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Minimum wage to increase, insurance payments may decrease

Released at: 07:14, 11/09/2016

Minimum wage to increase, insurance payments may decrease

Photo: Duc Anh

Deputy PM agrees to average 7.3% minimum wage increase, with consideration to be given to reducing insurance payments.

by Minh Tuyet

Deputy Prime Minister Vuong Dinh Hue agreed with a Ministry of Labor, Invalids and Social Affairs (MoLISA) proposal to increase the 2017 minimum wage by an average of 7.3 per cent and asked the ministry to reduce social insurance payments from enterprises, at meeting of the Central Steering Board in Hanoi on September 7.

The National Wage Council therefore concluded its plan to increase the minimum wage from 7.1 per cent to 7.5 per cent in the four regions. In Region I the minimum wage will increase by VND250,000 ($11.2), or 7.1 per cent, and in Region II will increase by VND220,000 ($9.86), or 7.1 per cent. In Region III it will increase by VND200,000 ($8.96), or 7.4 per cent, and in Region IV by VND180,000 ($8.07), or 7.5 per cent. Overall, the minimum wage in the four regions will increase by an average of VND213,000 ($9.55), or 7.3 per cent.   

MoLISA is collecting opinions from other ministries and related agencies before submitting the proposal to the government.

At the meeting, Deputy Prime Minister Hue also asked related agencies to carefully review the impact of minimum wage increases on both workers and enterprises.

Deputy Minister of Labor, Invalids and Social Affairs Pham Minh Huan assessed that insurance payments (including health insurance, social insurance, and unemployment insurance) are too high, at 32.5 per cent of wages and allowances, in which workers pay 10.5 per cent and enterprises 22 per cent.

Many enterprises have proposed cutting their contribution to 18 per cent from 22 per cent, he said. The ministry is considering reducing insurance payment from enterprises by 0.5 per cent and is also considering reducing occupational accident insurance by 1 per cent.

Occupational accident insurance is excluded from the 32.5 per cent figure above and not all enterprises pay it. Those that do and face difficult business conditions will pay 1 per cent less, Mr. Huan explained.

Vietnam has applied new methods to calculate insurance payments from this year. Previously insurance payments were based on the minimum wage, but for this year and next year it will be based on wages and allowances in labor contracts. From 2018, payments will be based on wages, allowance and other additional payments in labor contracts.     

As this is the first year the new method has been applied, Mr. Huan is concerned that an increase to insurance would be a burden on enterprises.

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