On 13 August 2018, the National Wage Council of Vietnam (NWC) proposed a 5.3% regional minimum wage increase - to be implemented in 2019. Buoyed by regional economic growth, Vietnam’s wage rise reflects rises seen across several ASEAN countries in 2018 - and is set to affect around 10 million employees.
Wage Growth Margins
Compared to previous years, 5.3% is the lowest margin minimum wage hike on record - following previous lows of 7.3% in 2017 and 6.5% in 2018. The rates proposed for 2019 reflect the increasingly competitive Southeast Asian business landscape, along with the Vietnamese government’s need to attract foreign business interests and mitigate the effect of higher labour costs.
Minimum Wage Details
After consultations earlier in the year, labour unions in Vietnam had initially sought an 8% minimum wage increase for 2019, while employers countered with 2% - before the NWC proposed the 5.3% compromise in August. Vietnamese Prime Minister, Nguyen Xuan Phuc, is likely to sign off on the 2019 proposal before December, with an implementation date of 1 January 2019.
The region-specific minimum wage increases proposed by the National Wage Council are:
| Region |
2018 minimum wage (VND per month) |
Proposed 2019 minimum wage (VND per month) |
Balance (VND per month) |
I |
3,980,000 |
4,180,000 |
Increase of 200,000 |
|---|---|---|---|---|---|---|---|
| II |
3,530,000 |
3,710,000 |
Increase of 180,000 |
III |
3,090,000 |
3,250,000 |
Increase of 160,000 |
| IV |
2,760,000 |
2,920,000 |
Increase of 160,000 |
Regional demarcations in Vietnam are organised as follows:
- Region 1: Hanoi and Ho Chi Minh City
- Region 2: Rural Hanoi and Ho Chi Minh City, along with Can Tho, Da Nang and Hai Phong.
- Region 3: Provincial cities, along with the districts of Bac Ninh, Bac Giang, and the provinces of Hai Duong and Vinh Phuc
- Region 4: All remaining localities
Future Rises
Although Vietnamese Deputy Labour Minister, Doan Mau Diep, stated that the 2019 minimum wage rise was “reasonable”, many observers are concerned that it won’t cover the living costs of Vietnamese workers. The smaller margin increase may well be felt more acutely by workers as inflation continues to drive prices up: Vietnam’s consumer prices saw a 3.53% rise in 2017, and are expected to grow by 4% in 2018.
Because of the tight margin between wages and consumer prices, a substantial minimum wage raise is expected in 2020 to help maintain the purchasing power of Vietnamese workers.
For more information on the Vietnamese payroll landscape, browse activpayroll’s Global Insight Guide to Vietnam.