An in-depth analysis of Vietnam’s minimum wage standard system provides a comprehensive guide for companies entering the Vietnamese market. The article introduces in detail the latest minimum wage standards in the four types of regions in Vietnam, discusses the wage characteristics of major industries, reviews the changing trends of minimum wages in recent years, and predicts future trends based on economic development and inflation. Through systematic data analysis and professional insights, this article aims to help companies formulate reasonable compensation strategies to remain competitive in the Vietnamese labor market.

The latest minimum wage standards for various regions in Vietnam

Vietnam’s minimum wage standard system is based on regional differences. This approach originated from Government Decree No. 103/2012/NĐ-CP on October 17, 2012. The decree divides the country into four types of regions, taking into account factors such as the level of economic development and cost of living in each region to ensure that the minimum wage standard can adapt to the actual conditions of different regions.

According to Resolution No. 38/2022/NĐ-CP issued by the Vietnamese government on June 12, 2022, Vietnam has implemented a new minimum wage standard starting from January 1, 2023. The minimum wage standard in Region 1 is VND 4.68 million per month, which is mainly applicable to the core urban areas of Hanoi City and Ho Chi Minh City. These areas are the most developed economic regions in Vietnam and have the highest living costs, so they set the highest minimum wage standards.

The minimum wage standard in Region 2 is VND 4,160,000 per month. The applicable scope includes the suburbs of Hanoi City and Ho Chi Minh City, as well as important economic center cities, such as Da Nang City, Hai Phong City, Vinh Phuc City in Vinh Phuc Province, etc. Although these areas have similar levels of economic development, they are generally lower than those in Area 1, so the minimum wage standards are also lowered accordingly.

The minimum wage standard in Region 3 is VND 3,640,000 per month, which mainly covers provincial-level cities, county-level cities and some economically weak and developed counties. These areas are usually the economic centers of each province, but their overall development level is lower than that of Regions 1 and 2. The minimum wage standard for Region 4 is a minimum of 3.25 million VND per month, which applies to other counties and rural areas.

The significance is that Vietnam’s labor law stipulates that the wages of workers who have received vocational training are at least 7% higher than the minimum wage standard in their region. This provision is reflected in Labor Law No. 45/2019/QH14 on November 20, 2019, which aims to encourage workers to improve their skills while protecting the rights and interests of workers with certain skills.

The Vietnamese government usually adjusts the minimum wage standard every year based on factors such as the economic currency rate, inflation rate, and labor market supply and demand. However, due to the impact of the COVID-19 epidemic, the minimum wage standards in 2021 and 2022 have not been adjusted. This adjustment in 2023 is the first improvement after the epidemic, reflecting the Vietnamese government’s efforts in balancing economic recovery and protecting workers’ rights and interests.

When formulating salary strategies, companies should not only consider the minimum wage standards, but also pay attention to industry averages and local living costs. Complying with minimum wage standards is not only a legal requirement, but also an important manifestation of enterprises’ fulfillment of social responsibilities and maintaining the stability of labor relations. Companies that have a deep understanding of the Vietnamese market, a deep understanding of and strict compliance with these regulations will help establish a good corporate image locally and attract and retain outstanding talents.

Minimum wage standards for major industries in Vietnam

Vietnam does not set different minimum wage standards for specific industries, but adopts a unified regional minimum wage standard. However, different industries often form industry wage levels with minimum wage standards due to their characteristics and market needs. Here’s what’s sent in format:

Vietnam’s labor law system, especially Labor Law No. 45/2019/QH14, passed in 2019 and effective on January 1, 2021, has established a unified minimum wage standard framework for all industries. Article 91 of the law stipulates that the minimum wage refers to the minimum wage level paid for the simplest work under normal working conditions, which is necessary to ensure the minimum living needs of workers and their families. This regulation sets a basic wage floor for various industries.

