INSIGHTS

The Draft Decree amending, supplementing several articles of several provisions of the Labor Code concerning salary

July 10, 2018 Labor & Employment

The Draft amends several provisions related to salary scales and tables, gradually reduces enterprise and labor norms and aims to abolish State intervention in the creation of salary scales and tables. Instead, the State shall manage by common principles and allow an enterprise independence in the creation and adjustment of salary scales and tables as well as labor norms and organization which are compatible with production and market principles.  Specifically:

  • For salary scales and tables, the Draft proposes an amendment of several principles in creating a salary scales and tables as specified in Article 7, Decree No.49/2013/ND-CP, specifically:

    1. As for the gap between two consecutive salary levels, the Draft provides two options:

     • Option 1: To abolish the provision of a 5% minimal gap between two consecutive salary levels.

     •Option 2: To retain the provision of a minimal gap between two consecutive salary levels, but decreasing the gap from 5% to 3%.

    2. As for the minimum salary rate for work or a job title that requires employees to go through training and apprenticeship, the Draft provides two options:

     • Option 1: To abolish the provision of a 7% minimal gap between the lowest salary rate for work or a job title that requires employees to go through training and apprenticeship and the minimum regional salary rate; companies will only need to ensure that the lowest salary rate for work or a job title that requires employees to go through training and apprenticeship shall be higher than the minimum regional salary rates prescribed by the Government.

     •Option 2: The minimal gap shall decrease from 7% to 5% between the lowest salary rate for work or a job title that requires employees to go through training and the minimum regional salary rates prescribed by the Government; this gap will only be applied to the elementary level and its equivalents upward.

    3. As for the salary rate for work or a job title which is heavy, hazardous or dangerous and work which involves especially heavy, hazardous or dangerous labor conditions, the Draft provides two options: 

     • Option 1: To abolish the provisions of a 5% – 7% minimal gap between the salary rates for work or a job title which involves heavy, hazardous or dangerous labor conditions (or for work or a job title for work which involves especially heavy, hazardous or dangerous labor conditions) and the salary rates for work or a job title of equivalent complexity but with normal labor conditions.

     •Option 2: To decrease the minimal gap from 5% down to 3% for the salary rate for work or a job title involving heavy, hazardous or dangerous labor conditions, or from 7% down to 5% for work or a job title involving especially heavy, hazardous or dangerous labor conditions compared to salary rates for work or a job title of equivalent complexity but with normal labor conditions.

    The above proposed amendments in the principles of creating salary scales and tables is to rectify an enterprises’ practical difficulties and obstacles encountered throughout the application process, specifically:

     • Principles for the gap between salary levels (minimum 5%) and between salary amounts of each specific job (jobs that require trained labor, jobs with heavy, hazardous, dangerous conditions, etc.), have greatly affected enterprises’ policies on salary and structure of salary scales and tables, and has been found not to be compatible with the market mechanism.

     Many enterprises create salary scales and tables by seniority (to ensure the minimum gap of 5%) which discourages retention of long-term employees, i.e. seniors receive a higher salary, and the insurance fees are also higher (with the same job, an enterprise has to pay employees of 15 – 20 years of seniority a salary and insurance amounts of approximately 2 – 3 times higher compared to new employees).  This phenomenon leads to enterprises unwilling to use senior employees, laying them off to employ new people.

  • As for the creating of labor norms as prescribed in Article 8, Decree No.49/2013/ND-CP, the Draft clarifies that the creation of labor norms is basically applied to the payment of salaries of employees who earn salaries by product:

    This proposed amendment is to match the regulations on the method of salary payment stipulated in the Labor Code and in Decree No.05/2015/ND-CP dated January 12, 2015. The 2012 Labor Code provided 03 methods of salary payment which consisted of payments by time, product and outsourcing; on that basis the Government provided details in Article 22 of Decree No.05/2015/ND-CP as follows:

     • Salary payment by time shall be based on the real working time of months, weeks, days, hours;

     • Salary payment by product shall be based on the labor norm and unit price of the assigned product;

     • Salary payment by outsourcing shall be based on quantity and the quality of the work and the time needed for completion.

    Therefore, in practice an enterprise only provides the labor norms for jobs earning salary by product.  For jobs earning salary by time the enterprise shall determine the scale of the job, and for jobs earning salary by outsourcing it shall be determined by the outsourcing norms.  Concurrently, Decree No.49/2013/ND-CP provides principles to create a common labor norm, which is not compatible with an enterprise’s methods of salary payment under the provisions of the 2012 Labor Code and Decree No.05/2015/ND-CP.  The current regulation makes it difficult for enterprises, because if they fail to create a labor norm applicable to all employees with different methods of salary payment, the enterprise shall be sanctioned.

  • Regarding enterprises employing fewer than 10 employees, the Draft proposes an exemption from several administrative procedures to facilitate these enterprises, specifically:

    1. Small enterprises shall be exempt from the procedure of submitting salary scales and tables and labor norms to the state labor management agencies at the district level where enterprises locate their production facilities.

    2. Small enterprises shall be exempt from the procedure of collecting the immediate higher-level trade union’s comments upon creating, amending, or supplementing the salary scales/tables and labor norms if the enterprise has no grassroots trade union.

    –   Written by LE & TRAN | Vietnam’s Premier Business Litigation Firm


    This insight is quoted from the Vietnam Labor Law Review (April – May 2018), you can download and read the full file of Vietnam Labor Law Review (April – May 2018) here.