Vietnam – Minimum Wage Increase – July 2024
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Vietnam is poised to implement a 6% increase in minimum wages starting July 1, 2024, mandated by the Vietnamese Ministry of Labour, War Invalids and Social Affairs (MOLISA). This adjustment responds to economic improvements, inflationary pressures, administrative changes, and public sector salary reforms aimed at maintaining equitable wage standards amidst evolving socio-economic dynamics.
Economic Justifications
The decision to raise minimum wages is supported by Vietnam’s robust economic indicators. With a GDP growth rate of 5.05%, the country has witnessed a steady recovery in the labor market, bolstering production efficiencies and profitability. This growth has contributed to increased incomes for workers, indicating positive economic participation and employment trends.
Inflationary Concerns
Anticipated inflation, with the CPI forecasted to rise by 4-4.5% in 2024, underscores the necessity of adjusting minimum wages. Current wage levels, set by Decree No. 38/2022/ND-CP, fall short of meeting minimum living standards for workers and their families by late 2024. Therefore, the wage increase aims to mitigate the impact of inflation on purchasing power and ensure sustainable wage growth.
Administrative Adaptations
Changes in administrative boundaries and infrastructure conditions have rendered the existing zone-based wage system ineffective. Recalibrating minimum wages is necessary to ensure fair and equitable standards across different regions and sectors, enhancing administrative efficiency and fairness in wage distribution.
Public Sector Salary Reforms
Aligning minimum wages with public sector salary reforms outlined in Resolution No. 27-NQ/TW of May 21, 2018, aims to harmonize wage structures between the public and private sectors. This alignment ensures that wage adjustments in the private sector are commensurate with those in the public sector, promoting socio-economic equilibrium and stability.
Current and Proposed Monthly Minimum Wages
| Zone | Until 30-06-2024 (VND) | From 01-07-2024 (VND) |
|---|---|---|
| I | 4,680,000 | 4,960,000 |
| II | 4,160,000 | 4,410,000 |
| III | 3,640,000 | 3,860,000 |
| IV | 3,250,000 | 3,450,000 |
Current and Proposed Hourly Minimum Wages
| Zone | Until 30-06-2024 (VND) | From 01-07-2024 (VND) |
|---|---|---|
| I | 22,500 | 23,800 |
| II | 20,000 | 21,200 |
| III | 17,500 | 18,600 |
| IV | 15,600 | 16,600 |
Recommendations and Impact
- National Wage Council Recommendation: Adopted unanimously on January 12, 2024.
- Expected Increase: Monthly increments ranging from VND 200,000 to 280,000.
- Balance of Interests: Ensures improved living standards for workers and supports business recovery and development.
Impact on Social Insurance and Other Contributions
The revised minimum wage will influence statutory pay rates and maximum salary thresholds for social insurance contributions:
- Statutory Pay Rate: Current: VND 1,800,000, Proposed: VND 2,340,000.
- Maximum Social Insurance Salary: Current: VND 36,000,000, Proposed: VND 46,800,000.
- Maximum Health Insurance Salary: Current: VND 36,000,000, Proposed: VND 46,800,000.
- Maximum Trade Union Fees Salary: Current: VND 36,000,000, Proposed: VND 46,800,000.
- Maximum Unemployment Insurance Salary: Varies by region, e.g., Zone I: Current: VND 93,600,000, Proposed: VND 99,200,000.
Please contact your Mercans’ services delivery team for any additional information regarding the implications of the above change.
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Key Points on Minimum Wage Increase in Vietnam (Effective from July 1, 2024)735.11 KB