Nonetheless, actual wage levels across industries tend to reach the minimum wage. Take manufacturing as an example. It is one of the pillar industries of Vietnam’s economy, and its wage levels generally meet the minimum standard. According to data from the General Bureau of Statistics of Vietnam, the average monthly salary in the manufacturing industry in 2022 is approximately VND7.8 million, which is far below the minimum wage standard. This reflects the labor demand and skills requirements of the industry, with companies offering additional wages to attract and retain talent.

The information technology (IT) industry is one of the fastest growing industries in Vietnam in recent years, and its salary levels are significantly higher than other industries. In major cities such as Hanoi or Ho Chi Minh City, a junior IT engineer’s monthly salary may reach VND10 million to VND15 million, while a senior engineer’s salary may exceed VND30,000,000. This high wage level reflects the scarcity of IT talents and the high value-added nature of the industry.

In the service industry, especially tourism and hospitality, although the base wage may be close to the minimum wage, it is often supplemented by various disadvantages and tipping systems. For example, although the basic salary of service staff working in high-end hotels may only be VND 5,000,000 to VND6,000,000, after adding service fees and tips, the actual income may be much higher. This salary structure reflects the special nature of the service industry and also provides employees with opportunities to increase their income.

Finance is another industry with high salary levels. Salaries for entry-level positions in banks, insurance and securities companies typically range from VND 8,000,000 to VND 12,000,000, while salaries for management positions may exceed VND 20,000,000. This reflects the high demand for professional knowledge and risk management capabilities in the financial industry.

Significantly, Decree No. 152/2020/ND-CP, which was required on October 12, 2021, stipulates the conditions for foreign factories to work in Vietnam. The decree requires companies hiring foreign factories to prove that local Vietnamese labor cannot meet spot demand. This indirectly drives up certain spot wage levels that require special skills or experience, especially in multinational or foreign-owned enterprises.

As a traditional important industry in Vietnam, its wages are usually low, often close to the minimum wage. However, with the improvement of agricultural modernization and refinement, the wages of some technology-intensive agricultural positions, such as agricultural engineers and agricultural technicians, are gradually increasing.

Although Vietnam has not considered setting different minimum wage standards for specific industries, each industry has formed different wage levels based on its own characteristics and market needs. When formulating salary strategies, companies need to comprehensively consider benchmark minimum wage standards, industry averages, employee skill requirements, and the company’s own ability to pay. At the same time, companies should also pay attention to the Vietnamese government’s industrial policy orientation, because key supported industries may attract more investment, thus pushing up wages in related industries.

Historical trends in minimum wage standards

The evolution of Vietnam’s minimum wage can be traced back to the early 1990s, when Vietnam began to implement the reform and opening up policy (“reform and opening up”, Vietnamese: Đổi Mới). In 1992, Vietnam established a minimum wage system in law for the first time, and the institutionalization of Vietnam’s labor market has begun. However, in the first stage, the minimum wage standard mainly applies to foreign-invested enterprises, and local enterprises have not yet fully completed this inclusion system.

The early 2000s were a turning point for Vietnam’s minimum wage system. In 2003, the Vietnamese government issued Decree No. 10/2003/NĐ-CP, which for the first time established a unified minimum wage standard for state-owned enterprises and pioneer enterprises. This initiative significantly increased the coverage of the minimum wage standard and laid the foundation for subsequent comprehensive implementation.

2006 is another milestone year. The Vietnamese government began to implement regionally differentiated minimum wage policies, dividing the country into different wage regions. This policy takes into account the differences in economic development levels and living costs among various regions, and reflects that the government pays more attention to actual conditions and flexibility when formulating minimum wage standards.

From 2008 to 2013, Vietnam experienced a period of rapid growth. During these six years, the minimum wage standard will exceed 20% on average annually. This rapid growth reflects Vietnam’s rapid economic development and the government’s efforts to reduce poverty. For example, in 2011, the minimum wage in Region 1 increased from 1.22 million VND to 1.8 million VND, with reinforcements as high as 47.5%.

