September 2nd, 2016
Earlier this month, following minimum wage reviews in Vietnam and Cambodia, Vietnam’s National Wage Council proposed increasing the country’s regional minimum wage (RMW) for 2017 by 7.3%. This is the lowest level in nearly a decade because employers are seeking to keep payrolls low to help them compete on the international stage. Labor and management in Vietnam wants to increase to a modest rate out of fear that higher pay might drive foreign companies away.
However, this figure represents a boost for some employers, as labor groups had proposed an increase of 11% while the Vietnam Chamber of Commerce and Industry suggested just a 5-6.5%. According to specialists in labor laws, there are two major factors behind the constrained increase. One is the stability of Vietnam’s consumer price index (CPI). The other is that Vietnamese organizations realize that an increase will lead to a rise in other costs such as salary and compulsory unemployment insurance contributions which will hurt their ability to remain competitive with other low cost manufacturing centers.
Meanwhile, in neighboring Cambodia, talks are scheduled to begin this month to set the new minimum wage levels for 2017. There are calls to expand the country’s national minimum wage beyond the garment sectors, its key export earner and largest industrial employer and only sectors currently covered. The minimum wage there is currently $140 US a month and a final decision is due in October. The Free Trade Union of Workers of the Kingdom of Cambodia (FTUWKC) is seeking a rise to at least $171 US a month while other unions have yet to commit to a target. The growing calls for the national minimum wage to be applied across the board will ultimately be decided by the government and related partners. Stay updated with our latest news and country fact sheets.
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