Vietnam’s National Wage Council has approved raising the regional minimum wages by 6% from July 1.

The increase was announced in a government decree signed on June 12 by Deputy Prime Minister Pham Binh Minh, marking the first time since 2009 that the minimum wage increase takes effect in the middle of the year rather than at the beginning of the year as happened on previous occasions.

Under the plan, the salary increase would be in the range of VND180,000-260,000 (US$7.8-11.2) per month per worker, depending on the four salary regions specified by the Vietnamese government. It means that the new minimum wage will vary from VND3.25 million to VND4.68 million ($140.19-201.88) per month. Geographic classification is determined based on the employer's place of business.

At a meeting of the National Wage Council on April 12, Deputy Minister of Labor, Invalids and Social Affairs Le Van Thanh, chairman of the National Wages Council, said the 6% rise would partly meet the demand of workers.

"For workers who are paid on a daily or weekly basis, or on piece rates, then their salary, when converted to the monthly or hourly rate, must not be lower than the minimum wage," Thanh said.

Ngo Duy Hieu, Vice President of the General Federation of Labor of Vietnam, said the regional minimum wage increase has been pending for two years, while wage earners have been suffering from rising product prices and falling incomes due to Covid-19.

An increase in the minimum salary at this time is needed to help laborers stabilize their life and stay with their employers. Photo: Duy Anh

Hieu added that the country’s economy recovered strongly in the first quarter of 2022. The minimum regional wage raise will benefit both employers and employees, as laborers will help increase productivity and help enterprises recover quickly.

"A portion of workers are facing hardship due to the pandemic and therefore a minimum wage increase is needed right now to help them stabilize their lives and stay with their employers," Hieu stressed.

The most recent revision of the minimum regional wages was carried out on January 1, 2020. The minimum wage in Vietnam has been raised 18 times since 2009.

Minister of Labor, Invalids and Social Affairs Dao Ngoc Dung on June 12 proposed that people would have to pay social insurance premiums for 15 years, instead of 20 years as at present, to begin to qualify for retirement pensions. Then, the period would even be reduced to 10 years.

Currently, contract workers must contribute to social insurance for the full 20 years to be entitled to the retirement pension, but they still have to work and pay premiums until they reach 60 years and three months of age for men and at 55 years and four months for women. This is one of the shortcomings that the draft amendment to the Social Security Law has to address,  Dung said.

“Twenty years is a long period and many cannot work that many years under contracts only to pay insurance premiums,” he said, adding that many have stopped halfway, choosing to give up on the retirement pension.

The minister stressed that a large number of retired people without pensions would create huge pressure on social welfare and healthcare funding.

“Reducing mandatory period of social insurance contribution to 10 years would encourage more people to enroll in the insurance scheme,” Dung added.

The minister said his ministry has submitted the draft amendment to the Vietnamese government and will collect public opinions until June 16.

It is expected that the amendment will be submitted to the sitting of the National Assembly (NA) in December 2022. If it is passed at the following NA meeting in May 2023, it will take effect from January 1, 2024.

Vietnam had around 14.1 million people in retirement, with only 4.9 million having access to the retirement pension by 2020.

Vietnam is currently among the most rapidly aging countries in the world. It officially entered the aging phase in 2011 when the number of people over 60 made up 10% of the population. It is expected to rise to 17.9% in 2025, and to more than 20% in 2038. By then, Vietnam would officially become an aging nation.