could you tell us what the current Labor Law stipulates about bonuses?

Deputy Minister Pham Minh Huan:According to Article 103 of the Labor Code, bonus is an amount of money that the employer rewards the employee based on the annual production and business results and the employee's level of work completion.

Enterprises often base on the production and business efficiency, evaluate the contribution process for employees after a period of contribution to have a bonus. At the end of the production and business cycle, there is usually a bonus, the bonus falls on Lunar New Year and New Year called Tet bonus... but in reality, the law does not have regulations on Tet bonus.

Bonuses will be based on the agreement between the employer and the employee through the labor contract and collective labor agreement. The bonus regulations are decided by the employer and publicly announced at the workplace after consulting with the organization representing the labor collective at the facility.

In my opinion, enterprises must publicize information about production and business situation and most importantly, the grassroots trade union must represent the workers. When seeing that the enterprise is operating effectively but the employer does not provide full information, it must be responsible for negotiating and dialogue to build bonus regulations. Fierce competition from labor migration.

Fierce competition from labor migration

- 2016 is the year of major changes in the integration process when Vietnam joined the ASEAN Economic Community (AEC) and the Trans-Pacific Partnership Agreement (TPP). So will workers' salaries be affected and changed, sir?

Deputy Minister Pham Minh Huan:The integration process will bring both opportunities and challenges. Integration will create more job opportunities and may have conditions to increase income for workers. However, for jobs with good income, workers will also face competition for jobs from the free movement of labor during the integration process.

The biggest challenge will be that we have to prepare good human resources for the upcoming integration process. If we do not prepare well, there will be occupations and job positions with good income and high salaries, but Vietnamese workers will not meet the needs and requirements of businesses, it will be difficult to compete with workers from other countries and investment may also shift to places with better human resources.

Thank you!

According to Vietnamplus