Regional Minimum Wage Increase: Insiders' Voice

(Baonghean) - In 2018, the regional minimum wage has been finalized to increase by 6.5%.

Electronic products production at BSE Vietnam Electronics Company in Nam Cam Industrial Park. Photo: Chau Lan

Business adds costs

According to Decree No. 153/2016/ND-CP, enterprises operating in a locality shall apply the regional minimum wage prescribed for that locality. In case an enterprise has units or branches operating in localities with different regional minimum wages, the unit or branch operating in which locality shall apply the regional minimum wage prescribed for that locality. Enterprises operating in industrial parks, export processing zones, economic zones and high-tech zones located in localities with different regional minimum wages shall apply the locality with the highest regional minimum wage.

In Nghe An, most businesses apply according to region III (Vinh City) and region IV (districts and towns), so the salary increases from 2,400,000 VND/month to 2,580,000 VND/month (region IV) and from 2,700,000 VND/month to 2,900,000 VND/month (region III). With this increase, businesses have to spend more on increasing income for workers, and at the same time increase the social insurance contribution rate. For businesses with few workers, they are usually not much affected and do not increase pressure due to the "increased" costs from the above two items.

When assessing the above impacts, Mr. Khuong Van Thang - Head of Human Resources Department of TNTP Central Plastic Co., Ltd. said: “With 85 employees of the company participating in monthly insurance payments, the increase in insurance contributions according to the regional salary regulations of our company is not large. In fact, the regulation of insurance contributions based on the minimum regional salary like that, but the company must create all conditions for workers to have a much larger income, the average income of our company's workers is 6,500,000 VND/person/month. However, when the insurance contributions increase, we have to add costs...”.

For businesses with a large number of workers, the application of increasing regional minimum wages has a significant impact on costs. Because previously, in 2016, the regional minimum wage increased from 250,000 - 400,000 VND/month compared to 2015 (according to Decree 122/2015/ND-CP). Thus, 2 consecutive years of increasing regional minimum wages means that businesses must pay higher insurance contributions. Typically, Minh Anh - Kim Lien Garment Joint Stock Company, with over 1,000 workers, the adjustment to increase regional minimum wages since the beginning of 2017 has increased monthly costs by about 400 million VND.

Mr. Nguyen Dinh Vinh - Deputy Director of the company shared: "Obviously, increasing the regional minimum wage for businesses employing many workers will greatly affect the costs of the business. If it is adjusted to increase further, the business will face more difficulties...".

Ms. Le Thi Hong Trang - Head of Human Resources at BSE Electronics Company said: “Currently, the company is paying salaries and paying full insurance for more than 4,000 employees, in compliance with the regulations of the State and the law. The average income of employees ranges from 3-5 million VND/month, our total monthly salary expenses are about more than 16 billion VND, not including lunch. If the minimum wage increases in 2018 as proposed by the Technical Department of the National Wage Council (level 2 is 160,000 - 220,000 VND), the company will also increase salary expenses by about 800 million VND/month…”.

In addition to increasing the cost of social insurance contributions for employees when adjusting the regional minimum wage, Decree No. 153/2016/ND-CP also requires enterprises not to eliminate or reduce wage regimes when employees work overtime, work at night, work in arduous and hazardous working conditions, in-kind allowances for arduous and hazardous occupations and other regimes according to the provisions of labor law. Other allowances, supplements, subsidies and bonuses prescribed by enterprises shall be implemented according to the agreement in the labor contract, collective labor agreement or in the enterprise's regulations. Therefore, most enterprises do not want to increase the regional minimum wage.

Some opinions say that, to ensure business development, the State should also have annual assessments of the impact of minimum wage increases on business development.

Workers at the AustFeed Nghe An factory pack products. Photo: Nguyen Son

What do workers say?

Mr. Nguyen Van Ha, a worker at The Vissai Nghi Thiet Cement Grinding Station, said: Currently, he is receiving a salary of over 3 million VND/month, not including 3 meals paid by the company. The company has a rule that if you eat at the factory, it is free, but if you don't eat, you won't get paid, so most people register to eat at the communal kitchen. If you include the cost of meals (20,000 VND/meal), the income is approximately 5 million VND. Mr. Ha shared: "In fact, we just hope to receive more money at the end of the month, and we don't really care about how the State increases the regional minimum wage...".

Ms. Nguyen Thi Duyen, from Trung Thanh commune (Yen Thanh), has been working at MLB Tenegry Co., Ltd. (Japanese garment factory) for 4 years, said: “We receive a salary of 2.9 million VND/month, working 8 hours/day, if we work overtime we get 21,000 VND/hour. In addition, if we work full time we get 200,000 VND/month for diligence, 80,000 VND/month for gas. The total income is only 3.2 - 3.3 million VND/month. With this salary, we have to live frugally to pay for rent, electricity and water, so we still have a shortage. To ensure a relatively decent standard of living, tailors need a salary of over 4.5 million VND/month. I heard that the minimum wage will increase soon, we hope to have more income.”

The general psychology of workers is to care about the total income received at the end of the month, not just based on the regional minimum wage. Through monitoring 85 enterprises in the Southeast Economic Zone, the representative of the Enterprise and Labor Management Department - Management Board of the Southeast Economic Zone of Nghe An assessed: The average income of workers in the first 6 months of 2017 of enterprises in the Economic Zone reached 5,758,095 VND/person/month (an increase of 110,000 VND/person/month compared to the end of 2016). In general, there is a clear difference in income between types of state-owned enterprises and joint-stock or private enterprises. Some enterprises that employ a lot of labor in the fields of garment, children's toy production or electronics have an average monthly income that is not much higher than the regional minimum wage, only if overtime is required can the average salary be achieved above.

In a forum, Mr. Vu Quang Tho - Chairman of the Vietnam Workers' Association - Trade Union said that according to a survey, currently the percentage of workers who have savings from the minimum wage is only 8% (the savings only fluctuate from 500,000 - 1,000,000 VND/month), 50% of workers do not have savings and more than 40% of workers are spending frugally and lacking. Mr. Tho said that with the current salary increase, it only meets about 93% of the minimum living needs of workers. This means that there is still about 7% left for the minimum wage to reach the minimum living standard of workers.

The increase in regional minimum wage in reality only increases by a few hundred thousand dong. Therefore, to improve the lives of workers, it is necessary to carry out well the stabilization of market prices, synchronize policies related to housing, spiritual life, kindergartens for workers' children,...

The National Wage Council has finalized the 2018 regional minimum wage increase at 6.5%. According to the representative of the Vietnam General Confederation of Labor, previously, many levels were proposed, but after debate and voting, the increase was finalized with the above plan. The National Wage Council will submit a report to the Prime Minister for consideration and promulgation of the Decree on increasing the regional minimum wage in 2018 in the coming time.

PV Group