Vietnam’s labor market
Vietnam’s workforce is estimated at around 42 million of which around 45% are younger than 35 years of age. The labor force is growing an average of 3.5 – 4% a year – faster than the average population growth of 1.4%. Every year, 1.3-1.5 million new workers enter the market. The trend of shifting labor from agriculture to industry and service continues although the pace remains slow.
Vietnam is well-known for a disciplined, hard-working, and fast-learning population. Traditions emphasizing learning and respect for authority as well as low wages and a high adult literacy rate are often cited by investors as among one of the most attractive aspects of the country’s investment environment. The World Value Survey confirms the unusual willingness to work hard of Vietnamese workers. According to the survey, many respondents in Vietnam declare that work is an important part of their lives, while only 7 percent of Vietnamese respondents see leisure as an important part of their life, a remarkably low percentage even by the standards of other hard-working societies such as Japan (40%) or the United States (43%).
Although the adult literacy rate is high – estimated at 93%, the number of professionally trained workers (including university, junior college and vocational school graduates) is still small. In 2001, the trained workforce accounted for only around 20% of the total working population. Furthermore, there is a severe imbalance between the ratio of university and junior college graduates on the one hand and vocational trainees on the other hand.
Foreign investors do not see the shortage of skilled labor as a hindrance to their business in Vietnam as Vietnamese workers are very fast-learning. The time and cost needed for worker training in Vietnam is often shorter and lower than some other countries. Intel would not have invested more than US$ 300 million in Vietnam if they saw the shortage of skilled labor as a problem.
The average wage in Vietnam, based on the Vietnam Household Living Standards Survey (VHLSS) 2004, was about 824,000 dong per month, or roughly 55 dollars. This figure was computed over both salaried workers and casual laborers, including the value of in-kind benefits. Although the figure is admittedly crude; for instance, in-kind benefits are most likely under-estimated and not highly precise, it confirms that labor is cheaper in Vietnam than in neighboring countries.
Wages in foreign invested companies are often higher than in domestic enterprises operating in the same sectors. According to a report by MPI, the average wage of a laborer in the foreign direct investment sector in 2004 was around 75 to 80 dollars per month, the average salary of an engineer is about 220 to 250 dollars, and that of an administrative officer is close to 500 dollars.
Priority for Vietnamese Labor
Recruitment and Work Permit
Holidays and Vacations
Employers must pay 2% of an employee’s salary or wages to an authorized health insurance company for health insurance benefits, and the employee must pay 1% for the same.
Both Vietnamese and foreign invested enterprises must pay an amount equal to 15% of the wages and salaries of its Vietnamese employees to the social insurance fund. Of this amount, 10% is paid to the local labor office for employment benefits and the other 5% is paid to a social insurance fund established by the enterprise and jointly administered by the representatives of the enterprise. This fund is used to pay employee benefits related to sickness, work-related accidents, and occupational diseases as well as for maternity leave and benefits, child care and funeral expenses of workers who die during their term of employment at the enterprise. Foreign workers are exempt from payment to the social insurance fund.
Employers are responsible for withholding 5% of each employee’s salary and paying such amount on their behalf to the local social insurance fund. This fund is used for 1) old age benefits, 2) benefits for those who are permanently disabled through work-related accidents or sickness, and 3) burial expenses related to the first two categories.
Enterprises may not hire workers under 15 years old; they may hire workers younger than 18 years of age but as junior workers and in certain occupations only. Persons under 15 years of age may only be hired to work in a number of trades permitted by the Ministry of Labor, War Invalids and Social Affairs. When hiring a worker younger than 15 years of age, an enterprise must obtain the permission of the parents and in the case of workers younger than 18 years of age, follow a slightly reduced schedule of work hours.
The general manager of any foreign invested enterprise must also sign a collective labor agreement with the workers no later than six months after commencement of operations. Along with other issues agreed to between management and the workers, this collective agreement must include items such as the salary for each type of occupation, working conditions, labor protection, collective welfare and social insurance. The agreement is valid for a minimum of one year and a maximum of three years.
By law, workers’ contracts may be terminated in cases of failure to carry out their tasks, breach of discipline (for example, absence from work for five days a month or 20 days a year without valid reasons) or other misconduct, or serious injury or illness. Companies may also dismiss employees because of financial problems at the company or the addition of technology that makes workers’ jobs obsolete.
The length of notice for termination is specified in the individual labor contract. The minimum length is 30 days for definite labor contracts, 45 days for indefinite labor contracts and 3 days for project-based or seasonal contracts. A dismissed worker may appeal to the local labor agency for reinstatement. A retrenchment allowance must be paid.
Trade Unions and Labor Disputes
Labor laws give workers the right to establish and join trade unions as well as the right to strike. However, strikes are set forth as being a last resort after negotiations to settle grievances through established councils of arbitration have failed, although in practice this appears unlikely to be fruitful.
When labor disputes arise, the two parties should first arbitrate either through a conciliation council composed of equal numbers of representatives from both sides and presided over by the Minister of Labor, War Invalids and Social Affairs, or through a council appointed and presided over by the same Minister. If the arbitration fails to reach settlement or the arbitration award is regarded as unsatisfactory, the employee has the right to sue in front of the court for settlement or to go on strike. Strikes are considered to be legal when:
- they result from a collective labor dispute and are within the scope of labor;
- they are carried out by the enterprise’s employees and within the enterprise;
- the collective of employees does not accept the decision of the provincial labor arbitration or lodges an appeal to the court;
- they comply with the strike procedures stipulated by the Ministry of Labor, War Invalids and Social affairs;
- they are not included in the list of businesses for which employees are not allowed to go on strike as stipulated by the government; and
- they do not violate a decision by the Prime Minister on the postponement of the strike.
The law also prescribes clearly the formalities for preparation of strikes, as well as the activities which are forbidden before, during and after the strike.
Strikes have been mainly because of low wages and delayed payment of wages and bonuses, more shifts and/or longer shifts illegally imposed by employers, harsh treatment of workers by employers or foreign technicians/foremen, and failure to provide social and health insurance for workers. However, some strikes have been considered illegal.
Cr. http://www.vietnam-ustrade.org, 123rf