Factories continue to cut workforce as orders remain elusive

F&P Company, which manufactures electronic components at its plant in the Tan Thuan Export Processing Zone in Ho Chi Minh City’s District 7, will not renew the labor contracts of some 80 workers.

Their contracts expire in the next two to four months, and it has furloughed them until then and pays their basic salary.

Tran Kim Phuong, 25, said the company has told her to stay at home, but would pay her basic salary of VND6 million (US$254) till April.

People look at job notices at the Tan Thuan Export Processing Zone in HCMC. Photo by VnExpress/Le Tuyet

She and the others have applied for new jobs in the past week but are yet to get a response, she said.

With orders down by 70% from normal, R.L Vietnam Company, which makes leather shoes in the Linh Trung II Export Processing Zone in Thu Duc City, has had to lay off more than 2,000 employees whose contracts were ending.

Late last year too it had sacked workers due to shortage of orders. None of them get any compensation.

"Currently the company only has workers with long-term contracts, but we don’t know what will happen in future," a trade union spokesperson said.

The workforce has halved to 3,000, many of whom are underemployed now. No one works on Friday and Saturday.

The company has been trying to find new customers without much success.

The Ho Chi Minh City Social Security said in the first two months of this year the number of workers at businesses has plummeted by more than 34,000, but it has not updated the list to include another 2,358 laid off by Taiwanese shoemaker Pou Yuen Vietnam.

According to the city Employment Service Center, in the period over 16,300 people have applied for unemployment benefits and expects the number to surge to 140,000 over the course of this year.

The number of workers at Pou Yuen factory has decreased sharply since the Covid outbreak began. Photo by VnExpress/Thanh Nguyen

Nguyen Van Lam, deputy director of the city Department of Labor, Invalids and Social Affairs, said there is no problem to overall labor situation in the city though textile and garment, footwear and woodwork firms receive fewer orders due to the difficult global economic situation.

Industry associations expect orders to start stabilizing gradually in June or July.

Phan Thi Thanh Xuan, vice president of the Vietnam Leather, Footwear and Handbag Association, said the industry, which comprises more than 2,000 businesses and 1.5 million workers, has seen orders decline by 30%, and so factories have to pare their payrolls.

But she also warned that the layoffs would cause labor shortages at businesses when order books recover.

According to the Vietnam General Confederation of Labor, nearly 547,000 employees at 1,300 enterprises had their working hours reduced or lost their jobs between last September and January.

Workers at foreign-owned firms, mainly in the garment and textile, footwear and wood processing industries in the south, accounted for 75% of the number.