Recommended actions
Companies should implement a plan to recalculate compulsory insurance premiums, as well as trade union dues and fees, to comply with Decree No. 73.
For full compliance with Decree No. 74, companies may also be required to review and update labor agreements, policies concerning salaries and adjust unemployment insurance premiums for employees.
Please do not hesitate to contact us if you require further analysis on the impacts of the new GMW and RMW according to Decree No. 73 and Decree No. 74.
In more detail
1. GMW change in accordance with Decree No. 73
Pursuant to Decree No. 73, the GMW increased from VND 1,800,000 (approx. USD 78) to VND 2,340,000 (approx. USD 102), effective from 1 July 2023.
The GMW applies to the calculation of salaries for individuals working in the state sector, including cadres, civil servants, public employees, and employees working under labor contracts for state agencies and the armed forces.
However, employers and employees in the private sector will also be affected by this change, as the GMW is used to calculate the following:
| |
Items |
Explanation |
| (i) |
The capped salary for the contribution of social insurance and health insurance premiums by both employers and employees |
The capped salary of each employee used to calculate social and health insurance premiums is set at 20 times the GMW |
| (ii) |
The capped salary used for calculation of trade union fees contributed to by employers |
The total trade union fees contributed to by an employer must be 2% of the employer's salary fund used for the contribution of social insurance |
| (iii) |
The capped contribution of trade union dues contributed to by employees |
The capped contribution of monthly trade union dues paid by employees is set at 10% of the GMW |
Therefore, the increase of the GMW may correspondingly result in an increase of labor costs in the private sector, in relation to statutory social and health insurance premiums, as well as trade union fees contributed by employers and trade union dues contributed by employees.
2. RMW change in accordance with Decree No. 74
According to Decree No. 74, the RMW has been increased by approximately 6%, specifically as follows:
- Region 1: VND 4,960,000 (approx. USD 216) / month; VND 23,800 (approx. USD 1.03) / hour
- Region 2: VND 4,410,000 (approx. USD 192) / month; VND 21,200 (approx. USD 0.92) / hour
- Region 3: VND 3,860,000 (approx. USD 168) / month; VND 18,600 (approx. USD 0.81) / hour
- Region 4: VND 3,450,000 (approx. USD 150) / month; VND 16,600 (approx. USD 0.68) / hour
According to Decree No. 74, existing commitments or agreements on salary payments in labor contracts, collective labor agreements, or other regulations / policies of the companies, which are more favorable for employees, will still continue being implemented, unless otherwise agreed upon by the parties.
The salary used as the basis for unemployment insurance payment is capped at 20 times the RMW. Thus, the capped salary for unemployment insurance payment will also increase according to the increase of the RMW. Therefore, the employer may also have to adjust unemployment insurance premiums in light of the new RMW to ensure regulatory compliance and the rights of its employees.
