Statutory Minimum Wages in Vietnam

(Applied from 1.7.2024)

Decree 74/2024/ND-CP regulating the minimum wage for employees working under labor contracts in Vietnam, effective from July 1, 2024. It has replaced the previous Decree 38/2022/ND-CP and has demonstrated the State’s concern for the lives and needs of the majority of workers in today’s society. Below, Viet An Law Firm will present the legal provisions on statutory minimum wages in Vietnam applied from July 1, 2024.

Principles of applying statutory/regional minimum wages in Vietnam

• Enterprises and employees may agree on wages, but in all cases, even with the employee’s consent, enterprises and employers are not allowed to pay employees less than the regional minimum wage per month or hour.
• Enterprises and employers must pay social insurance for employees at least equal to the statutory minimum wage. For employees doing jobs or positions that require vocational training and education, the salary must be at least 7% higher than the minimum wage. The salary for employees doing jobs or positions with arduous, toxic, or dangerous working conditions must be at least 5% higher; for employees doing jobs or positions with especially arduous, toxic, or dangerous working conditions, the salary must be at least 7% higher than the salary for jobs or positions of equivalent complexity, working under normal working conditions, unless otherwise agreed by the parties.
• Employers are not allowed to eliminate or reduce wage regimes when employees work overtime, work at night, compensation in kind, and other regimes as prescribed by labor laws.

Regulations on statutory minimum wages in Vietnam from 1.7.2024

According to Article 3 of Decree 74/2024/ND-CP stipulates the minimum monthly and hourly wages for employees working for employers by region:

With this regulation, the regional minimum wage applied from July 1, 2024 for the region I will increase the highest at 280,000 VND/month, the lowest increase is 200,000 VND for the region IV. For regions II and III, the increase is 250,000 VND/month and 220,000 VND/month, respectively.

Correspondingly in this regulation, the minimum hourly wage increases from 1,000 VND to 1,300 VND in order from region IV to region I.

Thus, compared to the regional minimum wage applied before July 1, 2024 in Decree 38/2022/ND-CP, the current regional minimum wage has increased by 6%.

When does the monthly minimum wage apply?

The minimum monthly wage is applied to monthly salary payment, i.e. in the case where the employee works enough normal working hours in a month and completes the agreed labor or work norms for the requirements of each job or position that the employee holds.

When does the hourly minimum wage apply?

The minimum hourly wage is applied to hourly wages, i.e. that workers will receive wages according to the work for each hour worked or the title of the worker working in one hour and completing the agreed labor norm or work.

How to apply minimum wage to labor contracts with non-monthly/hourly payment

In case the Labor Contract does not stipulate a monthly or hourly salary, the converted salary will not be lower than the minimum monthly or hourly salary, which is stipulated as follows:

The monthly salary is calculated in one of the following ways:

• Weekly salary multiplied by 52 weeks divided by 12 months
• Daily wage multiplied by the number of normal working days in a month
• Piece rate and piece rate wages are paid during normal working hours of the month.

Hourly wages are calculated in one of the following ways:

• Weekly or daily wage divided by the normal number of working hours per week or day
• Piece rate, contract rate divided by the number of working hours during normal working hours to produce products, and perform contract tasks.

Subjects applying new regulations on regional minimum wages from July 1, 2024

Subjects affected by changes in regional minimum wages include:

• Employees working under labor contracts;
• Enterprises are established, organized, managed, and operated follordngce with the provisions of the Law on Enterprises;
• Agencies, organizations, cooperatives, cooperative unions, cooperative groups, business households, households, and individuals that hire or employ employees to work for them under labor contracts (in case the employer is an individual, he/she must have full civil act capacity);
• Other agencies, organizations, and individuals (both domestic and foreign) involved in performing work in Vietnam that have been signed under a labor contract.

Locality principle minimum wage area in Vietnam

Apply according to the administrative area

• Operating in a region shall apply the minimum wage prescribed for that region; The same shall apply to the region where the unit or branch operates;
• In case the locality changes its name or administrative units are divided, employees will be temporarily subject to the minimum wage prescribed for the locality before the name change or administrative unit division until the Government has new regulations.

Apply according to the highest benefit level for:

• Operating in industrial parks and export processing zones located in areas with different minimum wage levels;
• Operating in a newly established area from one or more areas with different minimum wages;
• Activities in a city under the province newly established from one or more localities in Region IV (mostly localities with particularly difficult socio-economic conditions) will be subject to the minimum wage corresponding to Region III.

Note:

In case the agreed and committed salary payment contents are more beneficial to the employee, the more beneficial direction will continue to be applied.

For example: The salary regime for employees doing jobs or positions that require vocational training and education is at least 7% higher than the minimum wage, and the salary regime for employees doing jobs or positions with arduous, toxic, or dangerous working conditions is at least 5% higher; jobs or positions with especially arduous, toxic, or dangerous working conditions are at least 7% higher than the salary of jobs or positions of equivalent complexity, working under normal working conditions.

Obligations of employees when the minimum wage is adjusted to increase

According to current regulations, the monthly salary for compulsory social insurance contributions must not be lower than the regional minimum wage at the time of contribution for normal employees. Therefore, when the minimum wage increases, the social insurance contribution will also increase and employees will have to declare the increase in social insurance to the social insurance agency.

Thus, to implement Decree 74/2024/ND-CP on increasing regional minimum wages, employers need to make a list of employees participating in social insurance, health insurance, unemployment insurance, occupational accident insurance, and occupational disease insurance (according to form D02-LT) on electronic records to report increases in social insurance, adjust the contribution level if the contribution level is lower than the regional minimum wage in 2024. The records are sent to the social insurance agency where the enterprise is managed. Currently, several social insurance agencies in districts, towns, and cities have notified enterprises about the deadline for a declaration to promptly implement in practice, protecting the rights of employees.

Are benefits cut when salary increases?

According to Article 5.3 of Decree 74/2024/ND-CP, employers are not allowed to arbitrarily eliminate or reduce wage regimes when employees work overtime, work at night, in-kind allowances, and other regimes as prescribed by labor law.

The above regulation will apply to all employers without distinction between state-owned or private enterprises.

Administrative sanctions for violations in cases of paying wages lower than the minimum wage

Pursuant to Clause 3, Article 17 of Decree 12/2022/ND-CP, employers who pay employees less than the minimum wage prescribed by the Government shall be subject to the following penalties:

• From 20,000,000 VND to 30,000,000 VND for violations involving 01 to 10 employees;
• From 30,000,000 VND to 50,000,000 VND for violations involving 11 to 50 workers;
• From 50,000,000 VND to 75,000,000 VND for violations involving 51 or more employees.

In addition to paying fines to state agencies, employers are also subject to remedial measures: Requiring employers to pay full wages plus interest on the amount of wages that are late or underpaid to employees calculated at the highest non-term deposit interest rate announced by state-owned commercial banks at the time of sanctioning the violation.

Note: The above provisions apply to individual employers. For organizational employers, the fine is twice the fine for individuals.

If you need advice on the statutory minimum wages in Vietnam in 2024, please contact Viet An Law Firm for the best support!

Update: 9/2024