Starting July 1, 2024, Vietnam will implement significant updates to its minimum wage structure, impacting companies across various industries. This change holds particular importance for CEOs and HR managers, as aligning the company’s payroll systems with the new standards will be crucial for compliance and effective workforce management.
New Minimum Wage Rates
The Government issued Decree 74/2024/ND-CP dated June 30, 2024, providing for regional minimum wage, applicable from July 1, 2024. Here is an updated table showing the new minimum salaries by region, along with the previous rates introduced in July 2022, targeting to reduce the impacts of the Covid-19 pandemic., highlighting the date of application and providing figures in both Vietnamese Dong (VND) and U.S. Dollars (USD)
| Region (*) | Old Minimum Wage | New Minimum Wage
(From July 1st, 2024) |
Increase (%) |
|
I |
4,680,000 | 4,960,000 | 5.9% |
| II | 4,160,000 | 4,410,000 | 6.1% |
| III | 3,640,000 | 3,860,000 | 6.1% |
| IV | 3,250,000 | 3,450,000 |
5.9% |
These updates reflect an average increase of approximately 6%, also increase in the hourly minimum wage, now varying from VND 16,600 (approximately US$0.65) to VND 23,800 (around US$0.93) across different regions.
(*) In Vietnam, minimum wages vary by region based on economic and cost of living differences. Region I consists of urban Hanoi and Ho Chi Minh City. Region II includes their rural areas and cities like Can Tho, Da Nang, and Hai Phong. Region III encompasses industrial areas in provinces like Bac Ninh and Bac Giang. Region IV covers all remaining localities.
Comprehensive Impact on Payroll Components
The change in the minimum wage directly affects various statutory payroll components such as social insurance (SI), health insurance (HI), union fees, and unemployment insurance (UI)—collectively referred to as SHUI. The government will also be increasing the maximum caps for these contributions, effective from the same date as the wage increase. This will require businesses to accommodate higher payroll deductions and contributions, impacting overall payroll management strategies.
Effects on Employee Benefits and Company Costs
The enhancement in SHUI contributions following the increased minimum wage will lead to improved employee benefits, providing better social security and health coverage. For businesses, particularly those with employees under net salary contracts, this adjustment will translate into heightened operational costs as the burden of increased SHUI contributions will be shouldered by the employers alone. This necessitates strategic financial planning to manage these additional expenses without undermining business profitability or compliance.
Business Strategies Post-Wage Adjustment
To counteract the financial impact of the wage adjustments, businesses can employ several strategies:
- Adjust salary structures: Ensure all employees are paid at least the new minimum wage while considering the cascading effects on higher salary bands.
- Reassess benefits packages: Evaluate and potentially adjust benefits packages to balance out direct salary increases with non-monetary benefits that add value to employees.
- Enhance budgeting practices: Forecast and set aside budgetary provisions for increased SHUI contributions to avoid financial strain.
- Maintain transparent communication: Keep employees informed about how these changes will affect their salaries and benefits, maintaining transparency to ensure trust and morale remain high.
The upcoming adjustments to Vietnam’s minimum wage are poised to bring significant changes to business operations in terms of human resources and payroll management. By understanding these changes and preparing accordingly, businesses can ensure compliance with new legal standards while continuing to operate effectively and sustainably. Strategic adaptation to these wage adjustments is essential for maintaining employee satisfaction and ensuring business profitability in Vietnam’s evolving economic environment.
Metasource: Your Trusted Partner
Metasource is your trusted partner for consulting and supporting effective staff management across global teams, especially in culturally diverse environments like Vietnam.
Read more: Navigating the Complexities of Obtaining a Working Permit in Vietnam
Read more: How To Register A Limited Liability Company In Vietnam A Quick Guide
Discover more tips to help boost your business further in Vietnam by following us on our website and Linkedln page
