The minimum salary for employees of state agencies, the armed forces, political – social organisations and administrative agencies will be VND540,000 (US$33) as of January 1, 2008.

Domestic and foreign-invested companies’s workers’ salaries will be raised based on regional locations.

There are three regions: the first includes urban districts of Hanoi and HCM City; the second comprises suburban districts of Hanoi, HCM City, Hai Phong, Ha Long City, Bien Hoa city, Vung Tau city, Thu Dau Mot town and the districts of Thuan An, Di An, Ben Cat and Tan Uyen; the third includes all remaining areas.

For domestic companies, the minimum salary in region 1 will be VND620,000 (US$38) per month, up 38%; VND580,000 ($36) in region 2; and VND540 ($33) in region 3.

For foreign-invested enterprises, VND1 million ($62) in region 1, VND900,000 ($56) in region 2 and VND800,000 ($50) in region 3.

The Government clearly pointed out that the minimum salary is the lowest level of pay for workers with the lowest skills in normal working conditions. If trained and/or educated, salaries must be at least 7% higher.

Pham Minh Huan, Head of the Salary and Wage Agency under the Ministry of Social, War Invalids and Social Affairs, said that increasing the minimum salary doesn’t mean that all workers will see an increase because that it only applies to the lowest level employees. Pay specifics are negotiated between employers and employees.

In fact, most companies pay more to attract qualified human resources so this change will really be felt by companies whose expenditures for social insurance and health insurance will increase; possibly from an expenditure of 0.25 to 0.5%, he continued.

He also added this change will put footwear, garment and processing companies under pressure. Around 6 million workers will benefit from the increase, including 1 million in foreign-invested, 2 million in state-owned and around 3 million in private companies.

He explained that the higher increase of minimum salary for workers in the foreign-invested sector will eventually even out as Vietnam meets its WTO commitments (non-discrimination between forms of business). It is expected that by 2012, Vietnam will have a common minimum salary for all enterprises.

Towards that end, in the fourth quarter of every year, MoLISA will evaluate economic growth, the consumer price index and labour supply and demand in the market and raise or lower the minimum salary for the next year, which they will announce in advance.

For administrative agency workers (around 1.5 million people), increasing the minimum salary means the State will have to pay trillions (dong) more.

This is the fourth minimum salary adjustment in the past five years, having started at VND210,000 ($13) and now reaching VND540,000 ($33) per month.

For foreign-invested firms, this is the second increase.

Source: VNE