While employers seek to cap the minimum wage increase for next year at less than 5%, employees are pushing for an 8-10% pay raise, and the wide difference requires another round of negotiations on August 7.

The current salary level, according to experts, meets around 90% of the minimum living demand for laborers, said Hoang Quang Phong, vice president of the Vietnam Chamber of Commerce and Industry (VCCI) at a meeting of the National Wage Council last Friday.

Pay rise to erode competitiveness

Meanwhile, local companies want to achieve sustainable growth because any sharp rise in the minimum wage will force them to restructure production, resulting in staff layoffs and creating other social problems, said Phong of VCCI, which represents employers.

Phong said the business performance of local enterprises has slightly improved. However, those active in textile-garment, leather-footwear, seafood, and electronics sectors will face adverse effects upon any strong hike in the minimum wage.

A report shows there are around 54.4 million employees nationwide, but those having signed labor agreements with enterprises and cooperatives account for a mere 17%. As such, if the minimum wage is adjusted up strongly, other social factors will follow suit – lives of laborers subject to the adjustment and those working in the informal sector will be impacted.

Nguyen Duc Thuan, chairman of the Vietnam Leather, Footwear and Handbag Association, said enterprises always regard their employees as a cornerstone to fuel their growth.

However, Thuan said, if enterprises do not find ways to increase the productivity of their workforce, and apply scientific and technological advances into their production, any pay rise will make Vietnam’s labor cost higher than those in other countries and thus less competitive.

He remarked processing contracts may be shifted to other nations that have lower outsourcing price. Therefore, enterprises might face a fall in the number of product orders, and their employees might lose their jobs.

According to the VCCI, the salary fund of leather-footwear and textile-garment enterprises accounts for 70-78% of their outsourcing costs for export products. Given annual minimum wage increases and decreasing outsourcing prices, enterprises have earned less profit.

As a result, many enterprises intend not to increase salaries for their staff in a frequent manner, or even cut their bonuses in order to offset rising production costs.

Besides, raising the minimum wages also entails increasing social insurance, union, and overtime payments for laborers.

Laborer union disagreement

Meanwhile, according to the Vietnam General Confederation of Labor, the socio-economic situation has improved, and the CPI has remained high, at 4-5%, so a hike in the minimum wage that will be applied next year must offset inflation.

A survey of the confederation reveals 51% of laborers in 17 provinces and cities nationwide have to work overtime in order to meet their living demand, and 54% of them cannot make ends meet with the current minimum wage level. Thus the confederation pushed for a minimum wage rise at 8% or 10%.

Doan Mau Diep, Deputy Minister of Labor, Invalids and Social Affairs and president of the National Wage Council, said the differential between the two sides has been reduced but still remains wide.

According to prevailing regulations, Diep said, if the sides are unanimous to come up with a plan which is voted for by more than 50%, it will become the final solution of the council.

Otherwise, the two pay hike schemes by the sides are subject to a vote, and which plan that achieves a higher vote will be chosen as the final pay rise scheme to be submitted to the Prime Minister for consideration.

The next round of negotiations of the National Wage Council is scheduled for August 7.

SGT