Vietnam’s evolving labor market has made minimum wage policies a crucial factor for businesses, employees, and policymakers alike. With a rising economy and growing foreign investment, the government frequently revises wage structures to balance competitiveness with fair compensation. As of July 1, 2024, a 6% increase in minimum wages will take effect, impacting social insurance contributions and business expenses. Here’s an in-depth look at how these changes shape Vietnam’s labor landscape.
Understanding Vietnam’s Minimum Wage System
Vietnam operates with two types of minimum wages:
- The Common Minimum Wage – Set at VND 2,340,000 (US$93), this applies primarily to state-owned organizations and enterprises. It also serves as the foundation for calculating social insurance contributions across all sectors, which are capped at 20 times the common minimum wage.
- The Regional Minimum Wage – This applies to private and foreign enterprises, varying across four economic regions based on cost of living and economic development levels.
Regional Minimum Wages in 2024
With the new wage adjustment, the monthly minimum wage across the four regions will be:
Region | 2022 (VND) | 2024 (VND) | Increase (VND) |
Region I | 4,680,000 | 4,960,000 | 280,800 |
Region II | 4,160,000 | 4,410,000 | 249,600 |
Region III | 3,640,000 | 3,860,000 | 218,400 |
Region IV | 3,250,000 | 3,450,000 | 195,000 |
Additionally, minimum hourly wage rates for 2024 are as follows:
- Region I – VND 23,800 (US$0.94)
- Region II – VND 21,200 (US$0.84)
- Region III – VND 18,600 (US$0.74)
- Region IV – VND 16,600 (US$0.66)
How Minimum Wages Affect Businesses and Employees
The 6% wage increase has wide-reaching implications for businesses and workers alike:
- For Businesses: The adjustment affects social insurance, health insurance, unemployment insurance, and trade union fee contributions. Companies operating in multiple regions must adhere to the highest applicable wage rate when determining salaries.
- For Employees: Those employed under labor contracts, including in foreign companies, are guaranteed at least the minimum wage, which ensures a fair standard of living and better worker protections.
Impact on Social Insurance Contributions
A key consequence of the wage hike is its impact on social insurance contributions. The statutory pay rate, used to calculate these contributions, will increase from VND 1,800,000 to VND 2,340,000, causing a rise in maximum social insurance salary caps as follows:
Insurance Type | Before (VND) | After (VND) |
Maximum Social Insurance Salary | 36,000,000 | 46,800,000 |
Maximum Health Insurance Salary | 36,000,000 | 46,800,000 |
Maximum Trade Union Fee Salary | 36,000,000 | 46,800,000 |
Maximum UI Salary (Region 1) | 93,600,000 | 99,200,000 |
Who is Affected by the Wage Increase?
The wage revision applies to all employees working under labor contracts in businesses, cooperatives, organizations, and households that hire workers. Foreign employers in Vietnam must also comply with these rates. For companies operating in industrial parks or export processing zones that span multiple regions, the highest minimum wage rate must be applied.
Balancing Business Interests and Worker Welfare
Vietnam’s minimum wage policies reflect a delicate balance between ensuring fair pay and maintaining an attractive investment climate. The Vietnam General Confederation of Labor initially advocated for a 6.48–7.3% increase, while the Vietnam Chamber of Commerce and Industry pushed for a 4.5–5% rise to reduce cost burdens on businesses. The final 6% increase represents a compromise that considers both perspectives.
Final Thoughts: What’s Next?
The July 1, 2024 wage adjustment is the first increase since 2022 and sets a precedent for further revisions as Vietnam’s economy grows. Businesses should assess their payroll structures to align with new regulations while employees can expect better financial security. With Vietnam emerging as a regional manufacturing powerhouse, fair wage policies are vital in attracting top talent and maintaining labor market stability. As wages rise, businesses must prepare for increased labor costs while reaping the benefits of a motivated workforce.