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Vietnam Today

Salary increase a burden on enterprises

Released at: 16:13, 24/09/2015

Salary increase a burden on enterprises

Conference told proposed 12.4% increase would put a lot of companies under pressure, especially those in labor-intensive industries.

by Hoai An

If the Prime Minister approves a proposal to increase the minimum salary by 12.4 per cent, enterprises say, then the commensurate increase in social insurance should be delayed to give them some breathing space.

At a conference on issues in institutional reform and integration and enhancing the competitiveness of enterprises in the new context, held by the Vietnam Chamber of Commerce and Industry (VCCI) on September 24 in Ho Chi Minh City, Chairman of the Saigon Garmex JSC, Mr. Le Quang Hung, said that the company must spend about VND36 billion ($1.6 million) per year on social insurance, health insurance, and union fees. If the minimum wage rises by 12.4 per cent this amount would increase by VND5 billion ($222,000) annually. Meanwhile, the company is unable to increase the price of its products in markets such as Europe and Japan due to the economic circumstances. “Not to mention the possibility of electricity prices rising, which will also force us to think about how to grow,” Mr Hung said.

VCCI Chairman Vu Tien Loc told the gathering that the National Wage Council approved an increase rate of 12.4 per cent to the minimum wage for 2016 and this will increase other payments such as social insurance and health insurance. As the Prime Minister is yet to approve the increase, he added, businesses are still able to lobby the government and complain that the increase is too high.

Within the framework of the conference a number of business representatives and associations also reflected on problems such as administrative procedures, which are still creating difficulties and obstacles to doing business in Vietnam.

According to a representative from the Ho Chi Minh City Export Processing Zone Association, businesses are not afraid of the challenges posed by integration but Vietnam seems to be turning opportunities into challenges. For example, many new laws have been enacted but accompanying decrees and circulars for implementation are still to come.

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