Analysis on the Decree No. 38/2022/ND-CP prescribing minimum wage levels and notes for enteprises

On June 12, 2022, the Government issues the Decree No. 38/2022/ND-CP prescribing the region-based minimum wages paid to employees working under employment contracts. 

This Decree takes effect on July 01, 2022, with a number of important notes for enterprises as follows:

1. Increase the region-based minimum wage levels from July 01, 2022

1.1. Monthly region-based minimum wages

Clause 1, Article 3, the Decree 38/2022 prescribes the monthly region-based minimum wages in 04 regions as follows:

Unit: VND/Month

The monthly region-based minimum wage levels in accordance with the Decree 38/2022 increase by 6% on average from VND 180,000 - 260,000 compared with current region-based minimum wage levels.

1.2 Hourly minimum wage levels

This is the new regulation that is implemented in accordance with the regulations prescribed in the Labor Code 2019 on hourly minimum wage.

Hourly minimum wage levels are defined on the equivalent conversion methods with the monthly region-based minimum wage and standard working hours under the regulations of the Labor Code.

Accordingly, the hourly minimum wage level is the minimum basis for agreement and payment for employees in the form of hourly wage payment, ensure the job- or title-based wage amount within one hour and finish the agree on works but must not be lower than the hourly minimum wage level.

The hourly minimum wage levels are applied from July 01, 2022, as follows:

Note:

- An enterprise shall apply the region-based minimum wage level prescribed for the locality where it operates.

- An employer has units or branches in localities for which different minimum wage levels are prescribed, each unit or branch shall apply the minimum wage level prescribed for the locality where it operates.

- Enterprises in industrial parks or export processing zones in localities for which different region-based minimum wage levels are prescribed, the highest region-based minimum wage level shall be applied.

- For enterprises operating in the locality which is renamed or divided, the region-based minimum wage level prescribed for such locality before it is renamed or divided.

- For enterprises operating in a locality newly established from one or more than one locality for which different region-based minimum wage levels are prescribed, the highest region-based minimum wage level shall be applied.

- For enterprises operating in a locality being the provincial-cities established from one/many regions in Region IV, the region-based minimum wage levels of Region III are applied. 

2. No regulations be at least 7% higher than the relevant region-based minimum wage level for employees performing jobs that require trained employees

Currently, Point b, Clause 1, Article 5 of the Decree No. 90/2019/ND-CP prescribes that employees performing jobs that require trained employees be at least 7% higher than the relevant region-based minimum wage level.

However, the Decree No. 90/2019/ND-CP shall be ineffective from July 01, 2022, when the Decree No. 38/2022/ND-CP takes effect.

Accordingly, the Decree No. 38/2022/ND-CP prescribes that region-based minimum wage is the lowest level for employers to negotiate and pay wage for employees and there is No regulations be at least 7% higher than the relevant region-based minimum wage level for employees performing jobs which require trained employees.

However, at this time, enterprises must be more careful about this problem because:

The Decree No. 38/2022/ND-CP has no regulations on the above problem, but other effective documents point out clearly that the employees performing jobs that require trained employees be at least 7% higher than (Sub-point 2.6, Article 6, Decision No. 595/QD-BHXH).

[LuatVietnam’s recommendations]

Enterprises should pay at least 107% of region-based minimum wage levels for employees performing jobs that require trained employees to avoid legal risks to the time that all the legal regulations on this problem are unified.

3. Adjust localities in applying region-based minimum wage levels

Besides the increase in minimum wage levels, the Decree No. 38/2022/ND-CP also changes a number of regions for applying the region-based minimum wage levels from July 01, 2022.

Therefore, enterprises must pay much attention to the new region-based minimum wage levels:

- Region I: Supplement Thu Duc city (from District No.2, District No. 09 and Thu Duc District) in Ho Chi Minh City.

- Localities are transferred from Region II to Region I:

• Ha Long city (Quang Ninh province);
• Xuan Loc rural district (Dong Nai province).

