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New regulations put more difficulties for FIEs
The Government has asked foreign invested enterprises (FIEs) to put 1% of the total wage fund to the labour union fund. This is believed to put more difficulties for FIEs in the context of the economic growth slowdown.
Canon Vietnam said that the labour cost in Vietnam has been increasing. In 2000 when Canon planned its investment in Vietnam, the set minimum salary was VND 210,000 a month, while companies were exempted from labour union fee as a part of the policy on encouraging foreign investment.
However, the minimum wage has increased while the collection of labour union fee has been resumed, and the unemployment insurance fee (1% of the wage) will be applied as of early 2009. The labour cost of Canon has increased by six fold in the last six years. Ogiwara Tadayuki, Head of the Planning Division under Canon, said that with the labour cost on the increase, Vietnam’s attractiveness as an investment destination will be lessened in the eyes of foreign investors.
Every change of the policies relating to labourers raises questions about the changes in the production cost of enterprises. In October 2008, when the new policy on minimum wage applied as of January 1, 2009 was announced. Phung Quang Huy, Head of the Job Service Office under the Vietnam Chamber of Commerce and Industry, estimated that the input cost of enterprises would increase by 1.3-1.7%, noting that this would be a significant figure for the small enterprises which use big numbers of workers.
Most recently in the official press conference on announcing the unemployment insurance policy, Huy said that businesses’ expenses will not increase considerably when they have to pay 1% of the total wage fund to the unemployment insurance fund. However, when talking with the press on the sideline of the press conference, Huy admitted that more expenses at this moment would burden businesses.
Associations have sent petitions to the Government asking for the delay of the implementation of the regulations on minimum wages until June 2009. However, the proposal has not been accepted.
Analysts these days are talking about the wave of labour dismissal due to the impacts of the economic recession and the high labour cost. In fact, some enterprises have officially announced the plan to cut the domestic labour force.
Canon has cut 2,000 jobs; FPT Group has cut 10% of their labour force (1,000 employees). A lot of footwear and garment companies are now on the verge of bankruptcy due to the lack of orders. In the southern province of Binh Duong, 43 enterprises and 10,000 labourers do not have jobs because of no orders.
However, the analysts have also pointed out that the current situation is the consequence of the policy on investment encouragement by the low wage. With the policy, industrial zones have been fully occupied by enterprises which use many labourers.
In the latest news, the Government has allowed enterprises to owe the labour union and unemployment insurance fee of 2% of wage fund until June 2009 (enterprises don’t have to pay interests). They will have to pay the fees after June.
Dien dan DN
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