Minimum wage hike: workers eager, employers not so much

Nhabe, a garment maker with 15,000 workers, expects labor costs to rise by at least 10 percent if minimum wages rise by 5 percent.

Huynh Thi Thu Cuc, head of its labor union, said the minimum basic salary at the company went up to VND5 million following the 5.7 percent hike in 2020.

Nhabe usually pays 10 percent more than the prescribed minimum wage.

It also increased overtime and others by 6 percent, which pushed its salary costs up by hundreds of billions of dong.

But the company raised salaries for everyone, not just the lowest-paid workers, Cuc added.

A worker of Nhabe Garment Corporation. Photo by VnExpress/An Phuong

Dao Quoc Cuong, administrative head of Juki Vietnam, a machinery maker with a plant in HCMC’s District 7, said the minimum wage hike would be a financial burden since the company would be hard-pressed to find funds.

Business has started to recover, but not enough to offset the losses caused by Covid-19 last year, he said.

If average pay rises by VND500,000, its annual salary costs would increase by VND7.2 billion, he said.

In theory, the company does not have to give a raise to workers not at the minimum wage level but that would cause discontent and everyone would quit, he said.

"Our factory is forced to raise wages and try to find a way to manage later".

The Research Center for Employment Relations said not adjusting wages, since they are already mostly higher than minimum, would be the best option for companies.

This is because they have more control over when to make wage adjustments and are not affected by the annual increase.

Employees at work in Juki Vietnam's factory, HCMC's District 7. Photo by VnExpress/An Phuong

But Nguyen Vo Minh Thu, deputy head of the HCMC Export Processing and Industrial Zones Authority (HEPZA), said most businesses would opt to hike all employees’ wages, and so even a minimum wage increase of 5 percent would put them under financial pressure.

Truong Tien, vice chairman of the HCMC Food and Foodstuff Association, pointed out that a hike in wages would drive the prices of consumer goods and inflation up.

Companies could also cut their payroll to reduce costs, which is more likely since they could make the most out of remaining employees following the hike in overtime cap last month.

But Nguyen Viet Cuong, deputy head of the Mekong Development Research Institute, said raising the minimum wage would only affect businesses in the short term, and they could gradually adjust to it.

Companies tend to reduce working hours to keep the payroll unchanged, he said.

Minimum wage hikes, especially at this time, will prove beneficial for low-wage workers, most of whom have been struggling because of the pandemic.

The ratio of workers earning below minimum wage jumped from 5 percent in 2019 to 7.8 percent in 2020.

Cuong also exhorted the government to raise the minimum wage to help employees cope with inflation and surging living costs.