In addition to recommending against an increase in wages this year, many experts and businesses have also opposed proposals to change the timing of regional minimum wage changes from January 1 to July
in order to protect businesses and avoid operational issues as they attempt to wade through the pandemic period.
Business health to come first in future wage date changes. Illustration photo
Instead of increasing the region-based minimum wage on January 1 every year, the Vietnam General Confederation of Labour (VGCL) has asked the government to reconfigure the date to July 1, starting from 2022.
Explaining the timeline change idea, the VGCL said that each wage increase has a significant impact on goods and service prices. The increase in the minimum wage from July 1 will reduce the burden on price increases right before the Lunar New Year.
“If the minimum wage is raised from January 1 the way it does now, businesses will face financial difficulties because they have to pay for Lunar New Year bonuses, while also worrying about increasing salaries for employees,” said Ho Thi Kim Ngan, deputy head of the Labour Relations Department under the VGCL. “Therefore, in order to avoid tensions in labour relations and to make business plans more favourable, the VGCL proposes the delay to July 1.”
On the other hand, it was noted that a wage adjustment would help workers ensure a minimum standard of living when most are facing difficulties due to the effects of the COVID-19 pandemic. The proposal was one of two submitted by the VGCL. The second was to consider increasing the minimum wage on July 1 this year in order to motivate workers and help them improve their lives.
This proposal was made by the VGCL after assessing the results of positive GDP growth in 2020 when labour productivity increased by 5.4 per cent, and the average consumer price index last year rose by 3.23 per cent compared to the average in 2019.
Representing enterprises with a large number of labourers that would be directly affected, Phan Thi Thanh Xuan, general secretary of the Vietnam Leather, Footwear, and Handbag Association assessed that a leather and footwear business usually has from 1,000 to tens of thousands of workers, so the wage pressure is huge. Businesses decide the salary scale and payroll at the beginning of the year, any change would make the pressure “even more terrible” than preparing financial resources for employees’ salaries and Lunar New Year bonuses.
“Leather and footwear is an export industry, so it must be compatible with the general international system. Production and financial plans, even signed contracts, and payroll scale must always be decided at the beginning of the year. The change will take time and resources, and sometimes bring problems for businesses,” Xuan said.
Also representing other labour-intensive businesses, Truong Van Cam, general secretary of the Vietnam Textile and Apparel Association (VITAS), expressed disagreement with the plan. Cam said that keeping the adjustment time of the region-based minimum wage to January 1 will create favourable conditions for businesses to build and implement production, finance, labour plans, as well as limit disagreements, negatively affecting the stability of labour relations in enterprises.
In addition, VITAS also proposed not to increase the minimum wage in 2021 in order to reduce difficulties for businesses and create conditions for them to stabilise jobs, and not to lay off workers.
According to data from the General Statistics Office, last year over 101,000 enterprises in Vietnam halted operations, of which 17,500 have completed dissolution procedures and 37,700 are about to complete procedures, affecting the livelihoods of 7.2 million workers.
The pandemic seriously affected the turnover of businesses as 66 per cent of private enterprises and 62 per cent of foreign-invested enterprises (FIEs) said their revenues dropped in comparison with 2019.
The recently-released PCI 2020 survey also showed that more than 40,000 employees lost their jobs in the past year, including about 28,000 employees in domestic private enterprises and more than 12,000 in FIEs.
After consideration, the Ministry of Labour, Invalids and Social Affairs (MoLISA) rejected the two proposals from the VGCL for a rise in the region-based minimum wage in 2021 and decided to continue to maintain the timing for effective wage rise from January 1.
A MoLISA representative said that it will be appropriate not to increase the minimum wage in 2021, creating conditions for businesses to recover and workers keeping their jobs, and re-participating in the labour market. Regarding the proposal to change the timeline, MoLISA has studied the practical experience of other countries. Countries such as Germany, France, Russia, South Korea, and Thailand all start the fiscal year from January 1 and the period for wage adjustment needs to coincide with the start of a fiscal year to facilitate the establishment of production and business plans.
Vietnam’s fiscal year lasts from January 1 to December 31. Changing the time to increase the minimum wage to the summer could cause chaos in the first few years of transition, making it difficult for enterprises and especially FIEs when each adjustment must be greenlit by the parent company. Most parent companies are in countries with fiscal years associated with calendar years like Vietnam.
“Therefore, the salary adjustment from January 1 is in line with international practice,” said Deputy Minister of Labour, Invalids and Social Affairs Le Van Thanh.
According to Thanh, the Labour Code currently does not regulate the time of the minimum wage adjustment and the government has only altered this three times, to October, out of 18 adjustments since 2000.
However, the first two instances were performed to adjust the salary applied to businesses that received salaries from the state budget. The third time was for the purpose of stretching the impact on businesses when implementing a roadmap for unifying the minimum wage of state-owned groups and FIEs.
The MoLISA stated that the labour situation in recent times has remained quite stable at enterprises in Vietnam. If the time to raise wages was set to July 1, enterprises, employees, as well as the representative organisations of employees may have to negotiate many times over to change policies, causing disagreements and adversely affecting labour relations.
On the other hand, enterprises show large demand for labour today, especially in industrial zones. It is expected that when foreign investment continues to increase, a labour shortages could occur.
“If the wage increase is implemented in January, it will create favourable conditions for businesses to increase remuneration regimes and policies for workers, thereby encouraging them to return to work, ensuring the balance of labour supply and demand for key locations,” said the MoLISA representative.
The body that represents workers' rights in Vietnam is calling on the Government to increase minimum wage as the country's economy begins to show positive signs of recovery.