From 2014 to 2019, the growth rate of the minimum wage standard has been reduced, but it still maintains a stable growth of about 10% per year. During this period, the Vietnamese government paid more attention to balancing economic growth and the protection of workers’ rights and interests. In 2016, Vietnam introduced a tripartite consultation mechanism for minimum wage adjustment for the first time, in which the government, employer representatives and trade union representatives jointly negotiate the adjustment range of the minimum wage. This establishment led to the further implementation and improvement of the coordination mechanism of Vietnam’s labor relations mechanism.

2020 is a special year in the development of Vietnam’s minimum wage standard. Affected by the COVID-19 epidemic, the Vietnamese government decided not to adjust the minimum wage standard in 2021. This is the first time there has been zero growth since 2008. The decision reflects the government’s efforts to balance the burden on businesses with workers’ rights amid downward pressure on the economy.

In 2022, the Vietnamese government resumed the adjustment of the minimum wage standard. According to Resolution No. 38/2022/NĐ-CP, starting from January 1, 2023, the minimum wage standard in each region will be increased by an average of 6%. The magnitude of this adjustment is not large, but it is of great significance to the economic recovery after the epidemic. It not only reflects the government’s determination to protect workers’ rights and interests, but also reflects the consideration of the enterprise’s affordability.

Looking at the historical trends of Vietnam’s minimum wage standards, we can observe several obvious characteristics:

• Overall, there is an upward trend: Since its implementation in 1992, Vietnam’s minimum wage standards have generally shown a continuous upward trend, reflecting Vietnam’s determination to continue economic growth and improve people’s livelihood.
• Growth has experienced a change from fast to slow: faster growth in the early period (especially in the period 2008-2013), and noticeable growth in the late period (after 2014), which reflects the gradual transition of Vietnam’s economy from a high-speed growth stage to a high-quality development stage.
• Continuous improvement of regional reform policies: The regional reform policy has been implemented since 2006. The current four types of regional divisions reflect the government’s increasing emphasis on adapting measures to local conditions when formulating minimum wage standards.
• The gradual improvement of the decision-making mechanism: from the initial unilateral decision-making by the government to the introduction of a tripartite consultation mechanism, it reflects the progress of Vietnam’s labor relations coordination mechanism.
• Sensitive response to the economic situation: For example, the adjustment will be suspended in 2021 due to the impact of the epidemic and the slight increase will be resumed in 2023, which shows the close connection between the adjustment of the minimum standard wage and the economic situation.

These trends not only reflect changes in Vietnam’s labor market, but also reflect Vietnam’s overall economic and social development trends. For companies investing or doing business in Vietnam, understanding these trends can help predict future labor cost changes and formulate more reasonable human resources strategies. At the same time, these trends also provide an important reference for us to understand the economic policy orientation of the Vietnamese government.

Forecast of future minimum wage standards

First of all, we need to make it clear that the prediction of future minimum wage standards must be based on a comprehensive analysis of Vietnam’s macroeconomic situation, government policy orientation, labor market changes, international economic environment and other factors. Let’s explore the possible impact of each of these key factors.

From a macroeconomic perspective, Vietnam has maintained stable growth economic momentum in recent years. Despite the impact of the COVID-19 epidemic, Vietnam is one of the very few countries to achieve positive growth in 2020. According to World Bank forecasts, Vietnam’s GDP is expected to remain around 6.5% from 2023 to 2025. This sustained economic growth will provide a solid foundation for raising the minimum wage. However, we also need to note that as Vietnam’s economy gradually moves towards the ranks of middle-income countries, its economy may now experience a certain degree of correction. That means future minimum wage increases are likely to be lower than the average over the past decade.

