Vietnam joining the AEC will open up the country's businesses to increased competition in securing talent.
Ms. Tieu Yen Trinh, General Director of Talentnet Corporation
Vietnam's economy is now on the rebound. Although they may not be overly apparent, there have been many positive changes. The country's labor market has also witnessed positive signs thanks to the recovered economic dynamism.
Recruitment demands from organizations lifted in 2014, especially in Hi-Tech, Manufacturing and Retail, while other industries such as Fast Moving Consumer Goods (FMCG), Pharmaceuticals and Banking fluctuated slightly. Hiring demand increased among both foreign and large local companies. In the meantime, the trend of hiring local managers and executives has been increasing, as many Vietnamese have proven they are capable of taking on country manager positions at the affiliates of multinational companies (MNCs) in Vietnam. "Hot" functions in 2014 remained unchanged from previous years, being in Sales and Marketing.
According to the Mercer Total Remuneration Survey 2014, conducted among 473 organizations by Mercer and its associate, Talentnet, the average salary increase rate in 2014 at MNCs was 10.3 per cent while that of local companies was 9.7 per cent. Normally the gap in the salary increase rate and variable bonus between MNCs and large local companies is negligible, at around 0.5 - 1.5 per cent.
The highest salary increase rates were in Hi-Tech (11.4 per cent), Pharmaceuticals (11.1 per cent), and FMCG (10.7 per cent), which are three industries involved in meeting the daily basic demands of consumers. Non-Banking, Oil & Mining, and Real Estate had the lowest salary increase rates, at 6.8 per cent, 8.4 per cent and 9 per cent, respectively.
Regarding variable bonus, Banking, Pharmaceuticals and Non-Banking saw the highest while the lowest was in Hi-Tech, Real Estate, and Trading.
Pharmaceuticals therefore recorded both the highest salary increase rate and variable bonus increase rate in the labor market. On the other hand, Hi-Tech and Non-Banking had the highest salary payment - lowest variable bonus and lowest salary payment - highest bonus, respectively.
Vietnam is welcoming new waves of foreign investment, with the proportion of capital coming from Asian and Southeast Asian countries such as Japan, Thailand and Malaysia increasing significantly. Concurrently, Vietnamese enterprises are making plans to expand and develop their businesses around the region, in countries such as Myanmar, the Philippines and Cambodia. Trade will become more and more facilitative, especially as Vietnam officially joins the ASEAN Economic Community (AEC) in 2015.
In developing countries, where there is higher labor mobility and market flexibility compared to countries like Vietnam, workers have more occupational choice; talent is always scarce while demand among businesses are always high. Therefore, joining the AEC is seen as being a catalyst for both businesses and workers, creating interaction with external markets and resolving existing knots and difficulties.
So what benefits will Vietnamese workers receive from AEC membership as it turns Vietnam into an open market and lifts almost all barriers between businesses within ASEAN?
Firstly, it is clear that Vietnamese workers will not only have opportunities in Vietnam but also in regional markets. Secondly, Vietnamese workers will have a greater opportunity to interact with professionals in neighboring countries and at the same time enhance their experience and polish their skills. Thirdly, worker mobility, which is inherently not one of Vietnam's strong points, will be improved and enhanced considerably.
Meanwhile, Vietnamese businesses will benefit from this economic integration with regard to human resources (HR), as follows: (i) due to being an open market, human capital from neighboring countries will also find working opportunities in Vietnam, leading to an abundant workforce, (ii) labor supply will increase, with more variety and diversity, and (iii) businesses will have an ample choice of skilled and experienced candidates, bringing a refreshing change to the company.
Nevertheless, the AEC not only expands opportunities for businesses but also brings challenges. Many people are concerned that Vietnamese businesses will have to face "brain drain". Great people will leave, finding jobs at other companies with better policies and higher salaries. Businesses must therefore prepare with extra caution when Vietnam officially joins the AEC.
Preparations for regional integration
Expanding recruitment to foreign candidates can only be utilized most effectively if a business has standardized systems and processes in order to create an easily adaptable environment for any nationality or culture.
Communication and mental preparation for higher management levels, which are key subjects of a business regarding multicultural integration, are necessary. There should be a long-term program at companies in order for managers and leaders to enhance and equip themselves with knowledge, with "eye-opening" opportunities at the regional and international level. Innovative retention schemes are needed to retain talent amid fierce competition. On top of that, businesses should invest in their HR management and IT systems and have solid financial foundations and management systems, etc., to fully grasp their position when joining the AEC.
Businesses must clearly understand their strengths and weaknesses, their culture, and their expectations over recruitment demand to have proper HR planning and resourcing, as not every foreigner can work well in all positions.
To retain talent a business must fully understand the strategy and strengths of other firms and ascertain the strengths and competitive advantages of their own business in order to adopt justifiable employee retention policies.
Information regarding compensation and rewards for foreign candidates, compared to that for Vietnamese, in accordance with differences in living standards and cost of living, must be carefully researched through the many methods available, such as international salary survey companies, in order to find an appropriate salary rate while still attracting talent and delivering a clear and transparent message for candidates.
Working methods of foreign workers in neighboring countries must be analyzed, as well as their expectations while working in Vietnam, in order to create efficient resource allocation. Information regarding paperwork, labor laws for foreigners, working visas, etc., are also issues worth investigating.
The general tendency of advanced countries is to work and cooperate closely with a trusted partner or under advice from experts. Joining the AEC is not a trend; businesses have solid preparations and definite steps to take. Working with specialized consulting agencies will help businesses determine their needs and gain an awareness of the total cost of foreign labor and their contribution to the business. In addition, issues concerning procedures and information on labor laws, paperwork, administrative tasks, etc., must be acquired, as well as communication; what the strengths of the Vietnam market and the working environment are must be sufficiently imparted to both businesses and workers.
As such, it is evident that the AEC will open up new horizons regarding workforce, as labor supply will escalate and labor quality will also increase. However, the AEC will also present great challenges for businesses in talent retention. In order to "sail out to the big sea", businesses must first understand themselves, identify their strengths and points that need improvement regarding employment needs, and develop suitable HR strategies to maximize opportunities from the AEC while still ensuring their competitive advantage. Businesses must invest in HR management, improving training programs to expand the vision of their higher management levels when joining the AEC.