Vietnam: Higher Minimum Wage, Overtime Cap for Workers

331

One of the largest emerging talent pools, with over 90 million people, is found in Vietnam. The median age of the country’s population is under the age of 30, a benefit considering most markets are facing challenges related to an aging workforce. That said, Vietnam has a very small labor pool which is highly technologically skilled labor pool. This is because many young Vietnamese workers are now graduating from internationally accredited universities.

One time talent sourcing behemoths, such as China and India, are having difficulties adapting to a changing philosophy in talent sourcing strategy. Conversely, Vietnam is excelling and moving towards greater efficiency. However, many opportunities for improvement continue to hold Vietnam back in the contingent workforce arena. Businesses are no longer simply considering the base wage costs when seeking markets from which to source talent.

“Business leaders are paying more attention to talent shortages, particularly the potential for a shrinking workforce due to an aging population. Rising in importance is a population’s English proficiency, given the increased costs that result when proficiency is low. These shifting priorities have resulted in major swings among the most optimal markets for businesses seeking to use a contingent workforce,” said Kate Donovan, Senior Vice President of ManpowerGroup Solutions.

While the minimum wage in Vietnam has increased in 2015, minimum monthly salaries for Vietnamese workers are still relatively low compared to other countries in Southeast Asia, such as Indonesia, Thailand and the Philippines. Vietnam features more relaxed restrictions than other countries in the APAC region such as Singapore, Japan and China, though it is a far less mature market. In fact, cost efficiency is the only metric in the ManpowerGroup Solutions Contingent Workforce Index (CWI) where Vietnam was not ranked in the bottom five markets in the APAC region for 2015. Engagement strategies should include accommodations for language proficiency, which also affected Vietnam’s rankings overall with regards to the CWI.

Where regulations and productivity are concerned, Vietnam has strict overtime caps for employers which negatively affect both metrics measured in the CWI. The overtime caps will likely hinder employers’ abilities to meet their productivity and sales goals. Some have suggested that any overtime hours required by employers should be determined by agreements between the employers and workers. The Vietnamese Ministry of Labor, Invalids and Social Affairs has continued to decline proposals to extend the maximum overtime working hours for workers, citing the health of local workers amongst other concerns. As engagement contracts for Vietnamese workers are also limited to 72 months, careful consideration should be given while planning and executing talent engagement strategies.

Regarding workforce cost efficiency, Vietnam ranked fourth out of fourteen countries in the CWI for the APAC region. Comparable to India, Vietnamese workers earn the lowest minimum wages. This market has both wages which are below the regional average and the lowest manufacturing wages in the region. Additionally, no overtime premium requirements, and only partial parity requirements, may attract some employers. In fact, Vietnam is gaining popularity for the sourcing of IT talent as an alternative to India. However, careful consideration should be given when assessing a strategy to engage Vietnamese workers, as the employer taxes in Vietnam are the highest in the region.