Vietnam's Latest Minimum Wage to Take Effect from July

Starting July 1, 2024, the new minimum wage in Vietnam will impact various social insurance calculations based on the statutory pay rate. Employers in Vietnam should carefully consider the cost implications of the statutory pay rate and the minimum regional wage.

On June 30, the Government issued Decree 73/2024/ND-CP regarding the new basic salary and Decree 74/2024/ND-CP concerning the new minimum salaries, both of which became effective on July 1, 2024. Consequently, the capped salaries used for calculating contributions for social insurance, health insurance, and unemployment insurance will increase accordingly.

Revisions to the minimum wage in Vietnam effective July 1, 2024

In response to the market update, Nguyen Vu Phuoc Hong, Manager of HR and Payroll at Dezan Shira & Associates Vietnam, highlights that the adjustment in minimum wage will have a significant impact on various calculations tied to the statutory pay rate. This includes social insurance (SI), health insurance (HI), union fees, and unemployment insurance (UI), collectively referred to as "SHUI." Additionally, benefits from social insurance will also be affected.

Furthermore, it is noted that the maximum social insurance salary, health insurance salary, trade union fee, and unemployment insurance (UI) will see an increase on July 1, 2024.

Hong also emphasizes the importance for businesses to consider the cost implications of the statutory pay rate and the minimum regional wage. It is pointed out that if employees sign a labor contract with a net salary instead of a gross salary, the impact of SHUI costs will be borne solely by the company, not the employee's income. Consequently, in addition to the rise in SHUI contributions, employee benefits are expected to increase as well.

Contributions to SHUI and trade union fees

Understanding the concept of minimum wage in different regions of Vietnam

The minimum wage in Vietnam is the lowest level of pay that serves as the foundation for businesses to negotiate and compensate their employees. This wage applies to individuals working under employment contracts as outlined in the Labor Code, including those employed in enterprises, cooperatives, farms, households, individuals, and other Vietnamese organizations, as well as foreign organizations and individuals in Vietnam employing laborers.

Vietnam's monthly minimum wages differ across four regions based on the living standards in those areas. Region 1 includes urban areas of Hanoi and Ho Chi Minh City. Region 2 encompasses rural areas of Hanoi and Ho Chi Minh City, along with the cities of Can Tho, Da Nang, and Hai Phong. Region 3 applies to the cities and districts of Bac Ninh, Bac Giang, Hai Duong, and Vinh Phuc provinces. Region 4 covers all other localities.

Conclusion

Last year, Vietnam declared that it would implement a 6 percent increase in the minimum wage from July 1, 2024. The Vietnam General Confederation of Labor had pushed for a 6.48 to 7.3 percent raise, whereas the Vietnam Chamber of Commerce and Industry recommended a 4.5 to 5 percent hike for the benefit of businesses. As a result, a compromise was reached between the two suggestions. This adjustment will signify the first change in the minimum wage since July 2022.