- Localities are transferred from Region III to Region II:

• Quang Yen, Dong Trieu towns (Quang Ninh province);
• Hoa Binh city and Luong Son rural district (Hoa Binh Province);
• Vinh city, Cua Lo town, Nghi Loc and Hung Nguyen rural districts (Nghe An province);
• Hoa Thanh town (Tay Ninh province);
• Vinh Long city and Binh Minh town (Vinh Long province);
• - Bac Lieu city (Bac Lieu province);

- Localities are transferred from Region IV to Region III:

• Rural districts of Van Don, Hai Ha, Dam Ha and Tien Yen (Quang Ninh province);
• Quynh Luu, Yen Thanh, Dien Chau, Do Luong, Nam Dan and Nghia Dan Rural districts, Thai Hoa and Hoang Mai towns (Nghe An province);
• Mang Thit rural district (Vinh Long province);
• Hoa Binh rural district (Bac Lieu province).

4. What should enterprises do when the region-based minimum wage level increases?

Enterprises must have some consistent adjustments when the region-based minimum wage levels increase, in particular:

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

A wage is a money amount that 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. The job- or title-based wage amount must not be lower than the minimum wage level (Article 90, the Labor Code 2019).

Accordingly, on July 01, 2022, when the region-based minimum wage increases, the enterprise must increase the employee's current wages in accordance with the increase in the region-based minimum wage. The increased wage amount must not be lower than the region-based minimum wage prescribed in Section.

Fines shall be imposed on any employer that pays employees less than the minimum wage prescribed in Clause 3, Point a, Clause 5, Article 17 of the Decree No. 12/2022/ND-CP, as follows:

• A fine of between VND 20,000,000 and VND 30,000,000 for violations related to from 1 employee to 10 employees.
• A fine of between VND 30,000,000 and VND 50,000,000 for violations related to from 11 employees to 50 employees.
• A fine of between VND 50,000,000 and VND 75,000,000 for violations related to 51 employees or more.

At the same time, enterprises must compel the employer to pay full wages and the interest on the late payment or underpayment thereof to the employee. The interest rate is calculated according to the highest demand deposit interest rate of the state commercial banks announced at the time the penalties are imposed.
 

Increase wages for the employees receiving region-based minimum wage (Illustration)

4.2. Increase the payment for monthly social insurance, health insurance, and employment insurance

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

And in reality, many enterprises are paying this amount in accordance with the region-based minimum wage levels, and the increases in region-based minimum wage levels from July 01, 2022 can cause an increase in the payment for social insurance, health insurance, and employment insurance.

If enterprises are paying social insurance, health insurance, and employment insurance based on region-based minimum wage levels, the monthly total payment of compulsory insurance shall increase significantly when the region-based minimum wage increases from 7/1/2022.

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.

4.3. It is possible to 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 is 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 payments for employees increase, the trade union fee also increases accordingly.

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

4.4. Increase wages in case of work suspension

In accordance with the Clause 3, Article 99 of the Labor Code 2019, If, power or water-related incidents are caused not due to the fault of the employer, or due to natural disaster, fire, dangerous epidemic, enemy sabotage, or relocation of the operation place upon request of a competent state agency, or for economic reasons, the two parties shall reach agreement on wages paid in case of work suspension as follows:

- Not lower than the minimum wage level, if the suspension period is 14 working days at most;

- Not lower than the minimum wage level for the first 14 days, if the suspension period is longer than 14 working days.

Therefore, when employees are in case of work suspension, two parties shall reach an agreement on wages but must ensure that the wages in the suspension period of the first 14 days must not be lower than the minimum wage levels.

It means that the wage in the case of work suspension also increases in accordance with the increase in region-based minimum wage levels.

Accordingly, enterprises must check all the agreements in the labor contracts, collective labor agreements and other regulations of employers to have suitable adjustments and supplementation on the implementation of the new regulations.

Especially agreed on contents or commitments in labor contracts, labor agreements, or other legal agreements, that bring more benefits for employees compared to provisions provided in the Decree No. 38/2022/ND-CP to be implemented unless otherwise agreed by both parties.