What should enterprise do when the region-based minimum wage increases?

In accordance with the Decree No. 38/2022/ND-CP, the region-based minimum wage shall be adjusted with an increase of 6% from July 01, 2022. Enterprises must make some suitable adjustments in accordance with legal provisions when having changes in the region-based minimum wage.

1. Increase wages for the employees receiving region-based minimum wage

Article 90, Labor Code 2019 prescribes:

Article 90. Wages

1. Wage is a money amount which is paid by the employer to the employee as agreed upon for the latter to do a certain job, including job- or title-based wage amount, wage-based allowance, and other additional amounts.

2. The job- or title-based wage amount must not be lower than the minimum wage level.

Therefore, the minimum wage of employees is allowed to be equal to the region-based minimum wage of that region as prescribed by law.

On July 01, 2022, when the region-based minimum wage increases, enterprise must increase the employee's current wages in accordance with the increase in region-based minimum wage.

The increased wage amount must not be lower than the region-based minimum wage prescribed in the Decree No. 38/202/ND-CP as follows:

2. Increase the payment for monthly social insurance, health insurance, and unemployment insurance

In accordance with the guidance at Decision No. 595/QD-BHXH, employers must pay social insurance, health insurance, and unemployment insurance in a consistent percentage based on the wage fund for social insurance contribution for employees. In particulars:

With that, Point 2.6, Clause 2, Article 6 of the Decision 595 points out clearly that the monthly wage as the basis for payment of compulsory social insurance must not fall below the region-based minimum wage.

The minimum wage as the basis for payment of compulsory social insurance increases when the region-based minimum wage increases the next time.

Therefore, the monthly total payment of compulsory insurance shall increase significantly when the region-based minimum wage increases from July 01, 2022.

In the case that enterprises have paid the higher compulsory insurances such as social insurance, health insurance, or unemployment insurance than region-based minimum wage, there is no need for adjustment.
 

3. Increase in trade-union fee

In accordance with the Article 5 of the Decree No. 191/2013/ND-CP, the remittance level and basis of remitting trade-union are defined as follows:

The remittance level = 2% x Wage funds which are used as the basis for social insurance payments for employees

Within that, this wage fund shall be the total salaries of employees under objects payable social insurance in accordance with the law on social insurance.

Therefore, the wage levels which are used as the basis for social insurance payment for employees increase, the trade union fee also increase accordingly.

So, the increase in region-based minimum wage can change the monthly wage levels which are used as the basis for social insurance payments. This problem has indirect effects on the trade-union fee.

Accordingly, the increase in region-based minimum wage can cause an increase in the trade-union fees.

4. Increase wages in case of work suspension

Pursuant to the Article 99, Labor Code 2019, the enterprise must may the wage in case of work suspension as follows:

- If the suspension is due to the fault of the employer: Full wage as stated in the labor contract

- If the suspension is due to his/her fault: No wage

- if the suspension is due to other employees: The wage must not be lower than the minimum wage level;

- Power or water-related incidents, or due to natural disaster, fire, dangerous epidemic, enemy sabotage...

+ If the suspension period is 14 working days at most: The wage must not be lower than the minimum wage level

+ if the suspension period is longer than 14 working days: Not lower than the minimum wage level for the first 14 days, the two parties shall reach an agreement on wages paid in case of work suspension.

Together with the increase in region-based minimum wage from July 01, 2022, the wages in case of work suspension due to the fault of the employer or due to other reasons also increase.

5. Increase the minimum wage for employees assigned to perform other jobs

In accordance with Article 29 of the Labor Code 2019, when meeting with sudden difficulties, the employer may temporarily assign the employee to perform a job other than that stated in the labor contract. At the time of assignment, employees shall receive wages as follows:       

Article 29. Assignment of employees to perform jobs other than those stated in labor contracts

3. The employee who is assigned to perform a job other than that stated in the labor contract will receive a wage for the new job.  If the wage for the new job is lower than the wage paid under the labor contract, the employee shall be paid the wage under the labor contract for 30 working days.  The wage for the new job must be at least equal to 85% of the wage paid under the labor contract but must not be lower than the minimum wage

Therefore, when the employee who is assigned to perform a job other than that stated in the labor contract, the enterprise can pay the lower wage compared with the wage under the labor contract, with the condition that the employee shall be paid the wage under the labor contract for 30 days.

But the new wage of employees must not be lower than the minimum wage. Therefore, the enterprise must pay a higher wage for the employee who is assigned to perform jobs other than those stated in the labor contracts when the region-based minimum wage increases.