Government policy orientation is another key factor affecting the minimum wage standard. The Vietnamese government has been committed to improving people’s living standards and narrowing the gap between rich and poor. In the “Vietnam Social and Economic Development Strategy 2021-2030”, the government clearly stated the goal of “ensuring that workers’ wages are commensurate with the growth of labor productivity.” This shows that even in the event of economic recovery, the government will still maintain a minimum Adaptation of wage standards to increases. However, the government also needs to balance the protection of workers’ rights and interests with the maintenance of enterprises. Therefore, we expect that future adjustments to minimum wage standards will pay more attention to balance and gradualness.

Changes in the labor market will also have an impact on the minimum wage. Vietnam is in a demographic dividend period, but this expected advantage will begin to lift around 2035. As the proportion of labor force decreases and the industrial structure transforms towards an important direction of high added value, the labor market may experience structural changes, especially in terms of technical workers and highly skilled talents. This trend is likely to push overall wages higher, starting with upward pressure on the minimum wage.

Changes in the international economic environment cannot be ignored either. Factors such as the restructuring of global supply chains and trade protectionist tariffs may affect Vietnam’s foreign direct investment (FDI) inflows. If Vietnam can continue to attract foreign investment and maintain its position as a global manufacturing base, maintaining relative labor costs will become an important consideration. This could limit the rapid rise of the minimum wage in certain programming.

It is also important to take into account the rate of inflation. Vietnam’s inflation rate has been relatively stable in recent years, but it is still necessary to pay attention to the risk of imported inflation that may be brought about by global economic uncertainty. When the government adjusts the minimum wage standard, it will inevitably lead to an increase in the inflation rate to ensure that the actual purchasing power of workers does not decrease.

Based on the above analysis, we can make the following predictions about Vietnam’s minimum wage standard trends in the next 5-10 years:

• Overall trend: The minimum wage will continue its upward trend, but is aware it may be lower than the average over the past decade. It is expected that the annual average may fluctuate between 5% and 8%.
• Regional differences: The minimum wage gap between the four types of regions may gradually narrow. This is because the Vietnamese government is working hard to promote coordinated regional development and reduce economic gaps between regions.
• Frequency of adjustment: The government is expected to maintain the frequency of adjustment once a year, but does not rule out the possibility of taking temporary adjustment measures under special circumstances (such as economic scale or severe expansion).
• Industry impact: Although Vietnam currently adopts a unified regional minimum wage standard, it may consider introducing industry-differentiated minimum wage standards in the future to better reflect the productivity and profit levels of different industries.
• Comparison with neighboring countries: Vietnam may pay close attention to the minimum wage levels of neighboring countries (Thailand, Indonesia) to maintain its advantageous competition in labor-intensive industries.
• Social security system: Adjustments to the minimum wage may be more closely linked to adjustments to social security payment bases, unemployment insurance and other social security systems.
• Technological impact: With the development of automation and artificial intelligence technology, some low-skilled jobs may be replaced. This may push the government to increase investment in workers’ skills training and may lead to structural adjustments to the minimum wage standard.

It is important to note that these forecasts are based on currently available information and trend analysis. The actual implementation of adjustments to the minimum wage standard is affected by many unpredictable factors, such as changes in the global economic situation, major public health events, natural disasters, etc. , when formulating long-term strategies, companies should establish a flexible recruitment system that can be adjusted in a timely manner according to actual conditions.

In addition, companies should still pay close attention to the policy signals of the Vietnamese government. Vietnam usually discusses the third minimum wage adjustment plan for the following year in the quarter of each year and announces it before the end of the year. Timely tracking of this information will help companies better plan their human resources strategies.

Overall, while Vietnam’s minimum wage is likely to continue to rise in the future, be aware that it may be lowered. Enterprises should regard rising labor costs as a long-term trend. By improving production efficiency, strengthening employee training, optimizing process management, etc., enterprises should also realize that reasonable wage increases are not only necessary to fulfill social responsibilities, but also to improve employee motivation and It is an important means to reduce the churn rate and enhance the competitiveness of enterprises. In the rapidly changing global economic environment, only those companies that can balance short-term cost control and long-term sustainable development can achieve sustained success in the Vietnamese market.