HR

Vietnam’s Regional Labor Market: Labor Cost, Workforce Optimization and HR Strategy

Tra Mac

April 21, 2021

HR strategy – The labor market in Vietnam is increasingly changing in a synchronous and modern direction. However, this market still has weaknesses such as slow change of labor structure, underemployment, and imbalance of supply and demand of labor is quite large. In this article we will provide you with a brief of HR strategy for the Vietnam labor market.

Check out our related article: Vietnam Entry Procedure for Foreign Employees Amid the Pandemic

Overview of Vietnam’s lab market (Update till Feb 2021)

HR strategy in the “New normal”

According to forecasts, although the COVID-19 epidemic has been controlled in Vietnam, it is still complicated in the world and will continue to have negative effects on the labor market of Vietnam.

In the long term, the Ministry of Labor, War Invalids and Social Affairs has also consulted relevant agencies on Vietnam’s labor market development Draft project until 2030. The overall goal of the draft project is to implement solutions to support the development of the labor market. Thus, it creates a solid foundation for the synchronous and smooth construction and operation of the labor market. It also contributes to mobilizing, allocating, and using most effectively resources to promote socio-economic development.

The draft project outlines 6 specific objectives for supporting HR strategy:

1. Completing the legal corridor to create a driving force for the development of the labor market.

2. Create adequate, productive and good jobs for all men and women, including young people and people with disabilities. In which, the overall unemployment rate remains below 3%, the urban unemployment rate remains below 4%. The share of employment in the agricultural sector to the total employment will be below 30% by 2025 and below 20% by 2030. Annual labor productivity growth rate reaches at least 5% / year. The proportion of women in the total number of employees being employed is more than 48% / year.

3. A significant increase in the number of workers with skills relevant to the labor market needs to get good jobs and own businesses. Specifically, the rate of trained workers with diplomas and certificates by 2025 is more than 28% and by 2030 is more than 35%. The Skills pillar for indicators in the World Economic Forum’s (WEF) Global Competitiveness 4.0 ranking is in the top 60 countries (group 60) in 2025 and in the top 40 countries in year 2030.

4. To significantly reduce the proportion of young people who are unemployed, not attending school or training. Accordingly, the rate of young people aged 15-24 without training and vocational education will be below 25% by 2025, less than 20% by 2030. Unemployment rate for young people aged 15-24 years is under 6% per year. 2025, less than 5% by 2030

5. Ensure a safe working environment for all workers, especially those working in the informal sector.

6. To invest in and develop the national labor market information system and organize job transactions. Accordingly, by 2025, 80% and by 2030 more than 90% of students and graduates from training institutions will receive vocational guidance. By 2025, 40% and by 2030, there are 45% systematic employees

2021 forecasting

  • Domestic serving sector being the fastest recovery
  • Recruitment demand for e-commerce and information technology industries continues to increase 
  • Labor demand for the hotel and accommodation sector may decrease

With the most optimistic scenario is that if the Covid -19 situation is controlled, many businesses begin to promote their production and business activities, experts say that they should focus on industries serving the domestic market because recovery could be faster.

According to the analysis of Ms. Nguyen Thi Lan Huong, currently the market is mainly divided into 3 sectors of industries, including: domestic serving; joint ventures, associates serving; international markets serving.

From these 3 sectors, Ms. Huong predicts that the domestic serving sector is the one that can recover at a faster rate.

“I take the example of the upcoming Lunar New Year, if there is a stronger third wave of Covid -19 pandemic, the problem of travel may be limited, but traditionally, the demand for transporting passengers during the Tet holiday will definitely remain. Besides, according to statistics, from 2019 up to now, construction and processing will still increase to serve domestic demand. This completely gives us the expectation on the recovery of the domestic service industry” said Ms. Huong.

Particularly for the group of industries serving the international market, this time, Ms. Huong said that forecasts for 2021 have not seen any bright spots. “Temporarily, how to work together with domestic enterprises to stabilize the domestic situation, wait for the opportunity for the international labor market to open, we will continue”, Ms. Huong said.

As a labor market connector, Mr. Vu Quang Thanh agrees when he thinks that, in the coming time, activities in the domestic industry, activities for holidays and Tet will have better signals. . In which, the trend of recruiting employees in the fields of service trade, sales, business … will increase.

In addition, the group of e-commerce and information technology industries continues to increase recruitment demand and is expected to explode in the coming time. On the contrary, the labor demand for the hotel and accommodation sector is not going to change much or even decrease compared to the same period of last year.


HR strategy 

Wages and salaries

Vietnam Average Monthly Wages

The HR strategy depends much on Government decrees and tax and payroll strategies. Accordingly, a decree issued by the Vietnam government provides a minimum wage/salary applicable to all or any employers who hire employees under employment contracts from time to time. In consistent with that, the employers are required to pay a salary not less than the minimum salary level applicable in their region for the untrained employees and must be a minimum of 7% above the regional minimum salary for trained employees.

To Vietnam’s General Statistics Office, the typical monthly salary in Vietnam is VND 4232.55 Thousand/Month from 2007 until 2018. Then reaching a high of all time at VND 5.788 Thousand/Month within the half-moon of the year 2018 within the country.

ActualPreviousHighestLowestDatesUnitFrequency
5622.05788.05788.01399.02007 – 2018VND Thousand/MonthQuarterly

Currently, there are four regional minimum salary levels applicable to employers, starting from VND4,181,000 (the lowest level) to VND10,825,600 (the highest level) per month, counting on the locality.

According to a study by VietnamWorks, a recruitment company in Vietnam, these are the very best average salaries in Vietnam.

Cities/ProvincesAverage monthly salary (US$)
Ho Chi Minh City456
Da Nang452
Binh Duong444
Hanoi407
(According to Vietnam Briefing – Labor Market Trends In Vietnam)

PAYE & National Insurance Contributions

Vietnam tax law sets out the obligations of income taxpayers in terms of resident or non-resident status, no matter nationality. Therefore, the idea of taxation of employment income applies equally to foreign nationals working in Vietnam and also who work abroad. Including that, you must provide insurance for your employees, and must provide regular health checks as part of your new HR strategy.

Rate of taxation on employment income

The tax rates are progressive, based on the employee’s income. The scale of the progressive tax rates on each portion of income is as follows:

  • Up to VND5 million: 5%.
  • Above VND5 million to VND10 million: 10%.
  • Above VND10 million to VND18 million: 15%.
  • Above VND18 million to VND32 million: 20%.
  • Above VND32 million to VND52 million: 25%.
  • Above VND52 million to VND80 million: 30%.
  • Above VND80 million: 35%.

Workforce optimization 

Northern

Investors fixing in Hanoi should assess their needs and conduct HR due diligence to understand the power of an area labor pool to satisfy their needs.

Companies that are unable to find skill sets that match their requirements must factor in the cost to train employees into their operating models.

If you seek to outsource your training to vocational institutions, you should vet these institutions closely and situate operations within close proximity to make sure that training meets the company’s needs.

Southern

Vietnam’s southern labor pools are more diversified than their northern counterparts. Investment in services and a wider range of producing provides access to more niche talents than within the north. Thus, competition and recruitment demand in southern provinces are higher in comparison to the northern and central provinces.

Ho Chi Minh City’s status as Vietnam’s commercial capital helps it to draw in a gentle supply of workers for a good range of fields. 

On average, employers in Ho Chi Minh City receive a mean of 10 more applications for open positions than similar positions in Binh Duong. 

Professional services, IT, and hospitality are key labor pools that have seen significant growth within the last decade.

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